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Wheat, Flour and Bread Industries - Royal Commission - Fifth Report


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1934-35-36.

THE PARLIAMENT OF THE -COMMONWEALTH OF AUSTRALIA.

ROYAL COMMISSION

ON THE

WHEAT, FLOUR AND BREAD INDUSTRIES.

FIFTH REPORT.

Presented by Command; ordered to be p'l'inted, 1st April, 1936.

[Qost of Paper.-Preparation, not given; 89 5 copies ; cost of printing and publishing, £72.)

Print€d and Published for the GoVERNMEN T of the CoMMONWEALTH OF AUSTRALIA by L. F. JoHNSTON, Commonwealth Government Printer, Canberra..

No. 235.-F.766.-PRICE 3s.

•.·

COMMONWEALTH OF AUSTRALIA.

GEORGE THE FIFTH, by the Grace of God of Great Britain, Ireland and the British Dominions beyond the Seas King Defender of the Faith, Emperor of India. To Our Trusty and Well-beloved:

GREETING:

SIR HERBERT WILLIAM GEPP, Knight, Consultant on Development to t.he Commonwealth Government; THOMAS STANLEY CHEADLE, E squin, Pastoral Company Director;

CHARLES WALTER HARPER, Esquire, Company Director;

EDWARD PATRICK MICHAEL SHEEDY, Esquire, ] 'ellow of the Institute of Chartered Acco untants (Australia), Fellow of the Society of Accountants and Auditors (England) ; and PRoFESSOR SAlllURL McMAHON WADHAllr, M.A., Professor of Agriculture, University of Melbourne.

W HEREAS by the Constitution of Our Commonwealth of Australia it is provided (inter alia) that the P arliament of Our said Commonwealth may make laws for the peace, order and good government of Our said Commonwealth with respect to taxation: WHEREAS by the Constitution of Our said Commonwealth the Parliament of Our said Commonwealth has exclusive power

to make laws for the peace, order and good government of Our said Commonwealth with respect to bounties on the production or export of goods:

AND WHEREAS questions have arisen. with respect to the payment. of bounties for the assistance of wheat-growers and with respect to the effect of taxation under the laws of Our said Commonwealth upon the industries of growing, handling and marketing wheat, manufacturing flour and other commodities from whea;t-and manufacturing, distributing and .selling bread:

NOW THEREFORE WE do by these Our Letters Patent, issued in Our name by Our Governor-General in and over Our Commonwealth of Australia, acting with the advice of Our Federal Executive Council, and in pursuance of the Constitution of Our said Commonwealth, the Royal Commissions A ct 1902-1933, and all other powers him thereunto enabling, appoint you to be Commissioners to constitute a. Commission to inquire into and report upon the economic position of the industries of growing, handling and marketing wheat, manufacturing flour and other co=odities from wheat, and manufacturing, distributing and selling bread:

AND WE APPOINT YOU the said Sm HERBERT WILLIAM GEPP to be the Chairman of Our said Commission :

AND WE DIRECT that, any one or each of you Our said Commissioners, together with any other one of you Our said Commissioners-(a) may, if so directed in writing by the Chairman of Our said Commission after consultation between a ll of you Our said Commissioners, inquire into and take evidence upon any matter entrusted to you Our said Commisaioners by these

Our Letters Patent-(i) either as to the whole or any part of that matter ; or (ii) in respect of any State or part of the Commonwealth, as specified in the said direction; (b) shall, for all purposes relating to the taking of evidence in pursuance of any such direction, constitute a quorum ; and

that the Chairman of Our said Commission may, if and when he thinks proper, sit with and take part in the proceedings of any two of you Our said Commissioners when taking evidence in pursuance of any such direction; Provided that all of you Our said Commissioners shall report upon each m a.tter entrusted to you by these Our Letters Patent;

AND WE REQUIRE YOU with as little delay as possible to report to Our Governor-General in and over our said Commonwealth the result of your inquiries into the matters entrusted to you by these Our Letters Patent :

IN TESTIMONY WHEREOF WE have caused these Our Letters to be made patent and the Seal of Our said Commonwealth to be thereunto affixed. WITNESS Our Right Trusty and Well-beloved Counsellor, Si r Isaac Alfred Isaacs, Knight Grand Cross of Our Most Distinguished Order of Saint Michael and Saint George, Governor-General and Commander-in-Chief in and over Our

Commonwealth of Australia, this Twenty-fifth day of Jannary in the year of Our Lord One thousand nine hundred . and thirty-four, and in tho twenty-fourth year of Our Reign.

By His Exceliency's Command, J. A. LYONS, Prime Minister.

ISAAC A. ISAACS, Governor-General.

Entered on record by me, in Register of Patcnte, No. 60, page 136, this twenty-fifth day of January, One thousand nine hundred and thirty-four. F. STRAHAN.

TABLE OF CONTENTS.

l. HISTORY OP THE COMMISSION'S INVESTIGATIONS

II. THE WORLD WHEAT SITUATION

III. AssiSTANCE TO THE WHEAT INDUSTRY THROUGH THE HoME-CoNsUMPTION PRICE POR WHEAT

IV. PROGRESS TOWARDS THE ADJUSTMENT OF FARMERS' DEBTS

V . CoNSTITUENTS IN THE PRICE OF THE 2-LB. LoAF

VI. THE AusTRALIAN BREAD AND FLouR INDuSTRIES IN RELATION To MoDERN EcoNOMIC TRENDS

VII. RESEARCH AND THE INDUSTRIES

VIII. RECOMMENDATIONS

P.I.CIW.

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ROYAL ON THE vVHEA_ T, FLOUR A_ND BREAD INDUSTRIES.

FIFTH REPORT.

To His Excellency, Brigadier-General the Right Honourable Lord Gowrie, V.O., G.O.M.G., G.B., D.S.O., Governor-General and Oomraander-in-Ohief 1 ·n and over the Commonwealth of Australia.

l\1AY IT PLEASE YouR ExcELLENCY :

This Commission has already submitted Reports upon the economic position of the industries of growing, handling and marketing wheat, the 1nanufacturing, distributing and selling of bread, and the manufacturing, distributing and selling of flour.

The Commission now has the honour to present to your Excellency this Fifth and Concluding Report, which deals with the history of the Commission's investigations, and traverses the principal recommendations already submitted. It includes also a diagram showing the constituents in the price of the 2-lb. loaf.

627

SECTIO N I.- HIST ORY OF 'l'RE CO MMISSION'S I NVESTIGATIONS.

9

I.-HISTORY OF THE COMMISSION'S INVESTIGATIONS. 1. The appointment of this Connnission was rendered necessary primarily by the economic position of the wheat-growers of Australia, which had become increasingly difficult owing to the low prices received in the years 1930-31-1932- 33 . .

2. Table I., which is largely reprinted from the First Report of this Commission, illustrates this point clearly. TABLE 1.

WEIGHTED AVERAGE PRICES PER BUSHEL OF AUSTRALIAN ·wHEAT-F.O.R., PRINCIPAL . AUSTRALIAN SHIPPING PORTS.

Year. Price. Year. Price.

s. d. s. d.

1907-8 . . . . . . 4 1! 1921-22 . . . . .. 5 5

1908-9 . . . . . . 4 4! 1922-23 . . . . .. 5 2!

1909-10 . . . . . . 4 0 . 1923-24 . . .. . . 4 9!

1910-11 . . . . . . 3 5! 1924-25 . . .. . . 6 6

1911-12 . . . . . . 3 81 1925-26 . . . . .. 6 2!

1912-13 . . . . . . 3 1926-27 . . . . .. 5 3!

1913-14 . . . . . . 3 7! 1927-28 . . . . .. 5 4!

1914-15 . . . . . . 6 1! 1928-29 . . . . .. 4 9!

1915-16 . . . . . . 4 8! . . .. . . 4 3}-

1916-17 . . . . . . 4 7 1930-31 . . . . .. 2 4!

1917-18 . . . . . . 5 Ot 1931-32 . . . . .. 3 2

1918-19 . . . . . . 5 1932-33 . . .. . . 2 10£

1919-20 . . . . . . 8 8! 1933-34 . . .. . . 2 9!

1920-21 . . . . . . 8 6! 1934-35* . . .. . . 3 0

• To date (estimated).

Prices do not include bounties paid since 1931-32. The differences between prices of wheat at loc8J sidings and prices f.o.r. , principal Australian shipping ports, vary according to States and methods of handling. Approximately the differences are from 4!d. to 7d. per bushel, being lowest in South Australia where the average haul is low.

The figures are based upon bagged wheat. 3. Towards the end of 1933 the Commonwealth Government, appreciating that there was no immediate indication of an alleviation of the position, decided that there was a need for an accurate investigation into the economic position of t he wheat-growing industry, to the assistance of which it had already contributed £8,428,223 during the seasons 1931-32, 1932-33 and 1933-34.

4. It was felt that a complete economic investigation should establish the facts and thereby prevent the ever..;recurring arguments and contentions regarding the justification for national assistance to wheat-growers. 5. Further, in the public mind, there was an ever-tecurring doubt as to the justification

for the prices charged to the people of Australia for flour, wheat offals, and bread. Consequently an investigation into the industries concerned with these commodities was also added to the task of the Commission.

COURSE OF THE COMMISSION'S INVESTIGATIONS.

6. In view of the urgency of the position of t he wheat-growers the Commission devoted itself immedi&.t ely to the investigation of the wheat industry and presented its First Report on this industry t o His Excellency the Governor-General on the 30t h July , 1934. Findings submitted · in that Report are stated on pages 35 and 36 of that document. The re commendations were-

(i) That the policy applied to most other rural industries of ensuring better returns by means of t he principle of a home-consumption price of that part of the product consumed within the Commonwealth should be applied to the wheat industry. (ii) That in respect of the coming season t he Commonwealth Government should

- provide financial assistance for wheat-growers who have sown wheat for grain during 1934. (iii) That such assista nce be provided n.s to part by an excise on flour used within the Commonwealth and as to the remainder by a contribution from othEr

Commonweal th mon evs . (jv) That on the basis of conditions, including the present prices of about

3s. per bushel for fair average quality wheat free on rail at the principal Australian shipping ports, the amount of such assistance should be £4,000,000.

10

rrhis amount should, however, be subject to review when the quantity of wheat likeJy to be produced from the coming harvest is at least approximately known and there is a better indication than is at present available as to the prices likely t o obtain in respect to the coming crop. (v) That the rate of excise which should be imposed on flour used within the

Commonwealth should be variable in order to provide progressively more funds as wheat prices fa1l and progressively less funds as wheat prices rise. Such rate should, therefore, be based on the world parity price of wheat free on trucks at the principal ports of shipment. The excise should be imposed, however, with due regard to its effect on the price of bread. (vi) That action should be taken to impose or vary customs duties on wheat and

flour in order to render the operation of the excise effective to maintain the assist ance to the industry. (vii) That portion of the amount provided for the assistance of the industry should be distributed by the Commonwealth as a bounty per bushel of wheat produced. (viii) That the Commonwealth Government should urge upon the Governments of the

St ates the necessity of tllking steps effectively to prot ect against dispossession wheat-farmers who are worthy of such protection. NoTE.--\Vith reference to Recommendation (iv), the phrase " the present prices of about 3s. per bushel " is used intentionally bec;mse of the differences between the simultaneous f.o.r. prices at different principal Australian shipping ports. During the winter and early spring of 1934,

whilst the information of the wheat industry was being collat ed and cert ain further inquiries were being made, initial st eps were t aken to investigate the economics of the bread and flour industries. 7. On the 27th November, 1934, the Commission submitted to His Excellency a Supplement to its First Report. This suppJement embodied its initial recommendations on certain matters

which had been deferred until further information as to the 1934-35 wheat harvest had been obtained. The recommendations of this supplementary report were-

RECOMMENDATION No. 1.--(SuPPLEMENTARY TO REC OMMENDATIONS (ii), (iii) AND (iv) oF THE CoMMissioN's FmsT REPORT .)

That, in respect of the present season, the Commonwealth Governmen t provide financial assistance ·to the amount of £4,000,000 for distribution to wheat-growers who have sown wheat for grain during 1934; and that part of the said amount of £4,000,000 be provided by applying the receipts for the period lst January to 30th June, 1935, from the excjse duty and the sales tax on flour hereinafter mentioned, and that the remainder be provided from other Commonwealth moneys.

RECOMMENDATION No. 2.--(SuPPLEMENTARY To RECOMMENDATION (vii) oF THE COMMISSION's FIRST REPORT.)

A. That the said amount of £4,000,000 be made available by the Commonwealth to the States fo r distribution by the St at es as agents of t he Commonwealth. That payments t o wheat-growers in the Territory fo r the Seat of Government be made by the State of New South Wales; and that the amounts made available to that State pursuant to sub-clauses (i) and (iv) of clause B hereof, should make provision therefor. Such provision has already been made in the allocation in sub-clause (ii) of clause B hereof.

B. (i) That from the £4,000,000 the Commonwealth make available to each State such amount as is necessary t o enable that State to pay on behalf of the Commonwealth a bounty of 3d. per bushel of marketable wheat produced in that State from the 1934-35 harvest and sold or delivered for sale , and that the State pay such bounty of 3d. per bushel.

(ii) That from the £4,000,000 the Commonwealth make available the fo ll owing additional amounts, namely :-To New South Wales ,, Victoria

, South Australia , Western Australia , Queensland .. , Tasmania

Total

£

585,750 420,000 472,500 408,000

37,500 3,000

1,926,750

631 11

(iii) That the amount made available to a State in terms of sub-clause (ii) above be used by that State for the payment on behalf of the Commonwealth t o each wheat-grower who bona fide sowed wheat for grain during t he autumn and winter of 1934 (notwithstanding that such crop sown for grain may have been , for seasonal or other reasons, subsequently cut for hay ) of a sum for each acre of land so sown calculated by dividing the total amount of money made available to the Government of the State by the numb er of acres sown to wheat for grain in that State.

The said sum paid acre is to be additional to any payment received by a wheat­ grower under sub-clause B (1). (iv) That the Commonwealth make available to the States the balance of the £4, 000,000 in such proportions as may be determined by t he Minister for Commerce upon a further recommendat ion which . will be submitted by this Commission after it has consulted with representatives of the Governments of each of the States.

(v) That such amounts, aft er t hey have been determined in accordance with the t erms of clause B (iv), be applied, at t he discretion of the Government of the State, as a grant from the Commonwealth towards t he relief of wheat-growers who have experienced specially adverse farmin g conditions during the present wheat year.

RECOMMENDATION No. 3. - {SUPPLEMENTARY TO (iii), (v) AND (vi) OF

TmJ CoMMISSION's FIRsT REPORT.)

(i) That legislation be enact ed t o provide·for the operation, as from lst .January, 1935, of an excise duty on flour manufa ctured and consumed in Australia. '

(ii) That the amou nt of such excise duty be the difference between the sum of £12 per short ton and t he price of fl our delivered Melbourne and suburbs, fixed and declared from time to time by the Flour Millers' Associa tion of Vict oria, subJeCt t o t he Advisory Committee referred to hereinafter being satisfied tha t such price is fa ir and reasonable.

