House debates

Tuesday, 19 June 2007

Wheat Marketing Amendment Bill 2007

Second Reading

Debate resumed from 14 June, on motion by Mr McGauran:

That this bill be now read a second time.

6:38 pm

Photo of Simon CreanSimon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | | Hansard source

The Wheat Marketing Amendment Bill 2007 is crucial legislation but, unfortunately, we do not have a lot of detail about what we have before us. The government has just circulated some further amendments which it proposes to move at some stage later in the debate. To put this legislation into context, it is another attempt by the government to manage Australia’s wheat marketing arrangements following the wheat for weapons scandal. I say ‘another attempt’ because the government has failed to come up with a solution. It was bad enough that the government presided over the largest corruption scandal in Australia’s history, that it was negligent in not responding to repeated warnings of abuse by the Wheat Board and that it cost the country in reputation and lost earnings to wheat growers. Now it is showing itself incapable of coming up with a solution—despite the fact that the Cole commission has reported and the government has introduced, six months ago, interim measures. Today all we are doing, in effect, is extending the interim arrangements for another 12 months. I will come to those details in a minute, because I intend to move a second reading amendment. Because we cannot technically move to split the bill, our view is that the government should withdraw it, introduce legislation only to extend the veto power to the minister, come back with proper consultations with the industry, and tell the parliament, by way of legislative amendment, what it intends to do to put in place the new arrangements. That is our preferred position, and I will be moving an amendment to that effect. If that fails, we will move for the separation of the bill when it is debated in another place.

At stake in this debate—this is why it is a crucial issue for us—is the issue of the single desk. The single desk has stood the test of time; it has served the growers well over 60 years. In the past, the Wheat Board was regarded as a world-class organisation. It had integrity and it was held in very high regard. Its activities consistently delivered Australian farmers a premium price for their product. But that reputation is now in tatters, and it happened under the government’s watch.

The Cole commission revealed that under this government a corporate culture developed in the Wheat Board that was characterised by excesses and arrogance. It is a culture which has cost the Australian taxpayer $300 million—but it is not just the cost; it is what that money went to. It went as bribes to the Iraqi regime and ended up with Saddam Hussein, the same dictator that the Minister for Foreign Affairs and the Prime Minister reviled in this place as the enemy that had to be replaced. This is a government that allowed bribes to be paid to Saddam Hussein’s regime. Those bribes ended up in the coffers of Saddam Hussein whilst, at the same time, we were sending our troops to Iraq to depose him. How stupid can a government be to allow that to happen? It is not just the fact that it has cost the Australian taxpayer $300 million; it is what it was going to do. And that happened under this government’s watch. The Australian government allowed bribes to be paid to a regime whose downfall they were committed to. We have made the point on many occasions that, as a consequence, the Australian government became Saddam Hussein’s best friend. That is how bad this is. That is how scandalous it is. And it happened under their watch.

Apart from the cost to taxpayers, this culture and the government’s negligence in allowing it to happen also cost Australian wheat growers. It has cost them at least $500 million in lost contracts so far. It has cost shareholders of the AWB half the value of their investments. This is a culture that has exposed the Wheat Board to a string of future legal actions, including actions by wheat growers in the United States—under the Racketeer Influenced and Corrupt Organisations Act; to a class action on behalf of B-class shareholders, run by Maurice Blackburn Cashman; an action by the Australian Taxation Office to recover the tax forgone in respect of illegal payments to the AWB; and a class action on behalf of some wheat growers against AWB to recover performance bonus payments made by AWB International to AWB. That is quite a string of legal actions. Industry estimates put the ultimate impact on the Wheat Board of these cases at more than $1 billion.

This sort of culture cannot come about overnight. The seeds for the growth of this corrupt culture were sown in the very structure of the organisation at the time that it was privatised by the Howard government in 1998. The government turned a statutory body into a private monopoly without an appropriate regulatory watchdog to effectively oversee the AWB’s activities. Yes, there was a watchdog but it was a watchdog that was asleep all the time and which had no teeth. The government legislated a deeply flawed structure to oversee the running of the single desk. Those responsible for putting that flawed structure in place should be apologising to every wheat grower in the country today. It was the current Deputy Prime Minister and his immediate predecessor, the member for Gwydir, who must accept a lot of this responsibility. They devised the Australian Wheat Board’s structure; they took the legislation through the parliament. They now stand condemned as having failed to produce a structure for the privatised Wheat Board that was robust enough to maintain its reputation as a company worth the trust of the international market place and of wheat growers.

There were a succession of National Party agriculture ministers who failed to ensure that the Wheat Export Authority did the job that it was established to do. When the government, and more particularly the National Party, gave a Corporations Law company, AWB, a legislated monopoly it also had a clear duty to put in place a mechanism to ensure that the monopoly power was not abused. There was need for a real watchdog, but the WEA certainly was not the watchdog that was needed. The Wheat Export Authority had extensive powers on paper to oversight the management of the single desk. In practice, it was completely ineffective, as the Cole commission so damningly demonstrated. For five years, despite the Wheat Export Authority being responsible for looking through every contract, it completely missed AWB’s involvement in the wheat for weapons scandal. Even when all the evidence was coming out on the scandal, all that the Wheat Export Authority did was ask the AWB whether it was doing anything wrong. And, of course, the AWB, as we know, said that it was not doing anything wrong. The Wheat Export Authority pathetically and meekly backed off.

The minister responsible for the Wheat Export Authority was asleep at the wheel. He did nothing to ensure that the Wheat Export Authority did its job. Worse, in March last year the minister condoned the activities when he said:

But even if the Australian Wheat Board was paying commissions for wheat sales in Iraq, that would not cause any great worry … if ever there were any kickbacks to the Iraqi regime, then I guess they would end up with the government. So that is not terribly unusual.

In other words, the minister responsible for the Wheat Export Authority gets wind of the fact that there are kickbacks but does not think that there is anything wrong with them. Everyone now knows how wrong they were. But this was the minister of the day charged with the responsibility and he just did not get it. Did the minister direct the authority to vigorously investigate the allegations that were flying around at the time? No, he did not. Did the government, through any of the ministers, act on the 35 warnings that the Cole commission uncovered? No, it did not.

This approach by the current government is in stark contrast to the approach taken when Labor was in government. Labor had to oversee the activities of the Australian Wheat Board in similar circumstances—during the invasion of Iraq the first time when sanctions were imposed on the regime. UN sanctions were imposed and Labor ensured that there was no such rorting under its watch. Gareth Evans, the then Minister for Foreign Affairs and Trade, insisted that his department satisfy itself that the sanctions were not being breached by Australian companies. During the first Gulf War, there were no bribes paid. Labor also managed to ensure that Australian wheat interests were protected. I was then the Minister for Primary Industries and Energy, and I announced ex gratia payments to grain growers who would have lost out because of the application of the sanctions. We protected the integrity of the UN sanctions but also protected the interests of growers. That is what effective ministers do. They do not go to sleep at the wheel; they do not shift the buck. They take their international responsibilities seriously and they understand that, if there are to be consequences in terms of affected parties, governments may need to step in and make appropriate payments. There is a huge contrast between the approach that Labor adopted versus what unfolded under this government: the absolute negligence and slothfulness of this government and this cabal of ministers who allowed the wheat for weapons scandal to occur. The Cole inquiry noted that there were 35 warnings—35 times when the government could have acted and should have acted. This is pure incompetence.

The Department of Foreign Affairs and Trade also failed big-time. The Cole report was damning in relation to DFAT. I quote:

… DFAT did very little in relation to the allegations or other information it received …

Further on it says:

DFAT did not have in place any systems or procedures in relation to how its staff should proceed in response to allegations relating to the breach of sanctions.

