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Wednesday, 20 November 1974
Page: 2585

Senator WALSH (Western Australia) - Mr President,I think it was Galbraith who once drew attention to the nexus between ideas and the environment of people who conceive those ideas. I recalled this to mind when I was listening to Senator Townley expressing concern about what he called the middle income earner. He defined the middle income earner as a person who receives a taxable income of about $12,000 a year. The thought which struck me was that pharmacy must be an extremely lucrative business, if the association between a person's environment and the ideas that he holds and the way in which he interprets or conceives reality is valid. I do not have up to date statistics on this matter, but 3 years ago, only1 per cent of people received incomes of $12,000 a year or above. No doubt, because of rising incomes the number is now significantly higher than that. It may be as high as even 3 per cent or 4 per cent. But even at 3 per cent or 4 per cent it illustrates pretty devastatingly how the majority of honourable senators opposite are out of touch with reality. They imagine that people with taxable incomes of $12,000 a year and above represent middle income earners.

Senator Websterthen followed with what the Minister for Agriculture (Senator Wriedt) has described as a diatribe of distortions, or words to that effect. Although I did not take it down, I think he opened up by referring to the disastrous and discriminatory policies which this Government had pursued against rural industry. He once again demonstrated the Australian Country Party's propensity to be very strong on prejudice, very weak on comprehension and sometimes very weak on factual knowledge. The gaps in its factual knowledge part of it were demonstrated clearly in the other place on 12 November 1974 when the honourable member for Paterson (Mr O 'Keefe), speaking in the adjournment debate, followed the usual emotive rhetorical line of the Country Party when discussing the 1973 Budget. He claimed that the 1973 Budget had placed tremendous imposts upon the agricultural sector and concluded by saying:

It did this at a time when our wool, meat and wheat were difficult to produce and when we had unfavourable markets.

It just so happens that for the 6 months before and after that period meat and wheat prices had hit an all-time record high level, and wool prices had peaked at a level which had not been experienced for 2 decades. The honourable member for Paterson then stated that an export tax of lc per lb was imposed for meat inspection services. He stated that correctly. He went on to say:

In addition there was levied ... a levy of 6c per lb for the eradication of tuberculosis and brucellosis.

The magnitude of his error is 1,000 per cent. In fact, the levy imposed was 0.6c a lb. Possibly he has corrected the record since, but he had not corrected it in time for the printing of the daily Hansard- or perhaps he does not know any better,

Senator Websterwent on to repeat the stereotyped Country Party argument. He referred to taxation concessions, depreciation allowances and revaluation, and in the context of the last point I was interested to note that he stated it is impossible to calculate the precise effects of currency adjustments. At least that is a new twist for the Country Party. About 12 or 18 months ago the Country Party insisted on pushing the simplistic line that there was a direct one-to-one association between changes in the exchange rate and prices received by Australian exporters. I note with approval that the Country Party seems to have amended that simplistic idea. With respect to special depreciation allowances and special taxation allowances, on occasions there may be some justification for government intervention in some way in order to stimulate investment in a particular sector. But it is not possible to justify policies, which have become ossified or entrenched, of providing incentives permanently for particular areas of investment. I will not go into this matter at great length. The reasons behind this policy have been expounded many times by many people They are put very succinctly in the Green Paper on rural policy in Australia from which I shall quote an extract. Chapter 5.48 states:

Incomes tax concessions accentuate this problem much more . . .

That is the problem of unequal distribution. It continues: in that, as they have been operated in Australia, they provide the greater per unit subsidy to those with the highest marginal tax rate, i.e. those with the highest taxable income, and in this sense conflict with both efficiency and welfare criteria.

Without going any further into this question of taxation concessions and all the other imposts which the Whitlam Government was alleged to have placed on farmers in the 1973 Budget, the final test of the sincerity not only of the Country Party but also of the entire Opposition was demonstrated quite decisively in the election campaign in May 1974 when, despite having fulminated for the previous 8 months about the alleged injustice and the alleged unwisdom of these policy decisions, the Liberal and Country Parties gave no undertaking to reverse any of these policies, with the exception of the superphosphate bounty; and even then that undertaking was carefully qualified by the statement that the bounty would be extended for 3 years and referred to the Industries Assistance Commission for study. No commitment in relation to the superphosphate bounty was given beyond a period of 3 years. No commitment was given for anything else which the Liberal and Country Parties had said should not have been changed. That, I suggest, was a fair test of the sincerity of the criticism that they direct towards this Government.

Senator Scott - Do you think it was unreasonable to put it to the IAC?