If the said Committee is not sat isfied that the price so fixed and declared by the F lour Millers' Association of Victoria is fair and rea sonable, the excise duty sha ll be the difference bet ween the sum of £12 per short ton and a price to be recommended to the Minister by the Committee and an excise dut y at such rate shall be levied and collected from a date determined

by the Minister. (iii) That provision be ma de in the legislation for the constitution of an Ad visory Committee consisting of the Comptroller-General of Customs (Chairman), the Secretary of the Commonwealth Treasury, the Secret ary of t he Department of Commerce, and the Commonwealth Statistician, and that the Committ ee have the following duties assigned to them by regulations made under the Act, namely:-

(a) to review at such times as may be considered necessary by the Min ister the price of flour fixed and declared by the Flour Millers' Association of Victoria and for the purpose of such revi ew t o confer with representatives of the fl our industry and such other persons as t he Committee may decide. In the event of the

Committee not being satisfied that such price is fair and reasonable to recommend t o the Minister the price of flour per short t on which should be adopted as t he basis of the calculation of the Excise Duty. (b) t o submit, for the approval of the Minister, such additiona l regulations as in its

opinion should be made t o prescribe the methods of computing or t o facilitat e the operation of t he excise duty. (iv) 'l'hat the Commonwea lth Treasurer cause t o be kept a special assistance accoun t t o which shall be credited-

(a) the receipts from the excise duty on flour during the period lst July to 31 st March in each financial year; and (b) a sum equal t o the estimated receipts from the excise duty during the period l st April to 30th June of each financial year, such sum to be so credited not later

than the fifteenth day of April in such financial year. (v) That in order to provide financial assistance to wheat-growers in fut ure years, the amount at credit in the special assistance account on the sixteenth day of April be distributed each year as early as possible after t he said sixteenth day of April but within the last quarter of the financial year by the Department of Commerce or ot her appropriate Department in such manner as will be recommended by this Commission in its report dea ling with the rehabilitation of the industry.

(vi) If after the closing of accounts for the financial year it is found that the sum referred to in sub-clause (iv) (b) of this R.ecommendation ha s been over-estim ated, the account shall, in the first quarter of the next succeeding year, be debited with the difference between the estimated amount and the amount of duty actually co llected and conversely, if the said amount referred to in sub-clause (iv) (b) is foun d t o have been under-estimated, the account sha ll be credited with the difference between the estimated amount and the amount actua lly collected.

12

RECOMMENDATION No. 4.-(SuPPLE:MENTARY To RECOMMENDATION (vi) oF THE CoMMISSION's FIRST REPORT.) That, coincidently with the enactment of legislation to provide for the operation of the excise duty, vide Recommendation No. 3, steps be taken to impose or vary customs duties on wheat and flour in order to render the operation of the excise effective to maintain the assistance to the industry.

RECOMMENDATION No. 5.

(i) That legislation be enacted to provide for the operation as from 1st January, 1935, of a tax on flour then in the possession of millers, bakers, merchants and/or such others as may be determined by the Treasurer of the Commonwealth, and that suqh legislation remain in operation for a sufficient time only to ensure that payment of the excise provided for in Recomn1endation No. 3 or its equivalent in tax, has been made.

(ii) That the amount of the tax payable. on each short ton of flour as from 1st January, /1935, be equal to the amount of the excise duty per short ton of flour payable from the lst January, 1935.

No. 6.--(SuPPLEMENTARY To RECOMMENDATION (i) oF CoMMISSION's

Fl RST

That the Comn1onwealth Go vernment appoint an expert committee to consider and report as to whether the policy of maintaining a home price in excess of world parity is the best means of rendering financial assistance to the primary industries.

RECOMl\fENDATION No. 7.

(i) That in order to ensure that payment of the bounty of threepence per bushel m:de Recommendation No. 2 (b) is made only on wheat produced fro1n the present harvest-(a) steps be taken immediately to obtain declarations from the owners or holders of wheat as to the quantity of wheat (other than wheat produced from the

present harvest) which is held, and the place or places at which it is stored or held; (b) Suitable penalties for obtaining or attempting to obtain the bounty in respect of wheat other than that produced fro m ·the present harvest be provided for

in any Commonwealth or State legislation enacted in conne:xion with such payment. Explanatory notes were ·attached to each of those recommendations in order to afford certain further information with reference 'to them.

8. The Commission presented its Second Report on the Wheat Industry to His Excellency on the l 3th March, 1935. The recommendations were-(i) That assistance be afforded by the Commonwealth to the wheat industry through the application of a home consumption price for flour by an excise duty on

flour used within the Commonwealth as recommended in the First Report dated 30th July, 1934, and in the Supplement to the First Report, dated i>7th November, 1934. (ii) That, if for any reason, it be found impossible or undesirable to apply the principle

of a home consumption price through an excise duty on flour, it be applied in some other manner, as, for instance, through the agency of the compulsory marketing scheme, a.s set out in Recommendation (iii) below, or by such other means as may be considered desirable and appropriate. (ii ;) That, in any case, a compulsory marketing scheme for Australian wheat be adopted

provided that the majority of the wheat farmers of each of three wheat-exporting States express their approval of such a scherne, and that the principles upon which the cornpulsory marketing schen1e is bas_ ed shall be those recommended in paragraph 273 of sub-section 6 of Section V. of that Report (1\lr. Cheadle dissented). (iv) That action be taken by Gun1n1onwealth to facilitate adjustment of debts

within the wheat industry in a c:cvrdance with the scheme submitted by the Commission in sub-sections 4 and 5 of Section VIII. of that Report. (v) Th at the desirability of increasing the rate of exchange between Australia and London be referred by the Commonwealth Government for the consideration

of the COmmonwealth Bank Board in view of all of the facts relating to the wheat industry as detailed in this Report. (See sub-section 4 of Section V.)

638 13

(vi) That £avorable consideration be given to the suggestions contained in conclusion (i) of the Report by Mr. T. ·E. :Moorhouse on "Producer-Gas Fuel for Power Farming " in Appendix E. of that Report. (vii) That in the event of legislative action being taken with reference to time purchase

agreements the special case of agricultural machinery be borne in mind. (viii) That a small Commonwealth-wide organization be set up for the purpose of investigating matters concerning the machinery used by the wheat-growing industry, and that this organization be . under the direction of and financed

by the industry, through the medium of the Wheat l\1arketing Board-the sum so raised not to exceed one-fiftieth of a penny per bushel. (ix) That wherever practicable standards of quality be set up and adhered to in the. case of all industries which are protected by the tariff and which supply the

requirements of farmers. (x) That the States be urged to adopt the findings of the Royal Commission on Taxation (1934) in regard to averaging·incomes for the purpose of determining the rate of income tax and in regard to the deduction of losses from subsequent profits. (xi) That agricultural machinery manufacturers in Australia be urged to adopt the

principle of standardization wherever practicable, having due regard to the necessity for the application of improved ideas. (xii) That the f.a.q. system be the subject of a careful investigation in buying countries, especially Great Britain, and that any new schmne adopted in place of the

f.a.q. take into consideration the cleanliness and quality of the grain. (xiii) That the plant breeders in Australia make every endeavour to produce new varieties of wheat which have the quality "strength " in addition to the other favorable attributes characteristic of Australian varieties. (xiv) That the milling industry be urged to offer a stimulus to the cultivation of " high

strength " wheats in Australia by offering a guaranteed premium for such wheats and that the details of such guarantee should be developed in consultation with the experts of the State Agricultural Departments. (xv) That a systematic study of the seasonal and district characteristics of each wheat

harvest be instituted and where possible defects be remedied by mill additions. (xvi) That the Commonwealth Department of Commerce, in conjunction with representatives of the wheat-growing industry and of the milling industry, institute a systematic study of the particular type of flour desired by each

overseas market.

(xvii) That the States be urged to increase the extension service of their Agricultural Departments in the various wheat-growing districts and also their research staffs available for investigating specific problems connected with the wheat industry. (xviii) That the States be urged to conduct a campaign against over-cropping in districts

where such practices lead to deleterious results in the depletion of fertility and/ or uncontrolled growth of weeds. (xix) That facilities be afforded for an increase in the personnel and activities of the Soils Division of the Commonwealth Council for Scientific and Industrial

Research and the appropriate sections of the Agricultural Departments of the States. (xx)

(xxi)

(xxii)

(xxiii)

(xxiv)

That the publication of quantitative results of agricultural experiments which are not conducted on sound statistical lines be discouraged by the authorities concerned. That the Commonwealth and State authorities concerned give every possible

attention to the study of methods for the prevention of the further spread of Hoary Cress, Skeleton Weed and other noxious weeds. That the States be urged to give more attention to Home Extension Services jn co-operation with voluntary institutions such as the Country Womens'

Associations. That the States be urged to increase the personnel and equipment of their Statistical Departments, inasmuch as the collection and publication of reliable data form the necessary ground work for all organization and are becoming increasingly

important in connexion with international agreements. That the research work of the Commonwealth Meteorological Bureau be extended with particular reference to climatological factors such as the relation of evaporation to effective rainfall.

14

(xxv) That the Comn1onwealth take steps to ensure the availability of a staff in close touch with the economics of rural production of Australia in order to-(i) keep information such as has been ascertained and developed in this Report up-to-date;

(ii) reduce the time and expense of conducting any future special investigations, and (iii) have available for such investigations, a specially trained staff. 9. Between January and August, 1935, the Commission visited many centres and took ' evidence in respect to the bread and flour industries. The labour involved in obtaining the financial and other details of a large number of baking businesses representative of the whole industry and also in investigating the economic and trading position of every flour mill of any considerable size in Australia proved to be very heavy.

10. The collation of the data on these two industries was completed towards the end of 1935 and the Comn1ission has now prepared its Third and Fourth Reports which deal with the economic position of bread-baking and flour-milling in Australia.

RECOlVIMENDATIONS IN RESPECT OF THE BREAD INDUSTRY. II. The recommendations to the Commission in respect of the bread-baking "industry for submission by the Com1nonwealth Government to the State Governments for their consideration were-

GROUP A.

(i) that a Bread Board be constituted by statute in each of the States; (ii) that the Board consist of three members, one of whom (the ChaiTman) should be appointed and remunerated on the basis of full-time service; the other members on the basis of part-time service; (iii) that the Board be given such powers as will enable it to control and study the

bread industry within the area of its JUrisdiction in the manner set out in tions 4-27 ;

(iv) that the Board's primary step be one of requiring the preliminary registration of all businesses of m.anufacturing, delivering or selling bread; (v) that the Board proceed to prescribe standards with respect to the location and construction of all premises or vehicles in which bread is made, delivered or

held for sale ;

(vi) that the Board, prior to the expiration of the given penod to which each provisional registration certificate shall apply, shall grant a full certificate of registration · to each bakery, or delivery, or retail business as complies with the prescribed standards ; ·-

(vii) that the Board be vested with power, to the exclusion of any other authority, to enforce the observance of proper standards of sanitation, hygiene and health in respect to premises in which bread is made or held for sale ; (viii) that the Board be e1npowered to suspend or cancel certificates of registration if

it be satisfied that t he holder of such certificate has failed to observe the standards prescribed by the Board, or has been convicted of serious breaches of the laws or regulations relating to the baking industry; (ix) that the Board be vested with power, to the exclusion of any other authority, to

enforce the laws relating to the weight and purity of bread but that it be a duty of the Board to work out, in consultation with the leaders of the baking industry, a more satisfactory system of defining the weight and composition of the loaf than at present exists; (x) that the Board use the services of other branches of the Government's service

insofar as they can be effectively so used in the opinion of the Board, but that so far as is necessary, the Board appoint its own staff for this or other purposes; (xi) that the Board collect fees for certificates of registration whether provisional or otherwise, such fe es being applied to defray the cost of administration of the

Board, and also to such other proper purposes as it may determine including research and propaganda in the interests of the industry and the community; (xii) that the Board keep proper books of account, which shall be open to the inspection of the Auditor-General or any person authorized by him; and also prepare an

annual statement of its revenue, expenditure and financial position for submission to Parliament ; (xiii) that the Board survey continuously the costs of the industry and the component factors of such costs and, t o this end, it be vested with such cmnplete powers

as are ne cessary to enable it to obtain reliable evidence on this matter;

(xiv)

(:x:v)

(:x:vi)

(xvii)

(xviii)

(xix)

(xx)

(xxi)

(xxii)

(xxiii)

(xxiv)

(xxv)

(xxvi)

(xxvii)

(xxviii)

(:x:xix)

6 15

that the Board review the relationship between the prices charged

for bread and the costs of production, distribution and administration, after allowing for a fair and reasonable return upon capital; that the Board publish an annual report of its conclusions as to the economic position of the industry of manufacturing, distributing and selling bread;

that the Board represent the consumers' interest by subn1itting evidence tQ Industrial Tribunals on any application for alterations of wages, and/or conditions in the industry, and that it be empowered to submit views and data to the Industrial Authority in regard to any proposed arrangement by consent

between the employers and employees before such arrangement is registered or incorporated in an order of the Authority; that the Board consider all possible methods by which the costs of making, distributing and selling bread can be reduced; in particular, it should, in close

consultation with the industry, make a study of the problem of zoning deliveries ; that, in the event of the Board deciding that zoning is desirable in the interests of the community throughout the whole or part of its area, the Board should,

after consultation with the master bakers, draw up a scheme for zoning deliveries and endeavour to implement such a system with the consent of the industry. In the absence of such consent, the Board should recommend the Government to pass the legislation giving the Board the further necessary

powers; that the Board shall, at its discretion, from time to time make a declaration with reference to the prices being charged for bread ; ·

that the principle adopted with reference to the survey of, and con1ments on prices, be that prices should be related as far as possible to the respective costs involved, except possibly in tbe case of such " specialty" or " patent" breads as are more in the nature of luxury articles ; that the Board encourage the industry to attack the problem of stabilizing the

margin of profit between costs and prices by the adoption of some system of tickets or 1netal tokens sold to regular customers at a price somewhat lower than the normal cash price for a single loaf ; this will effectively allow smaller variations in the price of the individual loaf than are at present practicable ; that the Board be empowered to limit the sale of bread over the counter to certain

types of shops having due regard to the convenience of the community ; that the Board investigate the economics of the wrapping of bread and should encoliTage master bakers to offer the public the choice of buying bread wrapped or unwrapped ; that the Board collect and collate information in respect of the changes in the

practice of the craft of bread-making in other States and eountries and should use its influence to raise .the quality and nature of the ingredients used by and the products of the industry ; that the Board assist the movement ain1ing at the improvement at the level of

scientific and technical education throughout the industry ; that the Board, in consultation with appropriate State authorities (e. g., the State lVIedical and Chemical experts) and with the master bakers of the State, consider the question of increasing the nutritive properties and palatability of bread

by encouraging and/or enforcing the use of a certain amount of milk products in all bread made for public consun1ption ; .

that the Board, whenever it considers that an extension of its powers is essential, prepare and submit to Parliament through the appropriate :J\'linister, a special report setting out the reasons for and the nature of the additional powers which it recommends.