These are damning indictments of the department, but where does the buck stop? That is the question that still this government will not address. We say and the Westminster system says: the buck stops with the minister. It is clear that a succession of National Party ministers and the foreign minister have let wheat growers of this nation down. Australia’s wheat growers fund the operations of the Wheat Export Authority through a levy on every tonne of wheat that they sell. They must feel really short-changed as a result of its actions, and now they are being asked, as a result of this legislation, to accept as part of the ongoing interim solution that another National Party minister be given power to effectively manage and operate the single desk. The faith of the growers knows no bounds if they are prepared to put their blind faith in that solution, and that is why the legislation that we have coming to us today is so flawed.

The bill proposes six changes, in essence, to the Wheat Marketing Act. It gives power to the Minister for Agriculture, Fisheries and Forestry to change the company that manages the single desk from 1 March 2008. I make two points about that which is contained in the legislation. First of all, that date is after the election—very convenient indeed, because the government cannot solve the problem now. The member for O’Connor, who is in the chamber, has taken a very active interest in this debate and I will be very interested to hear what he has to say subsequently. The government recognises the need to change the company, but it is not going to make any decision about it until after the election. Also, the legislation makes absolutely no provision for how the unnamed company should operate. What sort of legislative solution is that? How contemptuous is this government? It is expecting people to buy a pig in a poke after the election.

In the amendments that have just been circulated there is another amendment being proposed by which the Wheat Board International and any affiliates are not allowed to stay as designated companies, but other entities can keep the designated company statement. Does this mean they will get the veto power that the minister relinquishes? Who are we contemplating in these new bodies and what powers will they have?

The second thing that the bill does is extend the minister’s temporary veto power for another 12 months. From the Labor Party’s point of view this is the most time-critical issue in the legislation. I accept that. The fact remains that the minister got the veto power last December. It was meant to last only until 30 June this year, after which the veto was to revert to the AWB in the absence of any alternative solution. That is why we are debating this legislation now; that is why it has to go through—because the veto power is the essential mechanism for ensuring the single desk. The veto power essentially means that no-one else can export, but, instead of coming up with new arrangements, the government has deferred the important decision on new arrangements until after the next election. It is now seeking for the minister’s temporary veto power to be extended for another 12 months. I also note that another amendment that has just been circulated will see the minister lose his power of designation on that date, obviously to put pressure on the government to come up with a solution. We are being told what the minister does by way of losing the power, but who gets it at the end of that time if they still have not resolved the problems? There is much uncertainty associated with this legislation and a hiatus created because of the inability of the government to get its act together.

Other changes proposed in this legislation involve the provision for broader information-gathering powers to a rebadged Wheat Export Authority regulator. So WEA goes, and a new body called the Export Wheat Commission comes in, but all this legislation does is enable it to obtain information from other wheat exporters and their associates. There are no additional powers; it has just a further information-gathering capacity. Another provision in this bill gives the minister power to direct the regulator to undertake investigations that the minister considers appropriate and pass the relevant information to other law enforcement and regulatory bodies. Again, it is an exercise in asking this new body to give information—it does not really go to the assessment of whether or not the existing powers of the new regulatory body are going to be sufficient to stop scandals occurring in the future.

The bill also seeks to adopt the Uhrig reforms for the governance arrangements and structure of Commonwealth agencies and it seeks to deregulate exports in bags and containers. That initiative is welcome and we wanted further information in relation to it. I understand that the deregulation of non-bulk wheat exports will apply now 60 days after royal assent. That amendment has been circulated today but was not in the original legislation.

All in all, this is a very unsatisfactory way to do business and to address the problem. The government claim that the majority of growers support the changes being proposed by them. It is a bold assertion because the fact is that until last week the growers had not seen what is being proposed, and the government are essentially using the numbers and the urgency of the time to ram this through. They are desperately going around trying to accommodate concerns, as evidenced by the four new amendments to the legislation that were not part of the original bill, which we have not really had time to consult with the industry about, and the mysterious Ralph report, which the government used as the basis for their claim that 70 per cent of growers support the changes that they are proposing and which to this day the government has refused to publicly release.

So what are they hiding? A report of the commission? They asked it to undertake consultations, but they will not produce the findings. And they come into this place and assert that the growers back what they want to do. The truth is that the growers are bitterly divided in respect of where we go next. The government have ignored the views of a large number of wheat producers from the major exporting states of South Australia and Western Australia. Why? It is because their views do not suit the outcome that the government want. The so-called consultation over the past few months has been about resolving Liberal-National Party politics, not about listening to the growers. The government, in essence, are choosing to hear what they want to hear

In respect of ministerial powers, some growers, particularly in the exporting states of Western Australia and South Australia, are concerned that the minister will abuse the veto powers and unfairly restrict reasonable competition. On 22 May the Prime Minister talked about ensuring that export applications are assessed on their merit, but the legislation is silent on merit. Our view is that this issue is just one of many that need proper consideration and proper deliberation. That is why the Senate Standing Committee on Rural and Regional Affairs and Transport is a mechanism that we suggest might be appropriate in the other place. The thrust of the second reading amendment, which I will move at the end of this speech, calls on the government to refer these sorts of issues to the appropriate House committee. We believe it does require further, detailed consideration and the proper use of the parliament to overcome the problems and address these important questions.

Let us go to the regulator’s powers. The debate about the regulator’s powers has been ongoing since the year 2000. The government has ignored the recommendations of the NCP review of 2000, a Senate committee report in 2003, several reports from the Wheat Export Authority itself and, ultimately, the Cole commission. The government has ignored the Cole commission’s recommendation to review the Wheat Export Authority’s powers. We do not have any proposal about what those powers should be. It has the ability to gain some extra information, but the government has not addressed the powers. The Cole commission specifically said it should. The government is asleep at the wheel again. It will not take on the hard decisions, it will not go through the consultative processes, and we end up with this flawed legislation.

Only two weeks ago, the Prime Minister said that the WEA would have significant new powers, but the legislation does not propose any. The new regulator could continue to be the toothless watchdog, the watchdog remaining asleep. The new powers only extend the reach of the regulator—its ability to gather information—but not its powers. This too is unacceptable to Labor—and to a lot of the industry whom we have spoken to, I might add. It is another reason why these issues should be referred to the appropriate parliamentary committee. On the questions of what the cost will be and who will pay it, the government has either not considered or not publicly released any assessment of the potential financial impacts on the industry arising from the new regulatory framework. There is no new money for the new WEA, the Export Wheat Commission. Who will bear this cost? What will be the cost to the grower? Where is that issue addressed in this legislation?

On the question of the bags and containers, the industry has expressed concern about the proposal for quality assurance of bags and containers. Some groups are claiming that it is an unnecessary bureaucratic hurdle designed to put a false barrier in the way of trade. The government has not proven its case for a QA scheme. Industry considers that the existing law and market mechanisms are more than adequate to ensure quality. Industry cannot see the role of government in this area, other than to ensure that the traders are responsible and not rogues. But the proposed quality assurance scheme does not address fiduciary or prudential standards. There is also concern from the growers about the costs of the quality assurance scheme, and this range of issues should also be referred to proper parliamentary scrutiny.