Senator WALSH - I certainly do not think that it was unreasonable to put it to the IAC. I suggest very strongly, though, that it is highly deceptive, to say the least, to grandstand in the countryside and say how necessary particular taxation concessions and rates of depreciation are, or are alleged to be, and then, when there is an opportunity of offering an alternative policy in an election campaign, to give no undertaking to provide some real backing for the empty rhetoric that the Country Party had been throwing around the electorate for the previous 8 months.

I was also interested to note that Senator Webster moved on to the old area of food production and raised the argument that we are under a compelling moral obligation to maximise the production of food. I find this intriguing in view of Senator Webster's opposition expressed consistently inside and outside this chamber to the removal of margarine quotas, because it so happens that the imposition of margarine quotas is a restriction on food production and, moreover, a restriction, deliberately imposed, on a type of food production which is vastly more efficient in terms of land and other resource requirements than the alternative productbutter. If Senator Webster is sincere in his desire to maximise food production I trust that he will cease opposing, in the way he has constantly done up until this time, the removal of margarine quotas.

Senator McLaren - He agreed to wheat quotas, too. That decreased food production.

Senator WALSH - Yes. As Senator McLaren points out, starvation and malnutrition are nothing new in the world. In 1969 the previous Liberal-Country Party Government was in power and when Liberal and Country Party governments were in power in all wheat growing States they imposed wheat quotas. People were then starving in places like Biafra. They were starving soon afterwards in Bangladesh. Of course, people have been undernourished in half the world for the past 50 years 'or longer.

Senator Young - Those quotas were introduced at the request of the wheat industry.

Senator WALSH - We now have the Opposition apparently putting its imprimatur on the notion that policy should be dictated to government from bodies outside Parliament. That appears to be the only reasonable interpretation that can be placed upon Senator Young's interjection. Although it is true that the Wheatgrowers Federation made such a statement, it did so under extreme pressure, in fact under duress from the then Federal Government which had placed an absolute limit on the amount of money which would be made available for a first advance payment. That absolute limit was $440m. The Government said: 'That is all the money there is.' Then it asked the wheat industry: 'What are you going to do about it?' The wheat industry came back and said: 'Well, maybe it would not be such a bad idea to impose quotas. ' That was supposed to have been a spontaneous decision arrived at by the Wheatgrowers Federation.

The argument that the Wheatgrowers Federation made the decision is advanced in this chamber by people who have maintained for the last couple of months that the level of the first advance is crucial in determining the volume of wheat which is likely to be produced. I also add that the Western Australian Government, which was a Liberal-Country Party Government at the time, moved to introduce wheat quotas before it received any request from the local wheatgrower organisations to do so. I shall say a bit more about the first advance payment, especially as the Opposition has seen fit to raise the subject. Over the last couple of months we have seen a sustained campaign with respect to the first advance payment for the coming 1975 harvest and for the 1975-76 harvest. The people who have been conducting this campaign fall into 2 broad categories- the political opportunists and the galahs. The galahs are those who either do not know any facts or who do not know how to interpret the facts which may be available to them. The political opportunists seem to be well represented in this chamber. It has been repeatedly said that the wheat industry has a liquidity problem. As usual no evidence has been produced to support that assertion.

If we examine the level of money which has been paid into the wheat industry over the last 3 or 4 years we see the sort of general picture which emerges. I refer to an article which appeared in the 'Financial Review' of, I think, Wednesday of last week. I do not have it on hand at the moment. I have no reason to doubt the accuracy of the article. It discloses that between now and April- which is 5 months- $667m will be paid into the wheat industry. For the same period last year $540m was paid in. The Minister for Agriculture has provided figures over the last 2 weeks in this chamber in response to a succession of questions from honourable senators opposite. If we set the figure of $667m from the Financial Review' which is to be paid into the wheat industry over the next 5 months alongside the payment for 1972-73 which amounted to $253m- that was for an entire financial year- we find that the payments to the wheat industry for the next 5 months will be 150 per cent in excess of the industry's total receipts 2 years previously. Certainly there has been an increase in the cash cost of wheat production. I stress cash cost because it is a good idea to distinguish between the 2 costs. It is impossible to estimate that cost at this time. It may have been as high as 25 per cent.

Senator Webster - Did the honourable senator include a calculation for increased taxation?

Senator WALSH -Senator Webster, 1 shall discuss taxation in a moment. Increased costs do not affect the industry's increased cash flow up by 1 50 per cent on what the amount was 2 years ago. So to talk about a liquidity problem in the wheat industry on an across the board basis is utterly absurd. I trust that honourable senators opposite will cease to do so. Of course, at the individual level it is possible that there are exceptions. It is possible that a wheat grower who either had a poor crop last year, will have a poor crop this year or who has had or will have a poor crop in both seasons may have a liquidity problem. To a wheatgrower who has a very small wheat delivery in either of these years, an increase in the first advance will have little effect on his liquidity position because he has not delivered much wheat on which he could receive a higher first advance.