GROU P B.

that schools of baking be established in conjunction with the chief technical colleges in all the capital cities of the Commonwealth ; that, in relation to (xxviii), the Federated 1aster Bakers' Association: through its constituent Associations in the various States, should obtain the agreement of

respective State Governments for the attendance at a conference in Sydney of the respec tive Directors of Technical Education and of such representatives of the science faculties of the respective Universities as may be appropriate. At this conference, after inspection of the work of the Baking School at the

16

East Sydn'ey Technical College, recommendations be made with regard to all matters appertaining to the sound establishment of the schools of bakery in each capital city; (xxx) that the Federated Master Bakers' Association of Australia, in consultation with

the respective Master Bakers' Associations of each State, should thereafter submit considered recommendations to the respective State Governments and attach to the recommendations the offers which the respective !Vlaster Bakers Associations are prepared to make with reference to financial and other contributions towards the establishment and operation of the respective schools of baking; (xxxi) that the conference be requested to consider and draw up the details of a schen1e

for the institution of a system whereby a special diploma in baking and allied trades be issued under the seal of the Federated lVlaster Bakers' Association of Australia. This diploma should be of a standard similar to that of a University science degree, but should include in its curriculum instruction in the art and business of the baking and allied trades in addition to a training in the appropriate fundamental sciences. The diploma should be parallel in standard to that granted by the National Association of l\1aster Bakers,

Confectioners and Caterers of Great Britain; (xxxii) that arrangmnents be made between the Federated Master Bakers' Association of Australia and the Master Bakers' Associations of the respective States on the one hand and the Educational Authorities of the respective States on the

other for the issue, after examination, of one or more types of certificate to operative bakers, and that the examinations upon which the issue of these certificates are based shall be similar in all the States ; (xxxiii) that, in due course, and having regard to the protection of the operative bakers

now working or available for work in Australia, all of whom should be registered as at a certain date, legislation be passed to make the holding of an operative baker's diploma or certificate a necessary precedent to employment as an operative baker.

RECOMMENDATIONS IN RESPECT OF THE FLOUR-MILLING INDlJSTRY.

were-12. The recommendations of the Commission with reference to the Flour-milling Industry (i) That the Commonwealth Government, after all necessary consultation with the State Governments, appoint a Standing Committee consisting of the

Comptroller-General of Customs (chairman), the Secretary of the Commonwealth rrreasury, the Secretary of the Department of Commerce, . and the Commonwealth Statistician (paragraphs, 207-213) ; (ii) that the duties of this Cor;nn1ittee shall be to watch the course of costs and prices

of flour and mill offals, and the relations which exist or should exist between the prices of wheat, flour and offals, and to make reports to the Commonwealth and State Governments from time to time ; (iii) that the Committee should confer from time to tirne with of

thd industries of wheat-growing, flour-milling and with regard

to all pertinent matters so that its reports to the Governments with regard to flour costs and prices shall be based upon the latest and best information obtainable; (iv) that the Commonwealth Government provide the Committee with a small

permanent staff to enable the continuation of the work instituted by this Commission in the .study of the economic factors affecting the flour-milling industry; (v) that the Commonwealth Government seek the co-operation _of the State

Governments with the object of ensuring that all flour-mill proprietors shall keep their books of accounts in a standardized form, and that these books of accounts shall be available, in confidence, for inspe'ction by the Committee or its duly appointed representatives ; (vi ) that the Commonwealth and State Governments adopt the principle that the

home-consumption price for flour shall be considered in relation to the importance of maintaining and de veloping the trade in export flour ; (vii) that the industry take all possible steps to organize and develop a control of the export trade ;

17

(viii) that, if the efforts of the industry in that direction fait the Commonwealth and State Governments give serious and sympathetic consideration to action in connexion with the institution of form of control of the export trade in flour provided that a majority of the industry makes the necessary

representations to the Governments concerned; (ix) that the Commonwealth Government, after consultation with the State Governments concerned, arrange for a system of licensing of flour-mills producing flour for export, that no flour-mill be so licensed unless it be

effectively fumigated at regular and specified intervals against insect infestation; (x) that the flour-milling industry give serious and active support in conjunction with the industries of wheat-growing and bread-making, to the inauguration of a programme of continuous research into the scientific, technical and economic

problems of each of these industries (see Recommendation in the present Report); (xi) that the funds for this programme of research be supplied from a levy made under the excise powers of the Commonwealth Government (see the present Report) ; (xii) that the Commonwealth Government submit to the State Governments a

recommendation that each consignment of offals sold or offered for sale should be accompanied by a label or other document on which the minimum percentage of each nutritional constituent contained in the offal is clearly stated. 13. The Commission experienced considerable difficulty in obtaining and retaining the services of the skilled staff necessary for such important work. For various reasons it was deemed desirable to carry out these investigations mainly with the of permanent officers of the Commonwealth Public Service, and, in a number of instances, the period of time for which special officers could be spared by the Departments concerned was insufficient.

14. The members of the Commission, in view of the work for which they are responsible in private and public life, have been unable to devote their attention continuously to the work of the Commission, but have individually and collectively made every effort to do the work as expeditiously as possible under the circumstances.

15. The Commission desires to place on record its sincere appreciation of the work which has been done by its staff under conditions of considerable difficulty. However: in view of the difficulties mentioned above, it again draws the particular attention of the Governments of Australia to the necessity of training and having available a small staff of expert investigators

which can be available to assist Royal Commissions and Committees of Inquiry. 16. During the course of its investigations the Commission has become aware of the need for a Fifth and Final Report which would serve two purposes. Firstly, to review the changes which have taken place in the circumstances of the wheat industry since the presentation of the

Second Report in order to assess the probable importance of those changes and the extent to which they are likely to affect the futur:e of that industry. Secondly, there are a number of matters in which all three industries are concerned and to which reference would be more suitably made in a General Report. Such matters are dealt with in these sections which follow.

F.766.-2

SECTION II.-THE WORLD WHEAT SITUATION.

21

II.-THE · WORLD WHEAT SITUATION. 17. The Commission in its Second Repo-rt concluded that-" Ex pert opinion is unamious in accepting the aecumulation o£ abnormal stocks of exportable grain as the immediate cause of the depression of wheat prices, this

accumulation being accentuated by the bounteous harvest of 1928."

"The principle of protecting the home producer of primary products has been adopted as a cardinal point in the policy of many governments."

"Consequently, in such countries there has been expansion of agricultural production both by the extension of cultivation into regions which could not be cultivated under a less protective system and also by developing more intensive methods of production which would · have been unsound without very considerable extraneous support."

" The Commission is forced to the view that, on the one hand, nationalism is too strong to permit European countries with high-production costs to alter their policy to one of accepting cheap wheat, and on the other hand, the present capacity for the production of wheat in exporting countries exceeds the probable demand to such an

extent as to make it doubtful whether any return to the price levels of 1926-28 will last for more than one or two seasons. Te1nporary improvements in price will be dependent on the prospects of poor harvests in large sections of the world's wheat areas. Permanent improvement, on the other will be achieved only by concerted international action or by the growth of world population to a level which will utilize t he present potential

wheat acreage to the full, and in view of the present decline in birth rates, this latter circumstances will be considerably delayed."

18. There has been some reduction in production during the 1933-34 season owing to a restriction of acreage in the United States of America, and also owing to a drought which caused a great reduc.tion in the crops of that country Canada. On the other hand, the crops in the Argentine and most European countries were good.

19. These factors led to a very sluggish condition in the world wheat market during the twelve months ending 30th June, 1935. The chief depressant factors were steady selling by the Argentine and also by France where the policy of a guaranteed price for local production had resulted in the accumulation of a considerable surplus. Further, the heavy European crop had

reduced the import demand. Fortunately, Australian exporters, aided by the currency position and by the relative shortage of wheat in North America, were able to make progress in sales in the Pacific. Meanwhile, the crop harvested in theN orthern Hemisphere in 1935 was again exceptional in that the United States suffered from a further severe drought and European crops were generally smaller. Consequently a large reduction in the world carry-over was to be expected.

20. The following Table taken from the League of Nations' World Economic Survey 1934-5, shows the change in the

Areat Crops

WORLD PRODUCTION, CONSUMPTION AND STOCKS OF WHEAT 1929-34, EXCLUDING THE U.S.S.R.

- 1929. 1932. 1933. 1934.•

. . . . .. . . million acres 242.1 244.6 242.1 234.7

. . . . . . .. million bushels 3,449.8 3,743. 4 3,633.3 3,303.0

Current suppliestt . . . . .. million bushels 3,486.5 3,743.4 3,670.0 3,303.0

.. . . million bushels 3,523.2 3,633 . 3 3,596 . 6 3,596.6 Apparent consumption End of season stocks .. .. . . million bushels 917 .5 1,101 1,137 880.8§

• Provisional. t Until 1933 area harvested ; 1934 area sewn. tt Crops excluding the U.S.S .R., China, Turkey, Iran and Iraq. § Forecast.

21. The reports of the Argentine crop for 1935-36 indicate that the yield was much below the average. Further, that country has begun the construction of an extensive system of silos which can be used for storing wheat and is, therefore, in a better position to avoid forcing wheat on the world's markets than before. In December, 1935, the responsible wheat authority in the

Argentine suddenly announced that the guaranteed price for Argentine wheat had been raised I

22

from 5.8 pesos to 10 pesos per quintal (220 lb .). This latter price is equivalent to approximately 33s. sterling per quarter c.i.f. and e. Liverpool, which would be equal to approximately 4s. (Australian currency) per bushel f.o.b. Australian ports. The immediate effect of this announcement was to raise the world price of Argentinian wheat considerably. As a result, the buyers turned to Australia for supplies, and Australian sellers were able to raise prices effectively. At the date of writing this section of the Report, Australian wheat has been sold as high as 32s. 6d.

(sterling) per quarter c.i.f. and e. Liverpool.

22. The Argentine will have relatively little wheat to sell in Europe during the present year, and the largest stock of wheat will be in the hands of the Canadian Wheat Board which, if it continues its past policy, will not force -sales. Australian exporters should, therefore, also be in a good position to obtain remunerative prices provided they do not sell their grain in large quantities over short periods. It is, therefore, to be expected that the world wheat price will remain at a level which will yield f.o.b. prices in Australia of the order of3s. 6d. to4s. per bushel at least until such time as the prospects of the next Northern Hemisphere crop begin to exert their influence about April or :May. The position after that time is naturally obscure, for on the one hand it is unlikely that a third bad harvest in succession will occur in North America and, on the other hand, a bad season in Europe or the dislocation consequent on an extension of hostilities may well arouse such feelings of alarm in the minds of buyers that they would be prepared to offer good prices so as to obtain control of grain within their own countries. Such buyers would no longer be in the comfortable position of knowing that very large stocks are ayailable and must be sold at no very distant date. If, as these ideas -suggest, the world carry-over will have been reduced to reasonable levels by lst July, 1936, then a period of more satisfactory prices may be expected. This, however, does not mean that the problem is peTmanently solved for the following reasons:-

(i) International trade in general has not recovered from the depression and, until it does, so many countries will continue to maintain an uneconomic production of wheat because they are unable to finance imports of materials which they can grow themselves. In this connexion, the future of agricultural production is linked inextricably with that of foreign trade, and the . trade treaties negotiated between different countries during 1934 and 1935 must be regarded as important steps towards regulation of the international and so of the national market. In essence these treaties have followed the lines of tariff bargains.

(ii) In many countries the present form of government is nationalistic in sentiment. Such countries usually adopt a policy which aims at self-sufficiency in foodstuffs irrespective of whether they can afford to pay for wheat imports or not.

(iii) The increasing tension in the international political situation is likely to reinforce the tendency to maintain a system of self-sufficiency in respect to wheat in European countries.

(iv) The possibility of developing a gre ater consumption of wheat or wheaten flour particularly in the East requires consideration. During the last few seasons, the East has absorbed an increased quantity of wheat as the following table ·

TABLE 2.

EXPORTS OF \VHEAT AND FLOUR (AS BUSHELS OF WHEAT) TO CHINA, HONG KONG AND KWANTUNG, FROM NORTH AMERICA, AUSTRALIA AND JAPAN.

(Million Bushels.)

Wheat and F lour.

July to June.

Total. Wheat. F lou r .

1924-25 . . . . .. 10.83 0.57 10.26

1925-26 . . . . .. 32.35 8.12 24.23

1926-27 . . . . .. 23.13 4.24 18.89

1927-28 . . . . .. 28.41 1.26 27.15

1928-29 . . . . .. . 65.85 12.56 53.29

1929-30 . . . . .. 31.57 1.29 30.28

1930-31 . . . . .. 63.83 33 .55 30.28

1931-32 . . . . .. 82.35 48 .90 33.45

1932-33 . . . . .. 85.19 41 .81 43.38

1933-34 . . .. . . . 42.07 12.14 29.93

. . . -- -·

23

If wheat prices rise to higher levels, the capacity of these markets to absorb the same volume of consumption will largely depend on the ability of these countries to pay the higher price involved. This ·is largely bound up with currency problems and with the volume and value of the exports they are able to make to other countries. An advance in the general prosperity of China

would be of immense significance for the world wheat market. Unfortunately, the Chinese situation is obscure. (v) On the other hand, the machinery for increased production is intact in most parts of the world's wheat belt except that soil erosion done some damage in

certain of the drier areas in the United States, and certain marginal areas have been devoted to other purposes in Australia and other countries. If a world wheat price approaching that of the period 1924-28 were re-established, the acreage under the crop will again increase unless the remuneration, to be derived

hom the land to alternative types of production, increases

proportiOnately. .

(vi) during the years of depressed prices the U.S.S.R. Government did not export any large quantities of wheat. There are indications that production has been definitely improved and increased in Russia during the last few years, but that surplus production has been devoted 'to the accumulation of reserves and the better rationing of the people. It is possible that in good seasons Russia will again become a factor of magnitude in the world wheat market and this in its turn must exert a depressing influence ; (vii) it follows that, if on the one hand the world rnarket for wheat is not expancling and

the world acreage under the crop is likely to increase to its pre-depression level, the debacle of 1929-30 may well be repeated as soon as a bounteous season in the main exporting countries coincides with a large harvest in the consuming countries and the resultant surplus is not depleted by a shortage in the following year. 23. Theoretically, the correct method of disposing of a surplus is by the stimulation of consumption through a lowering of the price to consumers. The experience E>f the last five years suggests that this machinery does not operate in the case of wheat except through exports to Eastern countries. The reaction of European wheat-importing countries has mainly been the development of higher tariffs or, alternatively, subsidies for the protection of their home producers, and these tariffs in turn frequently stimulated further local production. Thus, in the words of the

Wo1·ld Economic Survey 1934-35: "The only notable case in which such subsidies have been used to restrict production is that of the United States. Elsewhere, particularly in importing countries, large sl1bsidies have been granted as well as greatly increased protection, in order to maintain or increase production . . .

. . . Such payments, in addition to the extraordinary

measures of protection granted in recent years to the sheltered agriculture of industrial countries, tend to become permanent." A very low price for world wheat is not a matter of satisfaction for the government of any country except possibly China. 24. This view leads to a consideration of steps which -could be taken to avoid a large fall

in world price. International agreement between the main exporters is essential and the results of the International \Vheat Conferences so far held have not been very helpful. It is pertinent, however, to remark that no gov.ernment of a large wheat-exporting country can successfully operate its share of a scheme for rationalizing its exports unless the country · is equipped with

storages capable of holding the wheat safely for a and unless the marketing is conducted along channels, the natures of which render them subject to control. Thus, during the last five years, Canada was able to hold her wheat stocks effectively and also to control her marketing system; had she not done so, the world might easily have. fallen to even lower

Argentina on the other hand had no very satisfactory means of holding wheat, and her marketing system was not easily controlled. Australia is only now constructing adequate silo accommodation for much of her crop and, although this accommodation is intended for handling purposes only, it could, if necessary, be used for holding part of a surplus. At present, there is no effective means controlling the marketing method so as to prevent individual growers " breaking " the price.