It is reasonable that stakeholders continue to have concerns over what the government is putting on the table at this time, since they have not had the full opportunity to consider the impact of the proposed changes contained in the bill. There is a risk that the government is going to create a worse situation. There is a risk that the various proposals in the bill will create further cost burdens to the growers and leave Australia uncompetitive in the international marketplace. There is a clear need for aspects of this bill to be looked at further, with proper scrutiny, in order for Australia and Australian growers to get the best possible outcome in the long run. This is another classic example of the government not really listening—going through all the fanfare of saying it is going to consult, setting up the Ralph review and saying it is going to be serious about fixing the problem for future but still coming up with no real solution and not addressing concerns of major interest to the growers of this country.

That is why Labor would encourage the government to consider splitting the bill so that the minister’s power of veto can be passed immediately, so that it does not revert on 30 June to AWB (International), but so that other non-urgent aspects of the legislation—the ones that I have referred to in this address—can be put forward for consideration and scrutiny. They can then come back in a composite bill which has received proper consultation and consideration. Accordingly, I move the second reading amendment that has been circulated in my name:

That all words after “That” be omitted with a view to substituting the following words:“the House:

the proposed legislative measures in the Wheat Marketing Amendment Bill arise directly from the Australian Wheat Board’s role in the now infamous ‘Wheat for Weapons Scandal’;
the Government should be held accountable for the fact that it:
failed to act on at least 34 substantial warnings about the role of the AWB in the scandal;
failed to utilise the clear mechanism available to insist that the AWB reveal all information in its possession regarding its role in the AWB scandal;
failed to adopt practical and sensible measures to oversee the role of the AWB during the period of the ‘Wheat for Weapons Scandal’;
the Government limited the terms of reference of the Cole Inquiry to such an extent that it was unable to meaningfully evaluate the culpability of the Government in the ‘Wheat for Weapons Scandal’; and
calls on the Government to split the bill so as to separate:
the provisions relating to the extension of the temporary veto power of the Minister for Agriculture, Fisheries and Forestry over non-AWB (International) Ltd bulk exports, from
the remaining provisions of the bill, which should be referred to the House of Representatives Standing Committee on Agriculture, Fisheries and Forestry for inquiry and report”.

I genuinely urge the government to adopt the course of action we propose, particularly given the new range of amendments that have just been dumped on us. I hope the government starts to get this right. Labor are prepared to cooperate in achieving that outcome. I only hope the government takes up the opportunities we are offering. (Time expired)

Photo of Barry HaaseBarry Haase (Kalgoorlie, Liberal Party) Share this | | Hansard source

Is the amendment seconded?

Photo of Brendan O'ConnorBrendan O'Connor (Gorton, Australian Labor Party, Shadow Parliamentary Secretary for Industrial Relations) Share this | | Hansard source

I second the amendment and reserve my right to speak.

7:08 pm

Photo of Wilson TuckeyWilson Tuckey (O'Connor, Liberal Party) Share this | | Hansard source

I wish to say to the spokesman for the opposition, the member for Hotham, that I do not now believe that the suggestion he and his party have made to split this bill is necessary. My reason for saying that is the amendments to which he has just referred. I have made some notes here, which he might find quite informative, as to the effect that those amendments will have. The Wheat Marketing Amendment Bill 2007 provides the following conditions for the next 12 months of operation of the export wheat market. I will come to the future as it may be.

The Minister for Agriculture, Fisheries and Forestry will retain the veto power over applications from parties other than AWB (International) who apply to export wheat up until 30 June 2008. This is achieved in this legislation, as it was presented to the House last week, by the simple process to be found in schedule 2 as follows:

Schedule 2—Veto power etc.

Wheat Marketing Act 1989

1 Section 65 (paragraph (b) of the definition of temporary period)

Omit “2007”, substitute “2008”.

In other words, contrary to some remarks that were found in the second reading speech, this House is approving an extension of the veto provision under the conditions that were passed in both houses in December 2006. There is nothing in those provisions that states that the minister should do other than take account of the public interest and—I might add some words he put in his second reading speech—the rules of the World Trade Organisation. That might be interesting in the court case, which I think is now in progress, which relates to one of the vetos that was applied and the reasons given.

The first thing to understand—and this will be accommodated in the second reading speech in the Senate—is that it will be clarified that the conditions relevant to the veto are unchanged from what they were previously. The Prime Minister said in this place in question time, in answer to a question from the member for Grey, that the applications in this 12-month period to export wheat will be judged on their merits and the public interest. That will be clarified because there were some questions related to that. These matters were agreed and are now being circulated by the government.

The speech that will be made in the Senate will also clarify that the proposed new entity, of which I will speak further—and the member for Hotham raised some questions about what that might be—must establish its financial viability to conduct the management of single-desk marketing in the future. At the moment the bill only requires that it be registered under the Corporations Act. Clearly, that is an insufficient requirement. The speech will also reaffirm that the deadline for the creation of this new entity is 1 March 2008, with no extension, as implied in the explanatory memorandum to this legislation.

The power expressed in this bill for the minister to designate this new entity to assume the rights and powers of single-desk management will have a sunset of 30 June 2008. The bill presently, as proposed to this House, commences the power to designate a new single-desk manager on 1 March 2008. That power expires on 30 June 2008. That is a major change because, as the bill was presented to this House, that power existed in perpetuity. That was not the intention. As I will explain further, it is the intention to look at this new entity in the short period after the deadline that has been proposed to the farmer group that is interested in undertaking this challenge. That all has to be finished within three months. Furthermore, this minister or any minister in the future—no doubt the member for Hotham would be looking forward to that—will not have that power in perpetuity. No doubt the member for Hotham would be looking forward to that.

Furthermore, and of most importance, if the minister does not designate this new entity in the period 1 March to 30 June 2008 then the veto power will not further apply to AWBI, as it applies in the original act. This amendment is to ensure that if no new entity is designated, as would otherwise occur, the veto would revert to AWBI. That certainly never was the intention of the government and this amendment makes sure of that.

As a result of those matters I have mentioned, the regulator, now known as the Wheat Export Authority but to be called the Export Wheat Commission, will, unless the government of the day takes other legislative action, become the manager of the export power for all parties bar AWBI. I find it unfortunate that, in those circumstances, because of the present and existing legislation, AWBI does not have to get an export licence like everybody else. I think the very lack of that discipline of obtaining an export licence is the reason the whole Iraqi affair managed to occur—that and, of course, the confidentiality provisions that apply to this company but to no-one else.

When I want to know what BHP, Rio Tinto or anyone else is getting by way of price for their coal or their iron ore, even during a period of negotiation, I can find it in the Financial Review. I have never been able to understand why AWBI, throughout its life, has been entitled to not tell anybody that it sells wheat for a certain price in a certain market. It claims it might give some information to its competitors. But I am sure its competitors had the information every time, by the fairly simple process of asking the buyer what they paid for it. That is the point. The new entity will become the manager of the export power for all parties bar AWBI, which will still have the right to export but no power to prevent any others whom the Export Wheat Commission so authorises from doing so—in other words, AWBI will never again have the power over its own regulator, as has existed in the past.

The time limit on the QA arrangements for bags and containers is to ensure that the opportunity for people to export in bags and containers will be available within 60 days of royal assent. That is to limit the time it takes to put together the QA requirements—which I point out have been and are now in operation. The restriction on bags and containers that exists in the original act related to getting an approval for the actual export, but the processes by which the quality of the grain and the other necessary factors to maintain Australia’s export reputation are monitored are in place and are part of that approval process. I hope those particular conditions will be reintroduced under the QA proposals. The minister has agreed that he and his department can undertake the process and get the proclamation out in 60 days. That clears the air for people who are interested in these particular provisions.