Once again, I suppose this is typical of the type of thinking which prevails among honourable senators opposite. They have an apparently genetic propensity to use ineffective remedies to solve alleged problems. A simple fact emerges. Anyone who knows anything about wheat growing or anyone who has looked at actual case studies or analyses from wheat farms must realise that the margin in favour of wheat growing- - given anticipated price levels for wheat and its alternative commodities- runs so heavily in favour of wheat that any wheat grower who is facing a liquidity problem and who does not plant as much wheat in the coming season as he can must have rocks in his head. Just a couple of days ago I obtained from the Western Australian Department of Agriculture an estimate based on the assumption that the on farm price of wheat for the 1975-76 harvest would be in the vicinity of $2. 1 5 a bushel. Most people consider that estimate to be conservative. But based on that assumption and on the Department's estimated cash costs, the gross margin for wheat growing was $46 a hectare.

Given prevailing levels of meat and wool prices it is extremely unlikely- at least within the wheat growing areas of Western Australia- that any alternative to wheat production, other than some other grain, could reach half that gross margin figure of $46. If we look at the past, current and expected pool returns for wheat we find that in 197 1 the total return to the grower was in the vicinity of $1.25. For 1974-75- this is necessarily an estimate- it will be in the vicinity of $2.70. For 1975-76 which is a more hazardous estimate because it is further ahead, but which is a very conservative estimate, the figure is $2.20. If we look back to 1970 we find that the total return of $1.25 to the wheatgrower was so profitable that the Government of the day considered it necessary to introduce quotas which would restrict competition between farmers so that they would grow the limited quantity of wheat which was marketable at the ruling prices. Farmers 4 years ago were fighting each other for the right to grow wheat for a return of $1.25 a bushel. Do members of the Opposition have the audacity to suggest, given that historical reality, that it is not attractive to grow wheat for a return of $2.20 or $2.70 a bushel this year or next year?

Senator Scott - Is that due to the Government or the market situation?

Senator WALSH - As I have frequently tried to point out to members of the Country Party for their enlightenment, the thing that overwhelmingly determines the level of prosperity in Australian agriculture, particularly in those sectors of it which are exporters, is the level of overseas demand. I certainly nave never denied that. Governments exert little more than a peripheral influence over the final result. There are some sectors where the misconceived actions of governments can seriously aggravate problemssuch sectors as fruit growing and butterfatwhere in the past most of the output has been consumed on the home market and marginal production has been exported, normally at very low prices. In that situation, if a government moves in to artificially stimulate production it can have quite serious consequences for the producers in those industries. I observe in passing that previous Liberal-Country Party governments showed a very disturbing propensity to do just that.

It also has been claimed that because the price of wheat is higher the first advance should be higher. I suppose there is a rough logic in that unlike the liquidity argument which is nonsense. There is perhaps a certain amount of rough logic in the argument that because the final return is likely to be higher the first advance should be higher. If the first advance for a particular year is increased- I am sure members of the Country Party would appreciate this if they were in government- a precedent is established for future years. If the first advance was increased beyond the level of $1.50 which the Government has approved for the following year, it would create a precedent from which it would be very difficult to retreat if wheat prices subsequently fell, and we still followed the argument that there ought to be some correlation between the likely final return and the level of the first advance. Perhaps it is worth looking back 2 years before this Government came to power when the likely size of the 1972 harvest was known, when farmers generally had had 3 years of pretty low incomes and when there probably was a genuine liquidity squeeze as distinct from a fictitious liquidity squeeze. Two years ago approaches were made to the then Minister for Primary Industry, Mr Sinclair, to increase from $1.10 the level of the first advance. Honourable senators should remember, once again, that it was quite a poor wheat crop. The average yield was significantly below normal so the total amount of money circulated to wheat growers, even if the first advance had been increased, would not have been greater than normal. Mr Sinclair said no, which perhaps was a fair comment. What was not fair or reasonable were the reasons he gave for saying no. He said 2 things. The first was that it could provoke an adverse Treasury action. As I commented at the time, I would have thought that even the Country Party, after 23 years in government, would have learned that the Treasury is a Department of the Federal Government which has no option but to abide by directives transmitted to it.

Sitting suspended from 6 to 8 p.m.

Senator WALSH - I seek leave to continue my remarks.

The PRESIDENT -Is leave granted? There being no objection, leave is granted.

Debate (on motion by Senator Wriedt) adjourned.

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