25. It is to be expected that International agreements aiming at introducing a greater degree of stability into ;vorld wheat price attacked by . spec.ial interests in im:porting countries from time to trme. The memory of Individuals and natwns IS extremely short In such matters and the cry that some outside force is maintaining the price of bread at too high a level is attractive to the sensation-seeking section of the press in every importing country.

26. In the event of a continued expansion of a world surplus over a period of years some form of restriction would become necessary. In this connexion it is interesting to note the following

24

cable which recently appeared in the Australian ptess. Mr. John I. McFarland, who, for several years, acted as the Chairman of the Canadian Wheat Board, is reported to have said-" The problem of our present surplus has vanished, but the real question is what national or international policy are we and our Australian friends going to work out in

order to avert a recurrence of our surplus wheat problem. I ask my Australian friends to get this story straight about the results of Argentina's boost of 19 cents a bushel overnight. Big speculators and manipulators who had effected ' short ' sales in the Winnipeg futures market, and were awaiting a smash in were caught napping and stood to lose millions of dollars.

The Canadian public is wondering that these destructive short-sellers were rescued from their predicament by enormous sales by the new Wheat Board, which sold much of its wheat at less than the prevailing quotations on the Exchange and all of it at much less than Argentine values."

SECTION 111.-ASSISTANCE TO THE WHEAT INDUSTRY THROUGH THE HOME-CONSUMPTION PRICE FOR WHEAT.

27

m.-ASSISTANCE TO THE WHEAT INDUSTRY THROUGH THE HOME-CONSUMPTION PRICE FOR WHEAT.

27. On pages 31 and 32 of the First Report of this Commission a summary of the assistance which had been rendered to the industry by Governments was set out. The Government of the Commonwealth, following upon representations from the States, agreed that some assistance was necessary from Commonwealth funds, and over the three years 1931-32, 1932-33 and 1933-34 granted sums totalling £8,428,223 for the relief of .the industry. During the year 1931-32 the Government of the State of New South Wales supplemented the assistance granted by the Commonwealth by providing a sum of £300,000.

28. In order to raise the_ funds required for the assistance voted in 1933-34, the Commonwealth Parliament imposed a Flour Tax of £4 5s. per ton of flour sold for local consumption in Australia. This tax was levied from 4th December, 1933, to 31st l\1ay, 1934. During this period the Commission was making its preliminary investigations into the wheat industry; its .nrst report recognized the need for an extension of the principle of a Home-Consurnption Price

for wheat, and recommended that the sum of £4,000:000 should be distributed amongst growers with respect to the wheat crops sown for grain during 1934, and, further, that the money should be raised in part from the general funds of the Commonwealth and in part from a variable excise on flour.

29. The aim of the variable excise on flour was to maintain a steady price for that commodity to the consumer and, also, to provide a safety valve whereby in seasons of higher prices the money raised by the Conunonwealth for distribution to the wheat-growers should be smaller in amount and vice versa.

30. The Commission's recommendations regarding financial assistance to the wheat industry were adopted by the Commonwealth Government and approved by the Commonwealth Parliament as far as the amount was concerned, consequently the sum of £4,000)000 was distributed amongst the wheat-growers in respect to the 1934-35 harvest. As regards the method of raising this money, the Commonwealth Parliament decided to re-enact a Flour Tax and, on 7th January, 1935, a tax of £2 12s. 6d. per ton of flour sold for local consumption in the Commonwealth was applied. ·

31. In the supplement to its .First Report, the Commission dealt with the method of the allocation of the £4,000,000 recommended, and also put forward proposals with regard to the fluctuating excise. 32. The Commission, when making its recommendations on the Home Consumption

Price for wheat, was of opinion that this would most readily be achieved by the provision of the fluctuating excise on flour; it realized, however, that this method of achieving the principle might be inacceptable, ·and in its Second Report it suggested that in such case the same end might be reached through the inauguration of a controlled system of marketing co1loquially known as a Compulsory Pool.

33. At a meeting of the Australian Agricultural Council at Canberra in October, 1935, it was decided to recommend that a limited system of marketing control should be established in order to obtain a uniform price of 4s. 9d. per bushel for wheat used in the production of flour · consumed in Australia.

34. These proposals were adopted by the Commonwealth Government in lieu of the recommendations by this Commission for an excise on flour varying inversely with the price of wheat in such a way that there would be no excise when .the price of f.a.q. wheat at Australian shipping ports exceeded approximately 4s. 7 !d. per bushel.

35. 'rt proved impossible for certain State Parliaments to pass the necessary legislation in time for its application for the 1935-36 wheat harvest, consequently the Commonwealth Government introduced legislation, to extend for an indefinite period the application of the flour tax of £2 12s. 6d. per ton, and in December announced that financial relief to the extent of

£1,880,000 would be granted to wheat-growers for this season. 36. The sum necessary for assistance during 1935-36 was less than in the previous year because during the latter half of 1935, the position of the wheat industry had improved somewhat, and it was clear that the harvest for 1935-36 would be more normal in quantity than had been

that of 1934-:-35 ;}urther, the world wheat price had also risen to a moderate extent. 37. The sum mentioned will represent Is. a bushel on wheat used for home

consumption in the Commonwealth, plus the sum of £268,803 as special drought relief- the bulk of which will go to those States, which bave suffered severely through crop failures. Under . this heading Western Australia will receive £162,600; South Australia £69 ,896; and New South Wales £31,784.

I

28

38. Following upon the rise in the price of wheat which occurred during the latter half of December, 1935, the Commonwealth Government annoll:Qced that the Flour Tax would be removed from 24th ]'ebruary, 1936, and that the balance of the £1,880,000 not provided for by the proceeds of the flour tax up to 24th February, 1936, will be found from other Commonwealth funds.

39. As matters now stand it is to be presumed that before next harvest all the States will have passed legislation complementary to that of the Commonwealth Parliament, so that the system of marketing control designed to implement t4e principle of the home consumption price would have full effect for the 1936-37 harvest. So far, the Parliaments of New South Wales, Victoria, and Queensland have passed such legislation and in South Australia the steps taken have reached the " Bill stage ". · -

40. The main features and effect of the Commonwealth "Wheat and Wheat Products Act " are as follows :-In the course of interstate trade and commerce--(i) A wheat-grower may not deliver any wheat to a receiver unless :

(a) such receiver is the holder of a licence under this Act to receive wheat; (b) the wheat-grower himself has entered into an agreement with a prescribed State authority with respect to such wheat. (For the . purpose of condition (a) only "wheat,, does not include wheat sold or delivered

for sale for use as seed or as food for stock or poultry.) (ii) every person, including an owner, marketing wheat or wheat products out of one State into another must be the holder of a licence under this Act by the prescribed authority of a State ; (iii) every wheat processor must furnish to the State authority "home consumption

warrants " issued under the State Act representing the amount of wheat used in the manufacture of such wheat products he has sold for Australian consumption. In none of the Acts or Bills before Parliament with reference to wheat marketing control has has an exact definition of the term "warrant" been specifically included.

41. The schemes provided 'for by the States of New South Wales, Victoria and Queensland and submitted to the legislature in South Australia follow substantially the same lines. - (i) There is to be in each State a Wheat Marketing Board (variously described and constituted) invested and charged with the following main duties-

(a) to purchase and dispose of wheat and wheat warrants (including warrants issued by other States) and the wheat represented thereby; (b) to make agreements with wheat-growers in relation to wheat delivered by them to receivers in accordance with the Act ; (c) to enter into definite agreements with any bank or financial institution

for borrowing money on overdraft or otherwise, and to give securities in respect of such money ; (d) to make advances to the persons entitled thereto in respect of wheat or wheat warrants sold or disposed of through the Board; (e) out of the proceeds of wheat or wheat warrants disposed -of by or through

the Board, subject to certain deductions for the expenses of the disposition, the administration of the Act and repayment of advances made by the Board, and interest thereon-to pay to each wheat-grower concerned on the basis of the net proceeds of the total sales by or through the Board of wheat delivered to receivers during a prescribed period or of warrants representing such wheat and the proportion of

all wheat sold by such grower.

(ii) The Minister in each State may from time to time, after consultation with the Board, determine and promulgate a "quota " of home consumption wheat for the purposes of th(' scheme. (iii) The following requirements and procedure are prescribed for the purposes of and

consequent upon any delivery of wheat by a wheat-grower to a receiver in connexion with intra-state trade and commerce--(a) The receiver must be the holder of a licence issued by the Minister (in the case of the New South Wales, by the Board);

(b) the delivery must be accompanied by a statement by the grower showing 1 (inter alia) particulars of the wheat delivered and the interests (if any) of other people in such wheat ; (c) the receiver must give the grower a receipt for the wheat and must

furnish the Board with particulars of such wheat and also any other information relating to the grower's statement;

29

(d) the Board will thereupon prepare a home-consumption warrant, based on the quota for the time being in operation, in respect of a proportion of the wheat delivered by the grower, such warrant (subject to information thereof being furnished to the grower) to be retained by

the Board until the wheat represented thereby is sold by or through the Board, and an export warrant for the balance, such export warrant being forwarded to the grower and being transferable by endorsement and delivery. (iv) A receiver of wheat may not deliver any wheat except upon production to him of

a warrant representing the same quantity and quality of wheat and unless all fees, freight and other charges have been paid. (v) No wheat products may be sold by a wheat processor in excess of the quantity manufactured from wheat purchased under home consumption warrant, unless

such wheat was purchased in the course of interstate trade and commerce; and every wheat processor is required to furnish the Board with particulars of all wheat products manufactured by him, of wheat used by him in the course of such manufacture and of warrants purchased by him. (vi) The Minister is given power to declare that the Act shall not apply to any wheat

which in the opinion of the Minister is delivered or sold for use as seed or as food for poultry or stock. 42. This new legislation does not set up a Compulsory Pool system of marketing Australian wheat-it will, however cause certain modifications of the marketing system which has operated in the past. The extent of these modifications will largely depend upon the regulations which are, from time to time, made pursuant to the various State Acts, and, until these regulations are gazetted, it is impracticable to assess the ultimate results of the proposed alterations.

...r ..

SECTION IV.-PROGRESS TOWARDS THE ADJUSTMENT OF FARMERS' DEBTS.

33

IV.-PROGRESS TOWARDS THE ADJUSTMENT OF FARMERS' DEBTS. I. THE ROYAL ·cOl\iMISSION. 43. In its Second Report the Commission recommended a scheme for the adjustment of wheat-growers' debts which em bodied the following main features :-

(i) The constitution and appointment under the authority of the Commonwealth Parliament of-· (a) Debt Adjustment Courts;· (b) A Commonwealth Administrative Organization; and

(c) District Debt Adjustment officers. NoTE.-The Commission took the view that it was necessary to invoke the authority of the Commonwealth inasmuch as the administration of ·bankruptcy proceedings is, under the Constitution, a matter for the Commonwealth and not for the States.

(ii) (a) The adoption, subject to the approval of the Court of a plan of composition or scheme of arrangement or extension of time proposed by a farmer and accepted by his creditors, such plan to be enforceable only by the Court. A plan or scheme will be deemed to have been accepted by the creditors if agreed to by a majority of all the creditors present at a meeting of creditors convened by the District Debt Adjustment officer and holding three-fourths in value of all the proved debts, but the concurrence of all secured creditors is necessary.

In such a case the Court may as a condition of its approval require the farmer to execute a mortgage or other instruments it deems necessary, for the purpose of giving effect to the proposal. .

(b) In default 6r agreement between the farmer and his creditors, the formulation by the Court, on the application either of the farmer or any creditor, of a plan or scheme. Any such plan formulated by the Court may not, however, without the consent of the creditor concerned, provide for a of the amount

of a debt before the expiration of a period of seven years from the date of confirmation of the plan, but with or without such consent may provide-(i) for postponement of the farmer's debts or any of them for a period not exceeding seven years ;

(ii) for reduction of the rate of interest on any debt to a rate not exceeding in any case 4 per cent. per annum; (iii)" that any debt shall be interest free ; and (iv) for the appointment of a supervisor of the farmer's affairs. (iii) All proceedings and remedies against the farmer to be stayed ipso facto upon

the lodging of an application for adjustment. (iv) The provision by the ·Commonwealth of funds to enable advances to be made to the farmer of moneys to defray the working expenses of the plan or scheme and for loans for farm development and for the purchase of plant and machinery

such advances to be repaid to the Commonwealth out of income. In the case of a loan granted for farm development, such loan is to constitute a charge on the land and to take priority over any other debts charged or secured thereon; and for the purposes of such loan the plan or scheme may be extended for any period up to five years. (v) The farmer to receive 25 per cent. of the net annual income, the remaining 75 per

cent. to be distributed pro rata among the creditors. (vi) At the expiration of a period of seven years after the commencement of the plan or scheme, if such plan or scheme has worked satisfactorily, the Court to estimate the then value of the farmer's assets and to release him from such

portion of his debts as exceeds the value of the assets. All debts secured on any asset at the date of such release will remain charged thereon according to their respective priorities, and if so required by the Court, must be secured by a mortgage for a term not exceeding three years at the current rate

of interest. ·

(vii) Any relief granted to a farmer to be conditional upon such relief benefiting the general body of creditors and ensuring the retention of the farm by the farmer.

2. THE COMMON\VEALTH.

44. l\ieanwb{le the Commonwealth Parliament had enacted legislation to enable effect to be given to schemes of debt adjustment between farmers of all types and their creditors in the Loan (Farmers' Debt Adjustment) Act 1935 which makes provision for the sum of £12,000,000 for distribution, in the prescribed proportions, among the several States by way of financial

F.766.-8

34

assistance to such States for the purpose of making payments to or for the benefit of farmers to enable them to make compositions or schemes of arrangement with their creditors in respect of their · debts. 45. Broadly, the grant to the States is- subject to the following conditions :-

(i) No grant will be made to a State unless there is in force in that State legislation constituting an authority empowered on application being made to it and at its discretion to suspend the rights of any creditor of a farmer against that farmer; (ii) no moneys so granted may be paid to or for the benefit of a farmer except in

. pursuance of a composition or scheme of arrangement, and unless such payment is necessary to ensure that the farmer will continue to carry on farming operations and to give him a reasonable prospect of carrying on those operations successfully ; and (iii) no payment under a composition or scheme of arrangement may be made in

respect of any debt due to the Commonwealth or a State or a government authority.

3. STATE LEGISLATION.

46. The above scheme anticipated that the State Governments would pass complementary legislation during 1935, . and the States have introduced legislation to this end. The following is a summary of the present position as regards such

NEw SouTH WALEs.

47. The scheme in New South Wales has be€1n introduced by way of an amendment to the Farr;ners' Relief Act 1932-1935 and provides, in the main, for the following form of relief and procedure (i) The powers of the FaTmers' Relief Board are extended so as to enable it to-

(a) consider and approve of any application made to it by a farmer (to whom a stay order has been granted) for assistance to give effect to a composition or scheme of arrangement with his creditors or any of them in satisfaction in whole or in part of his debts and/or liabilities ; . · .