In general, these amendments satisfy me that we can make progress with this legislation, as the growers—who have campaigned so hard to have the right to test the wider opinions of the wheat export grower community by gaining their financial support to establish this new grower entity—are accommodated in these arrangements. It might be of some interest to members of the opposition to know what this is about. There is much divided opinion, which is very hard to assess, amongst export wheat growers in terms of the quantity of wheat one might export compared to another and whether they want to continue with a single export marketer. Unfortunately, polling and those sorts of things have not provided that assessment. The Ralph inquiry had some 15 per cent of the wheat grower community make submissions or attend one of the public meetings, so it is very difficult to say what the other 85 per cent might consider is the best option for their future. This legislation opens the opportunity for that to be proven.

A group of farmers associated with certain grower organisations—farmer representative bodies that have a small and reducing membership—will undertake this challenge. Most of them, I note, the other day were pleading with the NFF for reduced affiliation fees because their membership numbers are so low, for a variety of reasons, that they do not have the resources to continue to pay these fees. In other words, as a group they do not have a high degree of representation. But the government has agreed to give them one last chance to put an appropriate body in place. It is they and they alone, not somebody new on the scene, who have until 1 March 2008 to put a viable proposition before the government.

If they fail, to quote our Prime Minister, ‘All bets are off.’ The minister will have no body to designate. According to these amendments—which I ask the opposition to support—that veto power will not revert to AWBI. It cannot go to anyone else, so the Export Wheat Commission will be the controlling body. Unless there is further legislation, AWBI as a company with no power over anyone else will still be exempt from having to get an export licence. It will be able to continue conducting its pools or whatever it likes but with no power to stop anyone else that the Export Wheat Commission might approve.

We have to look, then, at the opportunities that arise with the formation of this new group, this new grower entity. I remind the House that, based on the creation of AWB Ltd and its fully owned subsidiary, AWBI, wheat growers contributed $600 million under a process known as the Wheat Industry Fund. Also, I would remind the member for Hotham, were he still here, that it was implemented by the Hawke Labor government. I think he said that it was some sort of insurance scheme at the time, but the community always knew that it was going to be the financial base for a corporatised body of the nature of AWB Ltd. I would imagine that $600 million in 1999 would be closer to $1 billion today—and that money was equity, not loans. Further, it represents only 20 per cent of the value of a typical 15 million tonne pool that wheat growers deliver in an average season. That is the amount of wheat that will be gifted to this new entity if it is designated. It is pretty obvious that there has to be a firm financial base so that the growers will get paid.

As growers deliver the ownership of their wheat at the time of delivery, they are entitled to know that this new manager will have its own cash equity resources to do the job for which the growers will be charged a fee. The concept promoted by the promoters of this group is for it to borrow such funds—that is, the basic equity that exists in AWB—as it may require them. This is not acceptable, as the only security it will have is the growers’ wheat. That would make you feel pretty good: you have been obliged to give this group your wheat and then it mortgages it to run the business. Yet that is being contemplated by the promoters of this group. The hurdles that will have to be jumped before this parliament will endorse, through the minister, a proposed new company have been identified. It is not going to be a $2 company, and that is the important point about it. Growers should not have to finance such borrowings from the proceeds of their crop. Under other arrangements that are available now, they would not incur such a charge.

I note here the matter of bags and containers. Growers will be able to find markets themselves overseas for bag and container lots. There are many flour mills that would appreciate the opportunity to buy in such quantities. What is more, in the present boom of mineralisation, Mr Deputy Speaker Haase, of which you are well aware, the price of bulk shipping has been going up very rapidly and containers—Australia has none; it is a great exporter of them—could provide a highly competitive opportunity in certain niche markets.

In the few minutes I have left, I want to mention quickly the circumstances of the current 2005-06 pool. I have been given a table of that pool, which at the end of this speech I might ask permission to table. The table indicates how much money wheat growers are owed by AWBI for wheat that they were forced to deliver in 2005-06. It is money that growers would desperately like to have at this time to finance them through the drought or, for those who have experienced a better turn of events, to put in a crop in areas where there has been rain. The last payment has not been made to them. In many cases, that last payment represents between $10 and $60 a tonne on their delivery. Growers who delivered 1,000 tonnes—and in parts of your electorate, Mr Deputy Speaker, it would be 10,000 tonnes—are still waiting to be paid $40 or $50 a tonne. In my electorate, such people are now contemplating their second year of no rainfall.

These things happen, as the member for Hotham has described, because of the lack of power within the act as it was written back in 1998. I wish that I had time to read to the chamber my 1998 speech, or just its opening remarks, in which I predicted every one of the disasters that have occurred. Of course, that speech is in the Hansard. If we are going to have a new entity—and I am concerned about it but I have agreed that that opportunity has to be extended—I hope that a couple of the following speakers will tell me where the money for it will be coming from and where the guarantee of equity will reside for wheat growers when they deliver their wheat. They would have to do that for growers in Western Australia, for wont of any other marketing opportunity except for bags and containers.

With those few remarks, I will conclude. However, it is important that we understand that improvements have been made to the legislation to give some certainty to wheat exports by whoever has to deal with them in March next year.

7:28 pm

Photo of Kelvin ThomsonKelvin Thomson (Wills, Australian Labor Party) Share this | | Hansard source

It is always interesting to listen to the member for O’Connor on wheat marketing and export issues. I hope that the minister is able to provide some appropriate response to some of the issues he has raised.

I rise to speak in support of the amendment moved by the member for Hotham to the Wheat Marketing Amendment Bill 2007. Right from the outset, we should make no mistake about what a big deal the AWB scandal is. In an international inquiry into an international scandal, it was an Australian company which came out at the top—a world-beater in the kickback Olympics, far outstripping any other company in the race. The Volcker inquiry estimated the AWB kickbacks at $US220 million. The next biggest supplier, Chayaporn Rice Co. Ltd of Thailand, came in at $US42 million, less than a quarter of the AWB sum.

Volcker’s conclusions clearly called for an Australian inquiry into the behaviour of AWB, both to maintain Australia’s international reputation as a country committed to clamping down on corruption and to safeguard the interests of wheat growers. International wheat trading is a hard-fought business. Had the Australian government not commissioned an inquiry, the damning findings of the Volcker inquiry would have been played and replayed in international forums by AWB’s competitors, with AWB as the major villain. Not having an inquiry would have made the situation worse, signalling to the world that, as far as kickbacks are concerned, Australia has a relaxed and comfortable approach. The Cole inquiry unfortunately turned into a monumental nonevent. What has it achieved? Nothing. It has been a monumental whitewash. It has achieved nothing by way of ministerial accountability for this debacle; it has achieved nothing by way of departmental or Public Service accountability for this debacle; it has achieved nothing by way of reform or restructure of AWB; it has achieved nothing in terms of prosecutions for individual wrongdoing. And the crowning glory, the piece de resistance, is that, once the Cole report came down, AWB proceeded to claim the $300 million in kickbacks as a tax deduction and the tax office and the Treasurer went along with it.

Let me substantiate each of those claims in turn. First, there has been no ministerial accountability for the AWB scandal. The Minister for Foreign Affairs approved 41 contracts over a five-year period—contracts which contained $A290 million in bribes that have cost Australia’s international trading reputation and Australian farmers dearly. Minister Downer made a virtue of his ignorance. He revelled in the fact that Commissioner Cole did not find that he was criminally culpable. But, as the second reading amendment points out, the government limited the terms of reference of the Cole inquiry to such an extent that it was unable to meaningfully evaluate the culpability of the government.