(b) if satisfied that the farmer will, in the event of such composition or scheme being put into effect, have a reasonable prospect of continuing and carrying on his farming operations successfully, to­ (i) advance the Rural Bank of New South Wales moneys

for the purpose of discharging either wholly or in part the debts or liabilities of the farmer; (ii) guarantee to any mortgagee the payment of interest on his mortgage at such rate as may be agreed and for such period

as the Board may determine-any such assistance to br · . granted only subject to the execution by the creditors of such releases, and by the farmer, of such securities, covenants and agreements (including provision for payment .

of interest at a rate not exceeding 2! per cent. per annum) as the Board may require ; ·

(iii) write off wholly or in part any debt owing by the farmer to the Rural Bank pursuant to the Farmers' Relief Act ; and (iv) appoint such agents to act on its behalf as it may_ think fit. (ii) The relief is limited to farmers who have obtained a stay order under the principal

Act. No such order will be granted to any farm er who has disclaimed the · benefits of the Act, unless such disclaimer has been withdrawn with the consent of the Board; and any stay order when granted must be registered and remains in operation for a period of three years. During the operation of

the stay order-( a) certain specified actions and proceedings against the farmer are stayed (but not so as to affect the rights of a mortgagee in possession) ; and (b) the farmer may not without the consent of the Board make any

disposition of or grant any encumbrance in respect of his property, but no instrument of disposition or encumbrance will be invalidated if executed prior to registration of the order.

35

VIOTORIA.

48. The Victorian scheme is enacted by and embodied in the Farmers' Debts Adiustment Act 1935. 49. The administration of the Act is placed in the hands of the Farmers' Debts Adjustment Board, as to central administration, and of conciliation officers as to)ocal administration.

•

(1) The duties of conciliation officers are-(i} To receive applications from farmers for debt adjustment.

(ii) On the receipt of any-such application, to issue and cause to be registered and notified in the prescribed manner, a stay order having the effect of staying certain proceedings and actions against the farmer, any guarantor of the farmer and certain specified· persons having legal

relations with the farmer, and prohibiting any disposition or encumbrance of his property by the farmer without the consent of the Board (saving, however, any disposition or encumbrance executed prior to registration of the Order.) (iii) To require the farmer to submit to him a plan of debt adjustment and, if

possible, to obtain the assent of the creditors thereto; and, if so assented to, to transmit same to the Board.

(2) The Board is empowered-(i) To confirm any plan submitted to it agreed to by the farmer and his creditors. Any such plan may make provision for payments by the Board to creditors and for the cancellation, by consent, of Crown

debts ; but no plan may be confirmed by the Board unless the Board is satisfied that the farmer will have, as the result of such plan, a reasonable prospect of successfully carrying on farming operations and that such plan is necessary to ensure that the farmer will continue

to carry on farming operations and to give hin1 a reasonable prospect of carrying on those operations successfully. Any such plan, if confirmed by the Board, will be binding on the farmer and all creditors who have agreed. (ii) Alternatively to confirming a plan agreed to as above, the Board may

·formulate a modified plan making provision for payments by the Board to creditors in consideration of the adjustment of the debts of the farmer, for submission to the creditors. If such modified plan is agreed to by all the creditors present at a meeting, the plan, if confirmed by the Board, will be binding on all creditors, whether present or not. If not so agreed to but agreed to by a majority in number and value

of the unsecmed creditors present, the plan will be binding on all unsecmed creditors whether present or not and all secured creditors who have agreed. In regard to secured creditors who have not agreed, the Board may (a) suspend all rights and remedies of such creditors

against the fa rmer for a period not exceeding fi ve years; (b) reduce the interest payable to such creditors, and (c) at the termination of the period of suspension, reduce the debt to an amount equal to the value of the asset by which the debt is secured and extinguish the

if This provision, however, does not apply to a 1nortgagee

1n possessiOn.

(iii) To make any payment to a creditor or to meet any guarantees made or given pursuant to a confirmed plan, and to require repayment by the farm er of any moneys so paid.

(3) No "contracting-out" of the benefits of the Act is permitted but the operation of the Act may be negatived by-(i) A certificate of exemption granted by the Board, or (ii) the lodging with the Board of an acknowledgment by t he fa rmer expressly

negativing the operation of the Act in relation t o a particular debt. . . (4) During the operation of the stay order or any determination of the Board suspending the rights of a secured creditor, the farmer is re quired to keep a record of receipts and expenditure and to make such re cord available to the

creditors .

I

36

TASMANIA.

50. In Tasmania a scheme of debt adjustment has been enacted by virtue of the Farmers' Debts Adjustment Act 1935 which sets up a Farmers' Debts Adjustment Board invested- and charged with the following powers and duties, namely :- .

I. To consider any application by a farmer for adjustment of his debts and if possible to arr11.nge an agreement thereto between the farmer and a maJority in number and value of his unsecured creditors (including any secured creditors who may surrender their securities and prove for the full amount of their debts or who may value their securities and prove for the balance), or alternatively to formulate a modified plan and endeavour to obtain the agreement of the creditors thereto. The Board may, if it is satisfied that such plan is necessary to enable the farmer to carry on his farming operations successfully, confirm any such plan which thereupon becomes binding on all unsecured creditors. 2. Pending approval of any plan-to issue a protection certificate staying certain

actions and proceedings against the farmer or any guarantor of the farmer and prohibiting any dealings with the farmer's property without the consent of the Board, but any such dealing to be effective if the instrument relative thereto was executed prior to the registration of the certificate in the manner prescribed. 3. Out of any moneys made available by the Commonwealth for the purposes of

the Act-to distribute pro rata amongst the unsecured creditors to whom the composition relates, such sum as the Board shall think fit, but so that such sum shall not in any case exceed a sum sufficient to pay a dividend of 7s. 6d. in the £1 on the debts which will rank for dividend in such composition. Any moneys so distributed are deemed to be a loa:o. to the farmer free of interest and are repayable to and may be secured in favour of the Board in such manner as the Board may determine. 4. Where the Board has approved of a scheme in respect of unsecured creditors­

to issue a relief order under which it may, during a period not exceeding five years-( a) prohibit a mortgagee (including a mortgagee in possession) lessor or owner of land occupied by the farmer from exercising any of his

rights under his mortgage, lease or tenancy agreement, as the case may be; and/or (b) reduce the rate of interest payable under such mortgage or the rent payable under such lease . or tenancy agreement.

Any relief order issued by the Board is invested with the same legal incidents as a protection_ certificate. No "contracting-out" of the benefits of the Act is permitted, but where a protection certifi cate has been issued, no relief order will extend to any property in respect of which the farmer has granted some form of security, and-

(i) the instnunent effecting such security negatives the operation of the Act; (ii) the security is given for some valuable consideration other than a past debt ; and (iii) it gives rise to an obligation on the part of the farmer unrelated

to any obligation existing at the time of commencement of the Act.

QUEENSLAND.

51. The Queensland scheme is embodied in the Farmers' Assistance (Debt Adjustment) Act 1935, which provides, inter alia, for-I. An extension of the powers and duties of the existing Rural Assistance Board, subject to the control of the Minister, so as to enable the Board-

(a) to consider any application by a farmer for assistance to give effect to a composition or scheme of arrangement with his creditors; (b) if satisfied that in the event of assistance being given to the farmer as aforesaid, the ·farmer will be able to carry on his farming operations

successfully-to approve of such application ; and (c) in that event to advance such moneys for the purpose of assisting the farmer as the Board may determine and upon and subject to such deeds, securities, agreements and releases as the Board may in its

absolute discretion require.

•

37

2. A stay of proceedings against the farmer and any guarantor of the tarmer for a period not exceeding twelve ·months from the date of approval of the application, together with a prohibition on the part of the farmer against any dealings with his property without leave of the Board. 3. A certificate of the registration of approval of an application to be filed in the

local Supreme and Magistrates' Comts. 4. Any assistance given to a farmer under the Act to be deemed to have been advanced by the Minister, who is constituted a corporation sole for the purposes of the Act, having power, inter alia, to secure the amount of such

assistance either by mortgage, personal, collateral or other security. 5. The Act does not bind tlie Crown.

SouTH AusTRALIA.

52. In South Australia the Primary Debts Act 1935 makes provision for the granting of assistance to primary producers by means of a system bearing the following principal features :--1. The Act extends the powers of the Farmers' Assistance Board established under

the Farmers' Assistance Act 1933 so as to enable it to deal with applications for debt adjustment under the Primary Producers' Debts Act. If the Board upon a consideration of the applicant's affairs is of opinion that in the event of the applicant's debts being adjusted he will have a reasonable prospect of carrying on his operations successfully it may approve

of any scheme of adjustment whether submitted to it by the applicant or a creditor of the applicant or formulated by the Board ; and upon such approval being given the plan will be binding upon and enforceable by and against the applicant and his creditors. But no scheme may be put into operation

unless it has been assented to by the creditors in accordance with the requirements of the Act. 2. Any scheme of adjustment under the Act may include all or any of the following main

(a) Payment on behalf of the applicant out of moneys granted tothe State by the Commonwealth of a dividend on the unsecured debts (not being debts due to the Commonwealth or the State) of an amount not exceeding 5s. in the £1 ; (b) the release of the applicant from the whole or any part of any unsecured

debts due to persons other than the State ; (c) the release of the applicant from the whole or any part of a debt secured or unsecured, owing to the State, subject to the consent of the State ; (d) a release of the applicant from arrears of interest on any secured debt

in excess of an amount computed at 5 per cent. per annum; {e) a reduction of the interest on any unsecmed debt as the Board thinks fit or a provision that such debt shall be interest free ; (f) the conversion of interest (in certain cases) from compound to simple ;

(g) a release of the applicant from any arrears of interest on any unsecured debt; and (h) a loan by the Board to the applicant out of moneys granted to the State by the Commonwealth, for the purpose of adjusting debts of

the applicant. .

3. Where payment of a cash dividend is provided for, the following conditions operate:-. (a) If the ratio of the unencumbered assets to the unsecured debts exceeds 5s. in the £1, the applicant will be liable only for the difference between

5s. and the ratio amount, or any less amount that the Board may fix; (b) if the amount does not exceed 5s., the scheme shall make provision for payment of such amount by the Board ; (c) in eitheT case, the scheme shall contain a provision that the amount in

the £1 by which the value of the applicant's unencumbered assets falls short of his unsecured debts off.

4. The applicant shall not be under any liability to the Board or the Crown in respect of any dividend paid on his behalf, but he shall be required to repay the amount of any loan advanced to him out of the moneys provided by the Commonwealth, together with illterest thereon at such rate not exceeding 2! per cent. per annum

as the Board may decide .

38

5. Upon the making of an application in the prescribed form, all proceedings and remedies against the applicant are ipso facto stayed and prevented, and the applicant is prohibited from dealing with his property without leave of the Board, until such time as the application is dismissed or withdrawn or the is released by the Board froin the operation of this particular

provisiOrL

WESTERN AUSTRALIA.

53. LegislaJtion in the form of the Rural Relief Fund Act 1935, has been passed in Western Australia, setting up a Fund to consist of moneys provided by the Commonwealth for rural relief. 54. The fund is placed under the control of three trustees and is for the benefit of farmers who are unable to make voluntary arrangements with their creditors for the Writing down and/ or suspending of their debts and liabilities. In any such case, the farmer or a creditor of the facmer may apply in the prescribed manner to the trustees, and if the trustees are of opinion that the farmer is deserving of assistance and that any such assistance will give him a reasonable prospect of carrying on his business successfully or of making some arrangement or composition with some or all of his creditors which will enable him to carry on his business successfully, the trustees may (a) suspend any debts of the farmer for a period not exceeding three years (but which may be extended to a maximum period of ·four years) and for such purpose may issue a stay order protecting the farmer from adverse proceedings during such period, (b) declare that no interest shall be chargeable on any debt during the period of suspension of the debt, and (c) subject to the conditions hereinafter mentioned make advances to the farmer out of the fund, such advances to be repayable by the farmer by instalments over a period of twenty years and to be secured by a mortgage or charge over all the assets of the farmer but not so as to confer any priority over any other encumbrance existing at the date of the stay order. ·

55. The discretionary power of the trustees to make advances out of the fund for the purposes of the Act is limited by the following conditions :-(i) The farmer must in the opinion of the trustees have, as a result of any assistance granted to him, a reasonable prospect of carrying on his farming operations

successfully;

(ii) He must have shown himself deserving of assistance ; (iii) Some discharge of the debt or debts in respect of which any advance is to be made must be necessary to ensure that the farmer will continue to carry on his farming operations and to give him a reasonable prospect · of carrying on

those operations successfully, and; .

(iv) No advance is to be made for payment of or composition on a Crown or Statute- barred debt. ·

REVIEW OF THE VARIOUS SCHEMES PROPOSED OR ADOPTED. 56. It will have been observed that the scheme recommended by the Commission was a Commonwealth scheme, financed out of Commonwealth funds and administered by a Commonwealth Court. This recommendation was made for reasons set out previously. (See par. 43.)

57. The Commonwealth has not, however, seen fit to make itself responsible for the administration of any scheme of assistance to farmers for the purpose of enaoling them to adjust their debts, but has made available funds for that purpose and, subject to imposing certain general conditions, has left the actual distribution of such funds to the various States.

58. The States for their part. have outlined the conditions upon which assistance will be afforded and have set up more or less uniform machinery for the purpose of giving effect to their respective schemes. In each State, except Western Australia, the final task of deciding whether assistance is to be given in a particular case is entrusted to a Board; in Western Australia, the place of the Board is filled by the appointment of three trustees.

59. In each· case the Board (or the trustees, as the case may be) has been given discretion to grant or refuse assistance, subject, however, to being satisfied that the assistance sought is essential to enable the farmer to carry on his farming operations and that it will give him a reasonable prospect of carrying on those operations successfully. In certain cases, the discretion is further modified in that before any plan of composition or scheme of arrangement may be

approved by the Board and made binding on the creditors, certain assents must be obtained from the creditors. 60. It is a uniform feature of all the schemes that adverse proceedings against the farmer (and, also, in most cases, against a guarantor of the farmer) are stayed or prevented. In some cases the stay takes effect only upon the issue of a stay order. In other cases, it operates ipso facto upon the making of an application for assistance.

39

61. As to the nature of the assistance rendered to a farmer in respect of whom a plan or scheme has been approved by the Board (or trustees), each system contains its own provisions. Taking a view of the systems as a whole, it may be said that collectively they make provision for the following matters :- ·

(a) The suspension of debts during the operation of the scheme; (b) the reduction of interest owing on any debts ; (c) the release of certain debts including Crown debts and debts in excess of the value of assets; .

(d) the making of advances to pay off creditors; (e) the granting of loans to enable the scheme to be put into effect; and (f) the guaranteeing by the Board of payment o£ debts by the farmer. 62. In general, any assistance granted to a farmer by way of advance or loan is repayable to the Board upon stated terms or as the Board may determine. In the case of South Australia, however, while the farmer is required to repay the amount of any loan granted to him, he is not responsible for any cash dividend the Board may pay to his creditors. .

63. The period during which any plan is to operate likewise varies from scheme to scheme, ranging from a period of one year up to a period of seven years. But any period specified by the Act relative to a particular scheme is capable of being increased or diminished at the discretion of the Board.

64. Inquiries in the various States have elicited the fact that the application of the provisions of the above legislation has not as yet proceeded very far and therefore no comments can be made at this stage.

•

SECTION V.-CONSTITUENTS IN THE PRICE OF THE 2-LB. LOAF.

•

/?G.l

Sht:JWING THE: ;...qcTORS THE:

COMPONENT r; IN THE: PRICE: OF 2 LB. LOAr rsu L£TT£RPR£ SS FOR E X PLAN ATI O N )

43-44

WHEN VVH£AT COSTS aj5 ........ 8C/SHE'J.... 4D r.o. R . PORTS. FLOUR r...qx I S Jf e · 12- 6 TOIV OFFALS ...4V£R,......qG'E" PRI CE .If 5 · 6 · 0 TON.

ao

eo FLOUR TAX PAID TO FARMER SEE PARA. / IV THE" L £ TTE'RPR£"$S". .-q:RCEIVTAG£" r----- -----, ' I

..

,g,..q,K£:RS M ANGIN FOA' RETURN 0 /V C,...qPI T.-""1L

RENtS .RAT.CS ...-""'4NO • O£PR£CIATI ON ON E"TC . &AKERS' I .-""40MI/V!STRATI OIV

OVE.RHEAD COST S

.. C OSTS

OFV£H/ C L£S E:TC.

.. 0 CL I V£r? Y V'v'A6ES

.. r"UCL , R EPAIRS ANO OTH ER BAKEHOUSE COSTS

•

• BAKEI-lOUSE" I

....

r"LOUR TAX

AND RETURN

ON CAPI TAL

-----Tl

ADMIN / ST.R...-4Tt 0 /V

T 0 /V

OELt V ERY

0 C...-"4P/ TAL. SELL IN G

T

OF (B·'('.) I•

OFI'/

GHT.........VO

CHAR5 ES

I

VVHEAT GROWING SECTION 44

O THE' R t::OSTS

LE'S S RETURNS r"ROJW S 10£LINES

f'A-C'".(.UOIA/fS' F A R M ER)

[]

PERCENT ....... GC

IE--I<--

IE-- 5 5;1.

1'4 <-----

BREAD M...-'!KING SECTION

I<--

I<--

!"--

<------

<------

I<--

I<--

I<--

I<--

4 ·0;1.

.? iii'j.

.e ·.ej.

/ ·8j. I ·.ef.

4·4j.

FLOUR MILLING SECTION

V.-CONSTITUENTS IN THE PRICE OF THE 2-LB. LOAF. 65. A graphic synthesis of the result of the Commission's investigations into the costs of production, sale and distribution and margins for profit in the wheat, flour and bread industries, is presented in the column diagram, Figure No. 1.

66. In this diagram an attempt has been made, from the evidence before the Commission, to give an approximation of t he components in the price of a 2-lb. loaf of bread (delivered retail) spread throughout the three industries concerned. 67. The great variations in the operations of wheat-growing, flour-milling, and bread-baking, all combine to increase the difficulty of presenting anything but an approximate indication as to how the price structure of a 2-lb. loaf of bread is distributed between the respective participants- the wheat-grower, the flour-miller and the bread-baker.

68. The position here shown is diagrammatic and based upon averages and consequently does not apply to any particular case or any particular State of the Commonwealth.

69. In constructing the diagram it has been assumed that 47 bushels of wheat yield, when gristed, 2,000 lb. of flour and 820 lb. of offals, and that a ton of flour (2,000 lb.) yields 1,330 2-lb. loaves of bread. In the following paragraphs the proportion which each item bears to the total price of the loaf has been set out in thick type as a percentage at the end of the note explaining that particular item. In the following paragraphs the amounts which the wheat-farmer, the flour­ miller, the bread-baker receive are set forth in detail :-

(a) THE WHEAT FARMER.

The cost of the wheat content in the 2-lb. loaf has been calculated upon the actual costs of the operation of an average farm as set out in the Second Report of the Commission, Section II. (page 87, par. 83), where it is shown that-

(i) the labour item (including that of the farmer) represents Is. 1 !d. per bushel . . . . . . . . . . .

(ii) the cost of maintaining the machinery on the farm averages 5£d. per bushel (iii) other farm costs, such as payment for rates, taxes, insurance, cartage, the provision of seed wheat, superphosphate, bags

(or silo charges) power and sundries, and the maintenance of the permanent improvements on the farm, totals an average expenditure of Is. 5£d. per bushel, from which has been deducted the average receipts from sidelines

(equivalent to 9d. per bushel) leaving a net :figure of 8fd. here shown in the cost of the wheat . . . . . .

(iv) the average of the interest actually payable in respect of money borrowed for the purchase of the farm and its equivalent was 8d. per bushel. This allows for no return on the farmer's own capital invested in the farm. It must be clearly understood that the figure accepted is an

average and that in the case of farmers having little or no debt the whole or part of this 8d. would be available for their own use; on the other hand those with large debts would find that the 8d. is insufficient to meet their liabilities in this matter (v) the average cost of railing the wheat to the seaboard and

handling it during transit is 6d. per bushel

Percentage In Diagram.

9.9%

4.2%

6.4%

5.9%

4.4%

Wheat-growers total percentage of cost (with railway freight added) 30. 8%

(b) THE FLOUR TAX.

The farmer receives the net proceeds of the flour tax. Assuming that the average saleable harvest is 160,000,000 bushels, and approximately one-fifth, viz., 32,000,000 bushels are milled for home consumption then the money received from the flour tax of £2 l2s. 6d. per ton on the flour produced from 32,000,000 bushels when spread over the whole production amounts to approximately 2!d. per bushel. This is available for the wheat-farmer in addition to the Sd. alrPady discussed to enable payment of rent or interest on borrowed money or for such other purposes as described in (iv) above.

The Flour Tax represents in the diagram , 9. 9 per cent.

46

(c) THE FLOUR MILLER.

The figures are based on the analysis of the averages as set out in paras. 137 and 202 of the Commission's Fourth Report. The average costs, which referred to the whole output of flour whether for export or local consun1ption, have been adjusted in accordance with the differential allocation of costs as discussed in paras. 200-202 of the Fourth Report, due regard being given to the proportion of local and export trade.

The actual cost of manufacturing flour from wheat is £1 3s. 7d. per ton Selling costs on the local market are 6s. 3d. per ton Delivery costs, 9s. 6d. per ton Adr.o.inistration, 12s. per ton ..

The margin available for return on invested capital in the flour-milling business is the average which was being obtained from the flour sold on the local market (Fourth Report, para. 202) in 1932-33, viz., lis. 7d. per ton

Percentage In Diagram.

4.4% 1.2% 1.8% 2.2%

2.2%

Total milling costs (including margin for return on capital) 11.8%

(d) Sale of Offals.

The return to the flour-miller from the sale of o:ffals is an offset against the costs. In the diagram this has been allowed for by making a break in the column and depressing its right-hand section to an extent represented by the average value of o:ffals received (£2 3s. 5d. per 820 lb.). This represents in the diagram 8 . 1%

Net annual cost and margin for return on capital in respect of flour milling 3. 7%

(e) THE BREAD BAKER.

The bread-baking costs have been constructed from the weighted averages of the :figures shown in Table 37 of the Third Report of the Commission. They, therefore, represent averages only and are not definitely applicable to any one capital city. The data have been analysed to show as many of the constituent items of cost as was practicable.

The wages in the bakehouse .. Materials other than flour Fuel and upkeep of the bakehouse, &c. The wage cost on the delivery side of the baker's business Upkeep of vehicles necessary for delivery . . . .

The overhead costs concerned in the bakery business . . . . . .

Rent, rates, local taxes, interest on borrowed money and depreciation on buildings . .

. o • • • • o.

The average margin available for return on invested capital

Total bread-making costs (and margin for return on capital)

Percentage Ia Diagram.

11.2% 4.-0% 4.0% 16.4%

6 .2% 5.5%

3.1% 5.2%

55.6%

70. In the diagram submitted the total selling price is 4. 8d. delivered. Of this amount-per 2-lb. loaf of bread The wheat-grower receives (including all costs and

allowances for return on capital, wheat being at 3s. 6d. per bushel) The Flour Tax absorbs The flour-miller receives (including all costs

and allowances for return on capital) Less recoveries from o:ffals

Pence.

0.6 0.4

The bread baker receives (including all costs and allow­ anc_ es for return on capital)

Thus accounting for the total price of

Pence.

1.5 0.5

0.2

2.6

4.8

Per cent.

30.8 9.9

3.7

55.6

100.0

------------------ - -----

SECTION VI.-THE AUSTRALIAN BREAD AND FLOUR INDUSTRIES I N RELATI ON TO MODERN ECONOM IC TRENDS.

49

VI.-THE AUSTRALIAN BREAD AND FLOUR INDUSTRIES IN RELATION TO MODERN ECONOMIC TRENDS. 71. A considerable improvement has occurred in the financial position of the bread industry since the earlier part of 1934 when this Commission began its investigations. At that time price-cutting was so fi erce and conditions generally were so bad that the representatives of the industry almost unanimously asked for the introduction of control. At that time it appeared as if the invasion of the industry by the small independent master baker would continue indefinitely; price-cutting was breaking out seriously, although intermittently, in various districts, particularly in the metropolitan areas and in the larger provincial cities. Generally speak­ ing, the larger the population of any area the greater the difficulties experienced by the master bakers.

72. During the past few months the conditions have improved considerably and in almost all centres. Probably the strain upon the individual price-cutter became too severe and the combination of the flour-millers' and master bakers' organizations had made arrangements possible whereby price-cutting was temporarily more difficult. Further, the improved financial and psychological atmosphere in Australia, resulting in less unemployment, has also had a marked effect. Possibly to a smaller but growing extent, the wider appreciation of the Australian people in favour of better quality bread has had its effect. Slowly but surely Australia is developing a quality market as well as a price m_ arket in bread.

73. Just as skill in the purchase of wheat is a large factor in the success of a flour-miller, so the purchase of flour by the bakers has in the past been a considerable fa ctor influencing the profits made by the individual master baker or bread manufacturing company. The master baker or manager with the necessary finance, courage and ability, has often made considerable profits additional to those possible from the sale of bread based upon the price of fl our normal

to any particular time or period. During the time of stress and strain in 1934--35 most master bakers advised the Commission that they would welcome a fix ed price for flour which would eliminate one of the gambling factors in the business, because losses as well as profits are obviously possible when speculation in flour is undertaken. With the advent of a somewhat easier and more attrative economic position in the industry doubtless the tendency is now to withdraw the support from any revolutionary changes affecting the industry. However , it is clear that either through a variable excise on flour or through a home-consumption for " gristed " wheat, a relatively "fixed" price for flour in Australia is inevitable . The Commission has come to the conclusion that this change will be beneficial to the best interests of the industry as well as to the community.

74. Much can and should be done to raise the efficiency and status of the Australian bread-manufacturing industry. Bread is the most generally consumed article of diet and yet its quality and cleanliness have in the past probably received less scientific attention than any other foodstuff. Whilst many master bakers have a ke en sense of their duties to the community, there are numerous cases throughout Australia where conditions under which the bread is made and where the quality of the bread produced leave much to be desired . The new spirit within the industry, as evidenced by the papers read and the discussions at the 1935 Conference of the Federated Master Bakers' Associations of Australia and New Zealand, is encouragingly indicative

of the future. 75. An industry which is periodically confronted by bursts of int ense competition must inevitably find great difficulty in raising its st andards and living up t o such an ideal of public service as is desirable in and really desired by the baking industry. The natural reaction from

a period of intense price competition is t o focus attention on the ac quisition of maximum profits as soon as competition diminishes. F urther, the knowledge that periodically fmther bursts of intense and somewhat unfair competition may, and probab ly will, occm naturally creates a hesitation when developments which might lead t o an improvement in the conditions of production are being considered. It follows, therefore, that'if advances are t o be made a certain amount of protection must be given t o the industry so that those wh o show enterprise and initiative may be given a better chance of.security then they at present enj oy . On the other hand it is necessary to ensure that the advent of this stability is not used for the purpose of extracting undue pro fits from the public.

76. For these reasons the Commission holds it to be desirable that wh ile the industry should be granted some freedom from unscrupulous attack, yet at the same time its attitude towards prices and profits should be watched in the public interest. The Commission is confident that the great majority of the . industry will welcome the recomm endations of the Com mission involving, as they do, a very minimum of interference and supervision , which supervision will contribute towards that necessary stability which is the basis of all improvement.

77. The flour -milling industry finds it desirable and necessary to make considerable financial contributions to the bread-making industry for the purpose of organizing the marketing side. Apparently these cont:r:_ibutions are rendered necessary on account of the difficulty of

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I raising funds through the lv.Iaster Bakers' Associations. The system does not seem to be the [I best for the reason that any expenditure in this direction should be made by the industry

concerned and not by an industry which is only indirectly concerned. 78. The Commission believes that in due course following upon wise co-operation between the State Bread Boards, as recommended by the Commission and the bread -making industry, a sounder and safer and generally better position will be developed enabling contributions to

be collected from all master bakers towards funds required for the improvement of the scientific as well as the financial position of the industry. 79. Probably the industry will develop in the future a much more varied production - than at present . This and other developments will depend not only upon the

vital improvement

in the knowledge and technical and business skill of master bakers throughout Australia, but also upon t he removal of the present variable insecurity brought about by the " catch-as-catch can" methods which have applied in the past. 80. In many ways the flour-milling industry offers a striking contrast to that of the

bakers. The smaller number of businesses, the larger amount of capital required to start in operation and the existence of certain wealthy interests in the industry have made it easier for millers to create and maintain internal organizations which have in themselves exercised a considerable measure of control as far as the home market is concerned.

81. In the past there has been to a certain extent an absence of organized forethought and precautionary measures; indeed in some cases the industry and Australia have suffered from the effects of uncontrolled competition in the export markets. However, Australia must congratulate itself upon the fact that this important industry of flour-milling is, in the main, not seriously over-capitalized and is in the hands of a number of able, energetic men who are rapidly appreciating the necessity for closer organization and more efficient methods, particularly in organized long-distance economic and scientific research.

82. A perusual of the Comn1ission's Fourth Report dealing with flour-milling will show how much more complicated is the industry than is usually imagined. The number of variable factors to which the flour-miller must give continuous and skilled attention is probably as great as in any other single industry operating within the Commonwealth.

83. The Commission has concluded that there are grave reasons for anticipating that a period of crisis may be expected in the Australian flour-milling industry in the course of the next few years. For this reason it has recommended that the industry should endeavour to organize the export side of its business under its own auspices.

84. Unfortunately, however, it is a truism that really practical actions based upon voluntarily organization and agreement are usually only possible when an industry is in extremis. Human nature does not seem capable of making the necessary sacrifices in order to avoid a serious disaster. Only when disaster has actually occurred or is unavoidably imminent does commonsense begin to operate. For this reason the Commission has recommended that the Government should take action if the majority of the industry so desires. Australia will be no better off and its flour-milling industry will be a great deal worse off, if as a result of difficulties on the overseas market, _ the industry should waste its reserves in either exporting at a loss or indulging in a price war for local trade.

85. Inasmuch as any regulation of export sales must imply some organization of the local trade and must have reference to the difference in the prices charged on these two markets, some sort of benevolent supervision of the industry's ideas as to what is a fair margin of profit, seems most desirable in the public interest. ·

86. The proposals of the Commission may appear to savour of control, and doubtless in the long run, unless the industry continues to realize its obligations to the public as well as its own particular rights, some more definite form of control may become necessary. 87. The Commission has endeavored to a void developing a specific plan for either the bread-baking or the flour-mil]jng industries. It realizes that with some slight amendment of the surrounding conditions it should be practicable for both these industries to operate and

develop effectively and thus work out their own pla11s. Freedom is an ultimate value, and for persons of the British temperament is probably far 1nore precious than complete efficiency. 88 . On the other hand if no steps are taken to stimulate the growth of a spirit of regulation in these industries, the results may well be unfortunate. There is no avoiding the fact that the

present world is dissatisfied with and unwilling to adopt the precepts of laissez faire which the late Sir Basil Blackett described as the "anarchic social code of the century of scramble" . . .