This is not a scandal that the government can disown. Under the relevant Security Council resolutions, national governments have a clear obligation to monitor compliance with the sanctions regime under resolution 661. Governments cannot escape responsibility merely by claiming that their national companies circumvented sanctions on their own initiative. Nor did the Cole commission have anything to say when evidence emerged contradicting government claims to the commission that it did not know about AWB’s payments of kickbacks to the Iraqi government.

First there was Alia. The government claimed that it knew nothing about this Jordanian company, through which kickbacks were laundered, until the Volcker inquiry in 2004, but an email in September 2003 showed that Austrade officials met with the al-Khawam family, 51 per cent owners of Alia, and the former head of the Iraqi Grains Board in 2003. Then there was Tigris. The Minister for Foreign Affairs and other Howard government personnel claimed to the Cole commission that the first they knew about Tigris Petroleum’s plan to defraud the oil for food program of $US8.8 million was through the Cole inquiry itself and that they had not heard of Tigris at all until 2003. But an email from AWB’s government relations manager, Matthew Foran, says that he spoke with Minister Vaile’s office in September 2002, advising the government to not make any public comment about a statement by the Iraqi embassy which explicitly referred to the Tigris deal. The email states that Minister Vaile’s office contacted the offices of the Minister for Foreign Affairs and the Prime Minister to warn them of the statement by the Iraqi embassy. The Howard government was caught out misleading the Cole inquiry, first over Alia and then over Tigris, but the Cole commission failed to follow up these matters or deal with them in its report.

Nor has the Cole commission achieved anything at all by way of departmental accountability. Minister Downer simply ignored Commissioner Cole’s findings of incompetence and negligence and announced that there would be no review of administrative practices within the Department of Foreign Affairs and Trade. This was incredible. It represented an all-time low in public accountability standards. It looks like society is to blame! There were $300 million in kickbacks and society is to blame.

Nor has the Cole commission achieved anything in terms of the structure of AWB, and the bill before the House makes that abundantly clear. Michelle Grattan reported this bill in the following terms:

Ministers have signed off on a political compromise for the new bulk wheat export marketing system designed to get the Government through the election.

A “kitchen cabinet” of John Howard and senior ministers decided farm organisations should be given until March to either set up a new grower-owned and controlled company to run the single desk, or have AWB demerge and AWB International operate the desk.

The Cole inquiry has achieved nothing on this front either.

Another Cole inquiry shortcoming is that it did not focus on the role and responsibility of the AWB board. Ethical standards depend, not only in AWB but in any large company, on the culture fostered by the company’s board. Culture was not within the Cole inquiry’s terms of reference but it is at the heart of why the kickbacks occurred. The AWB board’s role has received precious little attention. Indeed, their performance was rewarded by all six members standing for re-election being reappointed for another term at the following AGM. Sadly, the majority of the shareholders seemed more interested in blaming anyone and everyone rather than extracting accountability from AWB itself. The Deputy Chair of the Australian Shareholders Association, John Curry, said:

To restore its reputation all those directors who were on the board at the time of the dodgy, dubious deals with Iraq and Pakistan must resign and be replaced by new talent.

…            …            …

It is essential that the new directors come from a variety of business backgrounds and have experience in large public companies. Another board dominated by grain growers is not appropriate. New and independent directors are required urgently.

It seems to me that one of the fundamental problems with AWB is that there are opposing interests amongst its shareholders. There is a need for risk management and planning for and then dealing effectively with unexpected events such as this public scandal. The board seems to have had no effective strategy for dealing with such risks. Even prior to the Volcker inquiry, one wonders how the board could not have realised that there was always a possibility that this would come out—or did the board really not know what was going on? If that is so, just what sort of corporate governance was it exercising in terms of its responsibilities for guiding the company? The only risk management strategy pursued by AWB seems to have been to keep its fingers crossed and hope that the secret would never come out.

AWB did seek advice in December 2005 and January 2006 from international crisis management expert Peter Sandman. But, when he told AWB to apologise profusely for the kickbacks, it rejected that advice. The record also shows that, by this time, it was not just senior executives who were involved; the AWB chair was also party to this strategic blunder.

Then there is the issue of the prosecutions. In May this year, John Garnaut reported in the Sydney Morning Herald in an article entitled ‘Wheat scandal charges are years away’:

… now it emerges that it could be two years before charges are laid as a result of the Cole commission into the AWB oil-for-food scandal.

It was widely assumed the commission had broken most of the necessary ground for a criminal investigation when it examined witnesses for 10 months and then handed down its final report in November. But enforcement officials have told the Herald that a special AWB prosecution task force has made slow progress, partly because the Australian Federal Police are relatively inexperienced in handling complex, white collar investigations.

A team of corporate investigators from the Australian Securities and Investments Commission is yet to move into the federal police special task force headquarters because police data management systems are not yet in place.

He says that, in May:

… the task force was given $21 million to fund investigations through to 2009, including money next financial year for ‘IT and communications equipment and accommodation fit-out’.

An enforcement officer is reported as saying:

It will take at least a year and probably more than two years before charges are laid …


… initial assessment of available material, possible offences and identities of likely offenders had yet to be completed.

Mr Garnaut says that the office of the Attorney-General, Mr Ruddock, has said:

… the inquiry could ‘take years’ because so many agencies were involved.

That is all very convenient for the government, let me say, but another blank for the Cole inquiry.

Then we come to the crowning glory—the final insult. After the Cole report was handed down, AWB went off to the tax office and proceeded to claim the $300 million in kickbacks as a tax deduction. That is truly astonishing. AWB confirmed in late December, just before Christmas, that the Australian Taxation Office had ruled that the bogus trucking fees it paid to Iraq in breach of United Nations sanctions in order to secure wheat contracts were not bribes and qualified as legitimate business expenses. AWB’s share price surged almost 10 per cent to $2.88 on the news that it had dodged a tax bill expected to be more than $100 million.

Commissioner Cole said that AWB was not guilty of the crime of bribery because the Iraqi officials who took the money from AWB were not breaking Iraqi law. This drew the not unreasonably incredulous response from Tracy Lee in the Australian Financial Review:

Australian companies wanting to pay bribes overseas should make sure they do it in really corrupt regimes if they want to get a tax deduction.

She said:

That is the ridiculous outcome from yesterday’s decision by the Australian Taxation Office that has let AWB keep up to $180 million in deductions claimed on the payment of bogus trucking fees to the former regime of Saddam Hussein.

The Australian Financial Review obtained a letter to AWB from the tax office saying that it had relied on the Cole report in making its decision to allow AWB to keep over $100 million in tax deductions. We had Treasurer Costello saying that he was relying on the Cole inquiry as well. He said that the probabilities are that the tax office is bound by the Cole inquiry. Commissioner Cole made no findings on tax matters, saying that it was ‘beyond the technical and resource capacity of this inquiry to conduct a detailed investigation’ into the tax treatment of the kickbacks. He drew ‘to the attention of the Commissioner of Taxation the fact that this matter has not been the subject of any inquiry by me’. But, elsewhere in his report, Mr Cole said that the payments were ‘not unlawful in Iraq’.

So we have an astonishing situation. Each of them—the Cole commission, the tax office, the Treasurer—is saying, ‘Don’t look at me; it’s not my job to stop AWB from getting a tax break for these kickbacks.’ Well, whose job is it? There has been simply no accountability for the scandal—none at all. I invite people who are interested in this issue to have a look at the book entitled Against the Grain, written by Stephen Bartos, who is professor of governance at the University of Canberra. I want to draw on some of his work for some of my remaining remarks:

There is no defensible rationale for bribery or kickbacks. … Australia is one of many of the countries … that has signed up to tough anti-corruption standards, in recognition of the ongoing harm this sort of activity does to all those involved.