. "The world to-day is determined no longer to tolerate all round frustration owing t o anarchic competition among the individuals of whom it is made up ". 89. The principle that the profits of industries should receive some scrutiny has already been accepted in Australia to a far greater extent than most persons realize. In effect, it is applied in one way or another to both primary and secondary industries which are protected

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by the tariff. As regards the forn1er, the various control Boards exercise Judgment 1n respect to the prices of sugar, dried fruits, butter, while wheat is shortly to enter the list. As regards secondary industries the Tariff Board has apparently adopted the principle that the earnings of enterprises operating under a tariff protection should be scrutinized by the Board with a view to maintaining a fair balance between the interests of the consumers, the profits of the industries, the provision of employment and the encouragement of sound development in Australia.

90. Inasmuch as the State is no more than the weighted average of its individual citizens, and the general tendency in Australia during the last quarter of a century has been the development of fair and reasonable standards in relation to industries and to development in general, it is only logical that the same standards should be applied to flolrr-milling and baking

which are vitally concerned with supplying a national necessity.

91. At this present juncture most of the more civilized countries of the world are faced with the same complex of circun1stances, and have had to take drastic and revolutionary steps in an endeavour to re-adjust their positions. In certain directions Australia is lagging behind in respect to re-organization and improvement in efficiency. This may perhaps be explained by the greater resiliency of the Australian-economic structure when confronted with the economic depression. This resiliency is due, inter alia, to the high ratio of resources to population and the homogeneous nature and national characteristics of the people. .

92. Particularly since the onset of the world economic depression nations have concentrated more and more upon industrial control and control of foreign trade. The example of that stronghold of individualism, the United States of America, during the last four years, is a most significant example of this change of attitude. So far as foreign trade control is concerned, the principle of the Ottawa Cop.ference has been extended both within the British Empire and without it, and through bi-lateral trade agreements there has been a tendency for the nations of the world to segregate into blocs.

93. The Commission has concluded that the Australian public is singularly unaware of the extent to which such trends have developed and also of the magnitude of the efforts which have been made to organize production and trade in other countries. The Commission made certain inquiries with reference to the Japanese position in this matter, and has been fortunate in obtaining summaries of the 1nain laws and regulations made by the Japanese Imperial Government with reference to industrial and export control since 1925. Further, con1mentaries and opinions on the degree of success achieved by this scheme of regulation have also been obtained from two sources.

94. The Commission considers that the main features of these Japanese developments are of sufficient interest to be included in this report as indicative of the modern trends in civilized countries, and for that reason they are set out in the following sub-section. The documents on which this information is based are in English and have been forwarded to the

Prime Minister's Department at Canberra for retention. The Commission suggests that copies of these documents should be 1nade available to any proper person who may be interested in the study of such problems.

CONTROL OF INDUSTRIES AND FOREIGN TRADE IN JAPAN SINCE 1925. 95. Japanese industry enjoyed a period of wide expansion and great prosperity during the world war. There was a vast increase in the demand for Japanese goods because of the concentration of EuTopean and later of American industry on warlike production. The enormous profits which were earned during this period resulted in the mushroom growth of many small, badly organized, inefficient and weakly capitalized industrial units, which, in years subsequent to the waT, found great difficulty in surviving and used many means to obtain .

a share of the market with the result that the larger and more important industTial organizations were prejudiced. INDUSTRIAL CoNTROL.

96. The conditions already described, caused the Imperial Government to pass the Law of Important Export Industry Associations in :March, 1925. This law provides for the organization of associations and federations of associations to rationalize the production of various industrial commodities. The law gave power to the various major export industries

(which should be so designated by the Competent J\1inister of State) to regulate and control on a co-operative basis and with Government supervision their various problems of production and distribution. Such duties as examination (and in some cases the supply) of raw materials and equipment, maintenance of a standard of quality, organization of sales and research were

undertaken. The associations could lend funds for use in the businesses of their members or receive savings upon deposit from their members. Power was given to the associations to correct evil practices in business. F.766.-4

52

97. In April, 1931, and March, 1933, this law viras amended and, instead of being confined to the regulation of industries primarily interested in the export trade, the terms of the law were extended to en1brace concerns engaged in the manufacture of any 1najor industrial products. This law provides, inter al1:a, .for the form ation of a Central Union of Industrial Associations designed as a central directive agency to foster the general welfare of the various associations, and particularly to support t hose associations in their relations with the Government. The revision of 1931 enabled members of associations to limit their individual liability if the organization to which they belonged becmne bankrupt. 'rhe punishn1ent of officials was provided for where an industrial organization was found guilty of illegal practices.

In order to encourage the development of such associations the Government exempts them from Income Tax, the Business Profits Tax and t he Jlegistration Tax. It also assists by advancing funds at low rates of interest :for the business operations of the associations. On 31st December, 1933, the number of industrial associations had reached 344 (including 23 federations affiliated with t he associations in different localities), and en1braced 23, 831 n1embers. The following industries an1ongst others have developed effective means of control :--Export striped jene, cotton crepe, export cotton flannel, porcelain and earthenware, kinki enamelware and many others. Since 1933 , the above law is generally referred to as the Industrial Control Law.

98. Between 1925 and 1931 the powers granted to an industry to organize itself were merely permissive, and were not widely used ; therefore the activities of such industrial organizations, as were formed were stifled, because there were many non-participants. The amendment of 1931 provided for a Governn1ent enforcement of c01npulsory corporations, when a request was made by mernbers already participating in a control agreement approved by the

competent Minister of State. The attitude of mind of the Imperial Govern1uent may be gauged .from the three main articles of the 193 1 law. A1ticle I.-In case persons en gaged in a rnajor industry have entered into control agreements regarding prices, productions, &c., with one-half or more of all the persons engaged in the same industry, due notific ation to

the competent Minister of State is required within a period fixed by order regarding such agreements. No tification is required also with respect t o changes and abolitjon of the agreements. The kinds of major .industries referred to in the foregoing pamgraph shall be designated by the competent Minister of State after consulting with the Control Commission.

Persons who are engaged in the major industries designated in accordance with the provisions of the foregoing paragraph are 1equired to report t o the competent Minister of State regarding matters designated by order. · Article 11.-In case the competent Minister of State has been notified of the control agreements with approval of two-thirds or more of all the participants, and when it is deemed especially necessary fo r the pTotection of the fair interests of the industry involved and for the sound development of national economy, he may order, after consulting with the Control Commission, the participants in the said agreements or these who are engaged in the same industry but not participating in the agreements, to conform t o the whole or part of the said agreements.

Article 111.-\Vhen the competent Minister of State deems the control agreements entered into in accordance with the provisions of Article I . of this Law are contradictory to the public interest or detriment al to the fair interests of the industry directly involved or other .industr:i e1> closely allied with the industry in question, he may order, after consulting with the Control Commission, a change or changes or abrogation of such agreements.

· E xPORT CoNTROL.

99. The Law of Export Associations was passed in 1925. Under this law exporting firms were given opportunities to rationalize their activities. The export associations assist in the handling of goods of their n1em bers; buy outright comn1odities for export on a co-operative basis; store and classify goods; establish overseas agencies and investigate foreign markets;

control quantity and prices of export goods, inspect the quality and packing of goods, lend funds and generally control t he export activities of their members. 100. The export associations organized under the 1935 law number 74 (including three federations), the total membership being 7,400 . Thirty-seven of these associations are organized according to varieties of rn erchandise, 20 according to overseas markets and 17 according to both merchandise and markets. Unfortunately, the activities of these associatiQns have so far been limited, only 23 of them actually enforcing control measuTes, fifteen or sixteen kinds of commodities being involved. 1Jnlike t he industrial organizations, the export associations are still merely voluntary so that the initiative is left entirely to the merchants themselves.

101. Every export association has been unable to achieve the same degree of control over the quantity of goods exported, and the export piice. Iv.Iuch depends upon the conditions of production, the commercial power of the industrialists and the nature of the export market. Hence it is that some export associations are able to control both quantity and price, whereas others can control only one of these factors.

CoNCLUSIONS o F OBSERVERS.

102. Whether the methods used by the Japanese Government have been effective or not is to a considerable extent a matter of opinion. It is obvioUB that the attitude to the legislation will depend upon the effect it has upon the interest of any particular individual or company.

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Thus those business men who are engaged in the export trade and who depend on the availability of a large supply of manufactured goods claim that the control over the production of such goods lessens the supply and raises prices. This means ..that the prospective profit of the exporter dwindles. On the other hand the manufacturer objects that the exporters are more able to co-operate since the export trade has been rationalized, with the result that they can obtain goods at reduced prices.

103. Again, there has been a cleavage of opinion between the large manufacturer and the small man. The latter, of course, derives considerable benefit from the measures of control, whereas the former would be quite capable of carrying on without assistance. However,. it is true that many powerful industrial organizations, while they would prefer complete freedom,

will admit that the new legislation has been of assistance in the regulation of the supply of raw materials, the marketing of the finished product, the stabilization of prices, and the elimination of costly production. · 104. The general conclusion drawn by one authority is that since the industrial organization of Japan is exceedingly complex the benefits resulting from Government co-operation in industrial control have outweighed the disadvantages incident thereto. On the other hand another authority, while admitting that the industrial control which has come into operation under the Industrial Control Law has accomplished fairly favorable results, points out that co-operation is lacking amongst export associations, each of which conducts its control measures independently.

He concludes that the export control which obtains under the existing law is very imperfect ·and almost ineffective. Further, it is pointed out that there is no co-ordination between the internal industrial control system and the export control system, and very little can be expected until a new and comprehensive scheme is introduced whereby industries and export businesses

will be closely related. ·

105. There is a serious and urgent need for the Commonwealth Government to take the lead in providing information with regard to world trends in economic control. The Commission suggests that steps be taken to provide information as to movements in other countries of the world in order that whatever adjustments have to be made from time to time in Australia will not be commenced without the fullest understanding of the difficulties likely to be encountered and possible means of overcoming them.

SECTION \7JJ.-THE NEED FOR ECONOMIC TECHNICAL KNOvVLEDGE AND RESEARCH IN THE INDUSTRIES.

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Vll.-THE NEED FOR ECONOMIC AND TECHNICAL KNOWLEDGE AND RESEARCH IN THE INDUSTRIES. 106. The Commission has been greatly impressed during the whole of its observations and inquiries with the need for greater and more widespread economic and technical knowledge and scientific research into the problems of each of the industries concerned. While it is true that a certain amount of scientific research has been done and a certain amount of technical instruction is available, it is quite clear that the most that has been achieved in these matters in Australia so far makes very poor showing compared with what has been done in other co untries, and has scarcely touched the fringe of the problems.

107. It is interesting to notice that the Dominion of New Zealand in 1928 founded a Wheat Research Institute which is, in respect to many of its activities, in advance of anything which Australia has to show in the matter. In that Institute such problems as the relation o£ time of harvesting, and method of harvesting to the quality of the grain from the point of view of the miller and the baker, have been effectively s,:tudied. A special staff is available for the purpose , and the equipment of the organization permits of a satisfactory series ·of tests being

applied to any given wheat or flour. An important feature of this Institute is that it is maintained by the support of farmers, millers and bakers. E ach farmer pays a levy of I fd. per each 50 bushels of wheat he sells, each miller 1 td. per each ton of flour he sells, and each baker I fd. for every ton of fl our he buys. These levies were fixed by an Act of Parliament in force for a specified period, and the total sum available is subsidized £1 for £1 by the Government .

I08. The reasons for t he slow development in these directions in Australia are numerous. As regards the wheat industry, it is fairly Tecognized that each State Government has accepted its responsibilitY' in connexion with reseaTch work and also with wider education, but that although the spirit may have been willing the fi nances have been weak. The scattered nature of the Australian wheat belt, the wide variety of farms and farming circumstances have made it difficult for any State to provide the necessary finance for a research staff and stations which

would be adequate to grapple with the pToblem in the effective way it deserves. Particularly is this so 'in \iVestern Australia where the modern development of the w4eat belt and the relatively small local population has made the matter one of great difficulty. I09. As regards the flo ur and bread industries, the lack of technical knowledge and

scientific research may perhaps be attriouted to the fact that the public have been somewhat long suffering in the matter of accepting what comes to them as being t he best that can be expected in the way of quality The public do not know, and have no means of ascertaining, what would be the results given better conditions and better materials, and more effective knowledge of how to use them. The essential fact is that flour milled from Australian wheat is fair average

quality and usually makes a moderately good loaf, consequently the quality of t he bread has not been quite bad enough to create a demand for general improvement. The relative absence of bakers with sufficient technical skill to set and maintain a high standard and thereby . stimulate a demand for quality is noteworthy. In the milling industry also economic

circumstances have enabled the millers to dispose of their products in one market or another, and in the main the markets in which Australian flour compet es are "price" markets rather than " quality " markets. llO. Whether t hese conclusions as to t he reasons for the present position be all embracive or not, the Commission is convinced that the present situation is unsatisfactory, and that it is high time that increased attention and support were given to research and technical education in all three industries which the Commission has reviewed. In evidence before the Commission, representatives of all three industries agreed unanimously with this view and welcomed the

suggestion for co-operative effort. lll. Basic to the question of any developments of this kind are three factors : firstly, the provision of adequate financial resources to enable the research and technical education to be brought to fruition ; secondly, it is essential tb at government organizations which have in the past borne the burden of that part of the load wh ich it has been _possible to carry should

be encouraged to co -operate with the scheme and become part of it rather than be omitted from it; thirdly, broadly speaking, it is better policy to utilize and encourage the growth of an organism which is already in existence rat her t han to bring into existence a new organism which must spend some years in learning how to walk in the surroundings in which it finds itself. The history of research· into biological and agricultural matters has usually shown that satisfactory and stable research organizations arise through a process of evolution rather than t hrough one

of new creation. The Commission has, t herefore, given serious consideration and thought to these fundamental matters in outlining the scheme which it now recommends. ll2. As regards finance, the Comm ission considers that it is desirable that all the industries concerned should contribute towards the maintenance of this additional research.

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It is plain that at the present time the State Governments are finding difficulty even in continuing the modicum of work which they _have done in the past; it is therefore impracticable -to recommend that they should bear the burden of additional expense. 113. The matter is one which affects the Commonwealth as a whole and should have

Commonwealth support, but satisfactory interest will not be aroused in any developments of this kind unless the industries themselves have a definite part bpth in raising the money and in directing the investigations. 114. It may be assumed that the average annual wheat harvest in Australia for the next ten years will be not less than 120,000,000 bushels of saleable wheat. A levy of one-twentieth of 1d. on this would represent an annual income of £25,000. On an average production per farmer of 3,000 bushels this contribution would be only 12s. 6d.

115. The flour-milling industry exports approximately 600,000 tons of flour annually and 6d. per ton on this would represent £15,000 per annum. 116. The contribution from the master bakers and other users of flour in Australia (on a consumption of 660,000 tons) of another 6cl. per ton would produce £16,500 annually.