Australia is a signatory to both the UN Convention Against Corruption and the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Criminal Code Amendment (Bribery of Foreign Public Officials) Act, known as the bribery act, is this parliament’s legislative implementation of that latter convention.

Bartos also wrote:

… even if we were to accept for one moment that kickbacks are defensible, consider this particular set of kickbacks … $300 million is no minor “facilitation payment” to an underpaid border guard or customs official. These were payments that ultimately benefited a regime that was subject to international sanctions. They were payments to a regime that Australia had condemned in the strongest terms in diplomatic forums and that we would eventually go to war against.

So even if you think that there may be circumstances—and I do not—in which kickbacks are legitimate, as Mr Bartos said:

… this is a strikingly inappropriate arena in which to pay them.

Nor did the scandal arise from the actions of foolish individuals who may have been unaware of the consequences. This was no intrepid, young dealmaker venturing boldly but misguidedly into Iraq. The evidence presented to the Cole inquiry suggests that this was a deliberate corporate attempt to work around a sanctions regime to which Australia was a signatory. It was a systemic problem. The people responsible for AWB’s conduct were not rogue traders operating outside normal corporate standards, they were at the heart of the company, and they were operating according to established company practice.

The sources of a problem of this character lie in governance. They lie in corporate governance arrangements within AWB, national regulatory arrangements for the oversight of AWB and, underlying both of these, national governance standards as they apply to agricultural politics in Australia.

Three key areas of governance concern have emerged from the evidence that we heard at the Cole inquiry about AWB. There was the apparent failure of the board to detect and deal with the kickbacks at the time they were paid, the apparent failure of audit mechanisms to uncover payments after the event and the perverse incentives built into AWB’s dual shareholder structure.

I want to spend a minute or two on the audit process at AWB. According to the best practice guide in relation to audit committees, it is vital that an audit committee include independent directors, especially as chair. It is important for audit committee members to be independent and seen to be independent. Of the six current AWB audit committee members, only one is not listed as either a farmer/grain grower or someone with a financial interest in wheat farming. There appears to be a pervasive belief within AWB that wheat-growing experience is a prerequisite for any position of significance and very few board members have come from outside the industry.

It is virtually impossible for AWB to have an audit committee that is genuinely independent of the grain-growing business. In this light, the failure of AWB’s corporate governance processes to detect and control the kickbacks starts to make more sense. I do not have time to say much about AWB’s dual shareholder structure but again this is at the heart of AWB’s problems. The structure, which was created by this government when it privatised AWB, formed an arrangement in which the interests of different classes of shareholders can be at odds—and this is a matter of considerable concern which has been commented on elsewhere. I strongly support the amendment moved by the member for Hotham and I commend it to the House.

7:48 pm

Photo of Judi MoylanJudi Moylan (Pearce, Liberal Party) Share this | | Hansard source

I welcome the opportunity to speak to the Wheat Marketing Amendment Bill 2007, which has six key elements to address the future of marketing wheat internationally. These elements comprise:

  • the extension of the Minister for Agriculture, Fisheries and Forestry’s temporary veto power over non-AWB (International) Ltd bulk exports until 30 June 2008;
  • the inclusion of the power for the minister to change the entity that operates the single desk after 1 March 2008;
  • improved powers for the regulator to obtain information, particularly from wheat exporters other than AWB (International);
  • the inclusion of the power for the minister to direct the regulator to investigate matters relating to its functions and pass this information on to other law enforcement and regulatory bodies as necessary;
  • a range of structural and governance reforms to the Wheat Export Authority, in line with the principles espoused by the Uhrig review; and
  • the deregulation of wheat exports in bags and containers, but with the addition of a quality assurance requirement to safeguard the reputation of Australian wheat.

I must say that I am pleased to see that safeguard in there because Australia has a very fine reputation for clean, green grain. It is important that we do not do anything that would disturb that reputation internationally. The need for this legislation arose of course from the actions of certain individuals within AWB in relation to international marketing which did damage the reputation of Australia’s premier wheat-marketing organisation.

As the extent of some of the appalling corporate behaviour was revealed through the Cole commission of inquiry it became apparent that the growers of Australia have been poorly served by AWB and that alternative arrangements for exporting wheat would have to be considered. On the back of one of the worst droughts in the country’s history, the growers have had to face tremendous pressure and uncertainty with probably predictable calls to dismantle the single-desk system of selling wheat in the export market.

There are, and have been for some time, people who have wanted to see the end of this system. No area has been more affected by this than Western Australia, which grows around about 50 per cent of the nation’s export wheat. It was on the basis of the Cole findings that the government elected to establish a Wheat Export Marketing Consultation Committee to conduct a series of meetings with growers around the country and to report back on the findings. This was a very important step because I think there was the possibility of a knee-jerk reaction after Cole.

As I have said on many occasions, while we have to be concerned about what was going on in AWB and the activities that damaged Australia’s international wheat-marketing reputation, it is enormously important for us to keep a cool head and ensure that the steps we take are in the best interest of growers so that we can continue to contribute to maximising grower returns. The steps the government took were very responsible because they took the heat out of things and allowed people to stand back and examine the operation of the single desk outside of the furore that sprang up around AWB’s activities. In almost every meeting held around the country on this issue by the Wheat Export Marketing Consultation Committee, growers were very forthright in putting forward their views, which overwhelmingly supported the single desk. Even when Mr Ralph—the chairman of the Wheat Export Marketing Consultation Committee—reported, he acknowledged that around 70 per cent of growers across the country wanted the single desk to be retained. This was certainly the case with the Wheat Export Marketing Consultation Committee meeting held in my electorate at Beverley. Many of the presentations made by growers for the retention of the single desk were both articulate and compelling. We have some pretty smart growers; they have to be to survive in what is an increasingly competitive marketplace. It is fair to say, though, that there were opposing views from people who believe that wheat marketing should be deregulated. However, these were clearly minority opinions.

In a submission to the Wheat Export Marketing Consultation Committee, I made a few comments about the state of international markets and why growers overwhelmingly support the retention of the single desk. I will recap some of those comments, but I preface my remarks by saying that these are my own views. While allowing free market forces to prevail is almost always preferable in our mostly deregulated system of commerce and trade—and strong intellectual arguments can be mounted to support this from both an economic and social perspective—the fact is that Australia is not operating within an international trading environment that ensures perfect, near perfect or even semiperfect competition. When domestic wheat marketing was deregulated a few years ago—and the former Deputy Prime Minister made this point very eloquently recently because he had responsibility for this—Australia had, and continues to have, a competition watchdog to ensure that there was a reasonably level playing field for the sale of domestic wheat.

This is not the case in the international marketplace. We all know that growers in both the United States and the European Union are heavily subsidised by their respective governments, which give no indication that they intend to remove the generous cash subsidies to wheat growers anytime soon. It is unrealistic to suggest that Australian growers should accept full deregulation of the export market under these particular circumstances. They are not competing on a level playing field. In addition to the direct cash subsidies, the United States and the European Union use a combination of aggressive export credit programs, food aid programs, government funded promotions, government funded marketing activities and direct government diplomatic intervention at a commercial level.

With a total lack of commitment by the EU and the United States to change their domestic agricultural policies as they affect the international market, it would be very unwise and very unfair to place additional burdens on the backs of our own growers at this time—particularly following one of the worst droughts in the country, and with alarming increases in the cost of fuel, fertiliser, bulk handling and transportation further squeezing profit margins. Our farmers are very efficient, notwithstanding that they operate in a very volatile sector and are subject to the vagaries of weather and fluctuations in interest rates and international money markets. Additionally, the traditional approach to domestic interest rate changes are often considered in the context of consumer activity and levels of indebtedness in our major capital cities, sometimes seemingly without sufficient thought of the impact on rural Australia. Notwithstanding these restraints, Australia’s success as one of the three largest exporters in the world is significant, and it can be strongly argued that this has largely been achieved by growers funding the strategic plans and the marketing success internationally of the single desk.

It is for all the aforementioned reasons that a high proportion of growers reject the case for the deregulation of wheat marketing. This is a time to consolidate, to consider important changes in the structure of the single desk, to provide greater transparency—no-one can argue that greater transparency is not required—and greater contestability in the delivery of essential services to growers and to ensure that we contribute in a way that maximises returns to growers and ensures a market for wheat in the increasingly competitive global marketplace. In these deliberations, growers’ interests should be central to the future shape of export wheat marketing in this country.

Pearce has just over 600 growers, and although they do not grow the bulk of Western Australia’s wheat they operate in a fairly predictable rainfall area and grow high-yield crops and high-quality wheat for export. In a survey I did of Pearce growers, I found that they are predominantly of the view that there is great value in maintaining the single-desk system. In fact, 92 per cent of respondents were in favour of retaining the single-desk national pool, 72 per cent of respondents wanted AWBI demerged from AWB Ltd, 94 per cent wanted a grower owned and controlled single-desk marketing organisation and 77 per cent wanted the Wheat Export Authority to be retained. Many made the comment that they thought the Wheat Export Authority needed greater investigative strength and ability, and that is something that the government is incorporating in this bill. Many in the industry believe that the interests of growers would be best served by a grower owned and controlled entity with a real opportunity to maximise returns to growers without the obvious conflicts that have arisen through the existing corporate structure.

There have been some concerns raised about aspects of these amendments; however, I believe that, with goodwill between the government and the grower representative organisations, these minor issues can be addressed. There are issues around the make-up of the new Wheat Export Authority and there are other minor issues, but I understand that talks are taking place to try to make sure that those issues are worked through in a sensible manner. This bill makes it possible for a demerger to take place, and that is what is currently needed. It allows us to put in place a mechanism to ensure a marketing organisation that is grower owned and controlled and which does retain the full integrity of the single desk.

Splitting the bill, as I heard proposed by the member for Hotham, and supported by the member for Wills, would be a disaster for growers. It would create greater uncertainty and would jeopardise any possibility of the development and establishment of a new grower owned and controlled single-desk marketing operation into the very near future. This work needs to be done now. It cannot be done without the certainty of the passage of this bill in its current form. So it is enormously important that we put our full support behind this bill today without splitting the bill and causing greater anxiety and greater concern to the wheat growers of Australia.

The time frame to come up with a new entity is tight, given the task ahead. It is a mammoth task to establish a new entity, but I believe that those in the industry working towards this outcome are very determined. They have been working behind the scenes for some time now to try to achieve this. I believe that they will be doing everything humanly possible to achieve that new entity within the time frame that is given. I support this bill.

8:02 pm

Photo of Gavan O'ConnorGavan O'Connor (Corio, Australian Labor Party) Share this | | Hansard source

The Wheat Marketing Amendment Bill 2007 represents the Howard government’s response to the wheat industry crisis generated by the involvement of Australia’s single-desk marketer, AWB, in the wheat for weapons scandal. Like its recent initiatives on climate change and broadband, the Howard government has been forced into this legislative action because of its own incompetence and neglect. The Wheat Marketing Amendment Bill 2007 proposes six key changes to the Wheat Marketing Act 1989. It extends the Minister for Agriculture, Fisheries and Forestry temporary veto powers over non-AWB International Ltd bulk exports until 30 June 2008; it includes the power for the minister to change the company that manages the single-desk from 1 March 2008; it provides powers for the regulator to obtain information, particularly from other wheat exporters and their associates; it includes the power for the minister to direct the regulator to investigate matters relating to its function and pass this information on to other law enforcement and regulatory bodies as necessary; it introduces the Uhrig reforms to the industry regulator; and it deregulates wheat exports in bags and containers, but with the addition of a quality assurance requirement to safeguard the reputation of Australian wheat.

The Labor Party’s position on this legislation is that we support the bill in principle. I wish to place on the public record my personal support for the second reading amendment proposed by the member for Hotham—a person on this side of the House still held in very high regard by wheat farmers and wheat industry representatives throughout Australia. That amendment states:

That all words after “That” be omitted with a view to substituting the following words:“the House:

the proposed legislative measures in the Wheat Marketing Amendment Bill arise directly from the Australian Wheat Board’s role in the now infamous ‘Wheat for Weapons Scandal’;
the Government should be held accountable for the fact that it:
failed to act on at least 34 substantial warnings about the role of the AWB in the scandal;
failed to utilise the clear mechanism available to insist that the AWB reveal all information in its possession regarding its role in the AWB scandal;
failed to adopt practical and sensible measures to oversee the role of the AWB during the period of the ‘Wheat for Weapons Scandal’;
the Government limited the terms of reference of the Cole Inquiry to such an extent that it was unable to meaningfully evaluate the culpability of the Government in the ‘Wheat for Weapons Scandal’; and
calls on the Government to split the bill so as to separate:
the provisions relating to the extension of the temporary veto power of the Minister for Agriculture, Fisheries and Forestry over non-AWB (International) Ltd bulk exports, from
the remaining provisions of the bill, which should be referred to the House of Representatives Standing Committee on Agriculture, Fisheries and Forestry for inquiry and report”.

I commend the contributions of the members for Hotham and Wills—the members from this side of the House who preceded me in this debate.

Nobody in this parliament ought to be under any illusion as to the importance of the matters that we are debating in this bill here today. Thousands of wheat farmers and wheat-farming families across the length and breadth of this great nation depend for their living on this great Australian agricultural industry. The very existence of many rural communities depends on the economic viability of the farms and farm enterprises that make up this great Australian industry. Their economic viability depends heavily on the efficiency of the marketing arrangements for wheat and the prices that they are able to extract from a global marketplace that all acknowledge is, in many instances, corrupted by European and American producers who are heavily dependent on government subsidies and support for their existence.

It is in this context and against the backdrop of this government’s negligence and incompetence throughout the AWB wheat for weapons scandal that this parliament is now considering new legislation relating to marketing arrangements for wheat. There is a very good reason why Labor is proposing to split the legislation and to refer the details of the proposed marketing arrangements to a committee of this parliament for further consideration and scrutiny. It is simply because the government has not adequately consulted the industry about its plans. We all know the history of this. On 22 May, the Prime Minister announced the government’s plans for future wheat export marketing arrangements. This particular bill was introduced into the House on 14 June, without any consultation with growers or traders—with the government knowing that there is a wide divergence of views within the producer and marketing communities on how arrangements ought to be structured for this industry’s future. Until last Thursday, grower groups had not seen the detailed legislation, and they have not had a proper opportunity to consider the impact and the details of the changes that are inherent in this legislation.

In Labor’s second reading amendment, we are providing—and we will do the same in the Senate—the opportunity for the industry to consider in detail this legislation and its impact. We on this side of the House believe in consultation with the industry on these matters. I am pleased that Labor’s proposal to split the bill has been welcomed by key players in the grain industry, including the Grains Council of Australia and the PGA in Western Australia. It is simply not enough for the government to argue that it has already undertaken sufficient consultation with industry players through the Ralph Wheat Export Marketing Consultation Committee. The fact is that nobody has yet seen the report on the deliberations and recommendations of that committee. Furthermore, there has been no formal opportunity for industry players, who hold quite divergent views on the future of wheat marketing, to comment in detail on significant elements of the government’s legislation; hence our proposal to split the bill.