117. These three contributions together would make a total sum of £56,500 which, although it may appear large, is by no means excessive in view of the wide range of problems which are at present virtually untouched 118. The second fundamental point had reference to the pro:pQsed direction of the research work which is required. It is necessary that the development of the main lines of policy should be in the hands of some permanent organization sufficiently broad in its vision of economic, technical and agricultural problems, to stimulate progress. Fortunately, the Australian Agricultural Council which- was set up in 1934 bids fair to take up a position which will enable it to be effective in this regard. It would be impracticable for this Commission to do more than

suggest the particular avenues of activity which seem to it to be most desirabie; a permanent body such as the Agricultural Council would be in a position to consider the views of this Commission and co-ordinate the research work in respect to the problems occurring in the various parts of Australia. The Council will doubtless find it desirable to obtain the whole-hearted co-operation of the milling and baking industries in this rnatter. The Commission is satisfied that such co-operation will be readily obtained if it be sought in the right way ·and if the industries are maae to understand that they are partners in the scheme and smne effective share in its guidance. It would be childish to expeet that a powerful and reasonably efficient industry such as that of flour-milling in Australia would_ accept ex cathedra statements involving changes in its own technique and operations unless the facts were developed by an organization in wh:ch it has confidence and in the direction of which it is suitably represented.

119. The third point is that research activities should be encouraged to evolve as far as practicable from · present organizations. It seems probable, however, that the Australian Agricultural Council, when it examines the thoroughly and without regard to the feelings of any present organization on the matter, may find that there should be created a special research body dealing with the more abstruse of the problems of flour quality, while the problems which are more connected with specific locali-ties should be lmdertaken by the States. The Conunission feels that it cannot do more than express that view at this present juncture and leaves the matter to the decision of the Council. Should such a research institute be necessary, then its construction and inauguration would require a capital expenditure of possibly £25,000, and also a research organization with a well paid and highly trained staff which would require the expenditure of possibly £10,000 a year. The Commonwealth Government might well assist the enterprise by making a substantial contribution to the capital expenditure.

120. The specific problems which the Commission has encountered during its inquiries and which it considers to be most deserving of attention, have been mentioned in various sections of the precedjng reports. It is, however, not out of place here to summarize some of those which appear to be of major significance, and to which the Australian Agricultural Counqil might well devote its thought in t he first instance. They are as follows :-

(i) The Problem of the Trend in Soil Fertility.-It is clear that there is a general concensus of opinion amongst farmers operating on certain soils in certain districts that prolonged cropping to wheat on wheat-fallow or wheat-fallow --pasture rotations has had the effect of causing a certain amount of soil deterioration. The matter is difficult of assessment because the change is usually gradual and the effects only become apparent after a series of years and even then 1nay be _somewhat obscured by the vagaries of climate. The matter is important because if it be shown

that this process is taking place, then there is a fairly clear case that the general fertility of the soil is being deteriorated in the regions affe cted. The finer points in the maintenance of soil fertility are i1nperfectly understood under the conditions of Australian agriculture. The soil is a national asset, and the subject should be watched in the national interests. The question of soil erm'l;ion is a more obvious part of the same general problem. During the last two years much

'

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has been said and written in the United States of America and New South VVales on this matter, but Australia, as a whole, has yet to learn its importance in regard to some parts of her territory. In those sections of the wheat belt where t he problem is already showing itself, intensive research by soil physicists is necessary. Such research should deal with the way in which implements and cropping alter the physical nature of various sections of the soil profile in soils of various types. The result of such investigations should facilitate the desjgnation of areas in which there is danger of erosion. \Vith that information farmers could then consider how far ·they are forced by econ01nic circumstances to continue practices which may be pennanently deteriorating their farms, and Governments can decide how far they are called upon to interfere with such practices which are wasting a major national asset.

Possibly the Soils Division of the Comn1onwealth Council of Scientific and Industrial Research would be able to undertake this work in conjunction with State Departments, provided the staff and equipment were available. (ii) The Breeding of New Varieties is at present in the hands of the State Departments, and, speaking broadly, these organizations h.ave achieved results of considerable n1erit in the . past. The Council for Scientific and Industrial Research also has approached the problem from a fundamental standpoint in the researches of its Plant Division. In general, it may be . said that this matter is adequately dealt with at the present time, but that each State Department should be equipped with the latest satisfactory machinery for aiding the plant breeder in testing new varieties fro'm the point of view of flour quality. All State Departments are making some efforts in this direction, but in some cases the staff and equipment are meagre.

(iii) The control of weeds as a general rule can be most effectively achieved by the. suitable arrangement of soil management and crop rotation. As such it is a matter for State Departments. Exceptional cases occur where a weed can be controlled by the introduction of insects from overseas; in such matters the Council for Scientific and Industrial Research organization is already efficient.

(iv) Tractors.-The Commission is still of the opinion that this is a matter

of major importance for Australian rural development. Numerous private firms have endeavoured to carry out some investigations in the matter, but as far as can be ascertained Australia is far behind certain other countries (such as the French Colonial possessions) where climatic and topographic features are similar to those which prevail within the Commonwealth. The Commission recommends that further technical investigation to assist in the perfection of producer-gas equipment suitable for attachment to farm tract ors be made. ·(See page 125 of Commission's Second Report.)

(v) Flour Quality.- This subject is the most important of all fr01n the point of view of both millers and bakers. It has already been suggest ed in (ii) above, that plant

breeders of State Departments should be able to t est wheats on this score by the most up-to-date methods. Further, the flour-millers of each State should also be able to test the wheats they use 'so that they can blend their grist effectively. It may also be necessary for them to be able to test their products so that they can advise the bakers as to alterations desirable in bake-house procedure. If the new " Brabender " machinery proves suitable for detecting relatively minor

differences, than an entirely new and valuable weapon will be available for use by the 1nillers and they should take full advantage of it. In t hat event the industry must decide whether central testing organizations shoulQ. be established in flour-milling centres, or whether each mill should be equipped separately. These investigational activities should be part of the normal routine of flour 1nanufacture.

121. Apart from these are t he investigations of a fundamental nature which, as already mentioned in paragraph above, may have to be dealt with in a special institution devoted to the purpose. There is a danger that work of t his kind may be as neglected jn the future as it has been in the past in Australia. The tendency to be satisfied with things as they are and to regard

all imperfections of natural products as unavoidable, is marked in most industries which are carried on by numerous units. Such a tendency is a definite barrier to progress and must be a voided at all costs if t he Australian flour-milling industry is to maintain its position in respect to either local or export markets. In most progressive countries detailed scientific knowledge of the local wheats has increased remarkably. It is realized that if the per capita consumption

of flour is to be increased or even maintained, then the articles made from it n;1 ust be competitive with the · ever-increasing array of alternative foo dstuffs. Competition bet ween breadstuffs and these other new products is dependent on quality and quality can only be maintained effectively when an industry uses s12ientific research to the full. The Commission t b.erefore urges that the Australian Agricultural Council shall make fundamentar scientific research on whe at and mill products in relation to quality a definite objective without delay. It should be unnecessary to

add that the men qualified to do such work r equire special training and experience and will requite remuneration in accordance with their special knowledge.

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122. Economic In the past agricultural economics have been seriously neglected in Australia. Prior to the economic depression few Australians had any knowledge as to the economic foundations on which the major rural industries rest. Even the majority of farmers had only the haziest conception of their own financial position. The natural result was an over-optimistic view of the value of land often stimulated to some extent by those interested in

dealing ip. real estate. 123. A systematic and. continuous economic review of the position of the industry will assist in restraining the develop1nent of over-capitalization. Every time the prices of agricultural products in1prove the market for agricultural land becomes active, based, it is feared, more upon speculation than upon production ; and, simultaneously, the farmer is encouraged by pressure of salesmanship to over-capitalize his equipment and incur indebtedness which can be justified in many cases only by the expectation of a continuation of comparatively high prices.

124. The Com1nission is of opinion that a continuous economic service organized and operated by co-operative effort of the main primary industries in conjunction with the Governments of Australia is necessary in order to avoid so far as possible the worst effects of depression periods. Whilst history never repeats itself the ever-present recognition of the lessons of history assessed in the light of ever-changing circumstances and economic facts will contribute materially towards better national balance and the amelioration ,of the effects of altering economic circumstances. ·

125. If the Governments of Australia consider most carefully any actions with reference to primary production which may have the result of raising unduly land values and capitalization in primary production, and if those more directly concerned both in production and possibly in speculation connected with the value of agricultural lands are clearly warned, then the nation as a whole can refuse to contribute in the future towards the maintenance of a level of values which has been established by unsound and speculative methods. It is pertinent here to add that it should be recognized in the future that the lender has responsibilities as well as the borrower. ·

126. A continuous and courageous • economic review widely distributed through publications, through the press, and periodically dealt with through the medium of the broadcasting service, should contribute n1aterially towards preventing undue inflation of land values.

127. One of the most striking conclusions to which this Commission has been forced by its inquiries, is that agriculture is rather more a way of life than a method of making profits, and that, generally speaking, the interest which can be eaTned upon the money invested in agricultural pursuits on the basis of land values and costs of providing fixed assets on a farm, is considerably lower than the Fate of interest expected from investments either in gilt-edged securities such as Government Bonds or in .industrial enterprises. Unless land values be considerably reduced and cost of equipment be kept at the lowest possible point, then the state ,of affairs just above described must be accepted as axiomatic. ·

128. Apart from these general economic studies affecting farmers, there are numerous other econon1ic inquiries which, if undertaken, would clarify matters which are at present obscure. Among these are-(i) An analysis of the costs of selling and distributing spare parts for machinery.

The subject was raised at innumerable country centres and is a continual source of annoyance to primary producers. Yet there is little doubt that the farme:rs are largeJy to blarne and have little conception of the cost of the services which they demand of manufacturers and distributors. (ii) An exarnination of systems of rating and taxation on farming land and their

effect both on costs of production and on land tenure and on the outlook of farmers towards making permanent improvements to their properties. (iii) Similar reviews of economic and trade questions affecting the flour and- bread industries are necessary. (iv) A regular survey of the flour qualities required for various export markets is a

case in point. .

(v) The bread industry should have regular information regarding the practices adopted by that industry in other countries more or less similarly circumstanced. The types and qualities of which are being made and sold, the methods of distribution, the types of wrappings or packages and the development of any trade practices -which are applicable to Australian conditions should be investigated and the results published for general information. 129. Rural Social Services .- The Oom.mission in its First and Second Reports drew attention to the need for social ·services in connexion with farming communities. While many persons are alanned at t he partial failure of some settlement projects and at the drift of population

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towards the cities, yet few are prepared to do more than deplore such occluTences. There is little doubt that the problem is to some extent a psychological one and not entirely economic. The Con1mission takes the view that an investigation of the social life of rural con1munities and the reasons why farmers left or desire to leave their holdings would reveal interesting results.

It is probable that more attention to the amelioration of the conditions of the home life in many farms would add a greater degree of stability to agriculture in some districts. So far very little has been done in this direction and yet the matter is of vital importance to the welfare of rural Australia.

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RECOMMENDATIONS.

c. 0

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t::.g,{ h u

RECOMMENDATIONS.

130. The COlnmiss:_ on recommends-(i) That t he Federal and State Governments and the w·heat industry give the fullest consideration to t he world wheat situation with a view to co-operating with the major wheat .countries in international agreements as may be

ne cessary to avoid there-accumulation of large wo-rld stocks of wheat in excess of prospect ive requirements. (ii) That, should the world wheat situation justify a restriction of production, the Governments and the industry take all steps necessary t o ensure co-operation

with other participating countries. (iii) That scientific, technical and econon1ic research into problems pertaining to the wheat, flour and bread industries be intensified and be co-ordinated through the n1edium of the Australian Agricultural Council. ·

(iv) That the flour and bread industries be given a definite share in the direction of research into such problems as affect their particular industries. (v) That the finaneial requirements for the research work specified in

Reeommendation No. III. be met by a levy of l/20th of a penny per bushel to be paid by the wheat-growers on the annual produetion of saleable wheat, 6d. per ton to be paid by the flour-millers upon the annual export of flour, and 6d. per ton to be paid on flour used for human consumption in Australia. This money should be raised by authority of legislation passed by the

Commonwealth Parliament under t he exc jse po\vers of t he Commo!lwealth. (vi) That a detailed survey of the problem of soil eTosion in the wheat areas of Australia be undertaken as a work of national importance by the Council for Scientifie and Industrial Researeh in co-operation with th e Soil Experts of

State Departments, and further t hat the Comn1onwealth Government support this project by giving the necessary fin ancial assistanee to the Oouneil for Seientific and Industrial Research and co -operating bodies. (vii) That the Commonwealth Gove:rnment take steps to 1nake surveys of and make

available information regardi_r:Lg world trends in eeonomic eontrol and in particular to ascertain the degree of success or failure achieved by control measuTes in other eountries and the circumstances whieh have necessitated the institution of such measures and have influenced their sueeess or failure.

131. The Commission is under an obhgation to many Government Departments and to various organizations and individuals connected with the wheat : bread and flour industries, for the valuable assistance they rendered during the inquiry. A strong desire that the faets relating to these industries should be obtained was evidenced by the majority of t hose with whom the Commission was brought into eontact, and to t his end representative farmers, oakers and flour-n1illers willingly co-operated. To select a few fro m among so many would be an extremely

diffieult matter. The Commission regrets that in the eircumstances such individual aeknowledgment is impossible, but it takes this opportunity of Tecording its sincere appreciation of those who gave so generously of their time .and of t heir business experience in helping to the elucidation of many of its problems.

132. The Commission desires t o express again its appreeiation of the special services rendered by Mr. J. S. Duncan, Barrister-at-Law, as mentioned on page 256 of its Second Report.

133. The Commission has pleasure also in acknowledging the valuable assistance rendered by members of the staff. The nature of the inquiry demanded exacting and painstaking servic e from all those who were engaged on it, and on numerous occasions called for arduous work at h igh pressure . The various officers responded well to the requ es ts that were made and the

Comn1ission is under a debt of gratitude t o them for tbe interest they displayed and for the manner in whieh they discharged their duties.

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134. The staff consisted of-STAFF.

Mr. E. N. Robinson, Secretary (Development Branch, .t'rlille Minister's Department) Mr. C. J. Campbell, Assistant Secretary (Prime Minister's Department). Mr. R. H. Henniker, Accountant (Postal Department, Sydney). Mr. J. Mills (Crown Solicitor's Office, Sydney). Mr. G. vV. Burns (Banlrruptcy Court, Sydney). Mr. J. J. McKenna (Postal Department, Melbourne). Mr. A. H. Howqua (Postal Department, Melbourne). Mr. C. L. Lethlean. Mr. L. 0. Brown (Department of Commerce). Mr. E. J. Sexton (Pensions Branch). Mr. E. G. Fitch. Mr. W. G. Love, Draug}Jtsman. Mr. B. J. P. Newbold. Mr. R. H. Hayes, Draughtsman. Mr. A. J. Spratt. Mr. J. S. Ballantyne.

INVESTIGATION OFFICERS.

Mr. R H. D. White. Mr. D. Hampton.

Mr. ,iV, M. Owen. Mr. vV. L. Corrigan.

Mr. T. F. U. Schumacher. Mt. A. D. Francis.

Mr. H. E. Hogue .

. .M.r. J. L. Smith.

Mr. C. Quadrio.

in addition to the typistes.

Sydney.

Melboutne.

Adelaide.

Perth.

Hobari .

Brisbane.

A considerable number of the staff served the Commission for only part of the period of its investigations.

E. N. ROBINSON (Secretary). 14th February, 1936.

(

H. W. GEPP (Chairman). T. W. CHEADLE. C. W. HARPER.

I E. P. M. SHEEDY. LS. lVI. WADHAM.

Printed and P u blished i or the GOVERNMENT of the OF .... v STil.ALIA . by

L. F. JoHNSTON, Commonwealth Govrrnrnen t Printer, Canberra.