A cursory scan of the Minister for Agriculture, Fisheries and Forestry’s second reading speech provides ample clues to the quite decrepit state this government is in after 11 long years in office. In his second reading speech to this House, the minister demonstrates the paralysis of government that inevitably comes from being duplicitous, incompetent and in power too long. I notice that my coalition colleague from South Australia is here—a wheat farmer from the Eyre Peninsula

Photo of Patrick SeckerPatrick Secker (Barker, Liberal Party) Share this | | Hansard source

No, from the south-east.

Photo of Gavan O'ConnorGavan O'Connor (Corio, Australian Labor Party) Share this | | Hansard source

Oh, from the south-east. He has joined us in the House tonight for this debate. He would appreciate this comment: there is no point in feeding the minister wheat. He has been running around in policy terms like a chook with his head cut off ever since the wheat for weapons scandal. I ask: where in the minister’s second reading speech is the acceptance by this minister and this government of their responsibility to growers and to the industry? I note in the gallery tonight a visitor from Geelong—a local legend, Mick Robinson. Mick served for some 10 years on the Bellarine Council. He served with distinction on that council as a local legislator who accepted his responsibility to his constituency and to his community. He umpired some 300 games in the local leagues in the Geelong and Western District regions, and he accepted responsibility for the decisions that he made in all of those games. He now serves on the tribunal in the Geelong area, and he accepts responsibility for the decisions that he makes on the future of others. But we do not get any sense of responsibility when we look at the minister’s second reading speech on this piece of legislation. I am going to take you through this speech, because it is a classic example of how this government avoids being accountable and avoids its responsibility to key constituencies in this nation. In his opening remarks, the minister states:

It has been an immensely difficult 18 months for Australia’s wheat growers.

We on this side certainly agree with him. He goes on to say:

Last year they faced a devastating growing season as winter and spring rains failed and the drought continued to tighten its grip across the country.

This is from a government that only recently conceded that global warming is a problem. He goes on:

Growers have also had to deal with continued pressure to dismantle their wheat single desk due to strong, but justified, criticism of the corporate behaviour of AWB Ltd stemming from the findings of the Cole commission of inquiry.

What the minister failed to mention was that this industry and those growers have had to deal with the incompetence of National Party ministers in dealing with the AWB scandal that has cost them hundreds of millions of dollars in lost market—and it is about to cost them many hundreds of millions more as the international wheat community starts looking at the prospect of suing the pants off AWB for its actions in the wheat for weapons scandal.

What he fails to mention is that the Howard government became Saddam Hussein’s bagman. It all happened under the watchful eye of Howard government agriculture, trade and foreign affairs ministers. The cost to growers is in the hundreds of millions, yet not one minister has paid any political price for their incompetence in those portfolios. The minister then goes on with the speech, giving the detail of the legislation and coming to this point:

The government has decided to give growers until 1 March 2008 to establish a new entity to manage the single desk.

What happened to the government’s responsibility to govern? Isn’t that what you were elected to do? Talk about giving a hospital handpass to somebody in a difficult position. The industry is on its knees from drought, is reeling from the wheat for weapons scandal, has had to put up with incompetent ministers whose negligence has almost brought it down, has to put up with a government that has until recently denied the existence of climate change, and, when the going gets tough, the National Party ministers handball the problem to growers and deliver them an ultimatum: it has decided to give growers until 1 March 2008 to establish a new entity. The minister goes on to say:

The government acknowledges that the challenge it has set the industry is a significant one. No-one should be under any illusions as to the difficulty of the task that lies ahead for the industry. It will require strong leadership and unity within the industry to reach a satisfactory outcome in the time allowed. It is now time for the industry to act. The government is giving industry the opportunity to set up what it has asked for; it is now the responsibility of industry to deliver.

Have you ever heard a greater cop-out than that? I have been in this parliament a considerable time and I do not think that I have ever heard a greater cop-out in terms of ministerial and governmental responsibility than that. Of course the challenges are significant and it is a difficult time for the industry. But where is the leadership from and the unity of the government?

Every member of this House—both sides of it—knows exactly the contempt in which these National Party ministers are held in this place. I hear it from members opposite. The senior members of the coalition grizzle in my ear and complain about National Party ministers and their incompetence. We get stuck into them, and it is our right to do so. But when it comes from members opposite, I simply say to them that they should get up in their own party room and wield the axe on them. You should have done it long ago, because they are absolutely incompetent and have betrayed the industry that they pledged themselves to protect. I will go to one more line of the minister’s speech, if I might. He had this to say:

The wheat industry is a major Australian export earner of great social and economic significance. Growers must be given the opportunity to get it right.

It is not the growers but the government who should have got this right. It is the government that should have prevented the wheat for weapons scandal. The only reason that this legislation is in this House tonight is the incompetence of government ministers.

Why do I say that the government is duplicitous? Because one after the other they get up here on the floor of this parliament and beat their breast about defending the single desk. We on this side of the House, the Americans and the whole international community know that they have already sold the single desk in the US FTA and the WTO—they have sold it out to the Americans. As part of the US FTA, the government agreed to work with the United States in the current round for the dismantling of all state trading enterprises, such as the wheat single desk. Everybody knows that when the Americans talk about state trading enterprises they are talking about Australia’s single desk. Article 3.1.1 of the US FTA commits the parties to work together to ‘reach an agreement on agriculture in the WTO that eliminates restrictions on a person’s right to export’. In its report on the FTA to the President and congress, the US Technical Advisory Committee on Grains, Feeds and Oil Seeds made it clear that it expects the administration to hold the Australian government to this commitment—the commitment in relation to the export monopoly single desk here in Australia. The summary of the US-Australia Free Trade Agreement on the website of the US special trade representative contains the following statement, which is dated 2 August 2004:

In response to U.S. concerns about Australia’s agricultural state trading enterprises, Australia committed to working with the U.S. in the ongoing WTO negotiations on agriculture to develop export competition disciplines that eliminate restrictions on the right of entities to export.

There can only be one conclusion from those statements, and that is that the Howard Liberal government agreed in the US FTA in 2004 to work with the United States entities to dismantle the single desk. Pure and simple, this is a duplicitous and incompetent government. Wheat growers have paid a heavy price for that incompetence. The reason we are having this debate tonight is that this government failed to be accountable to the wheat growers, to this nation and to the great governance principles that govern all enterprises in this nation. (Time expired)

8:22 pm

Photo of Patrick SeckerPatrick Secker (Barker, Liberal Party) Share this | | Hansard source

I have listened with interest to speakers from the other side and I acknowledge that the member for Corio probably has some understanding of agriculture and the wheat industry. Unfortunately, I cannot say the same for any of his 90 other colleagues. It is very interesting to see who from the other side has spoken: the member for Hotham is a city Labor member; the member for Wills is another Labor member from the city; and the Labor member for Barton, another city Labor member of parliament, is about to speak. They have no idea about the wheat industry—no understanding, no feeling and no soul for the wheat industry or any agricultural industry. It is always very interesting to hear these people get up and try to bluff their way through speaking about an industry that they have no idea about or feeling for.

The member for Corio suggested I was a wheat grower. Yes, I have been a wheat grower occasionally, although I tend to grow other crops because of the area I live in. He questioned whether I came from the Eyre Peninsula. My family does come from the Eyre Peninsula. I have two brothers, and my father and mother started there, so I am bred from the Eyre Peninsula. There is a lot of wheat grown on the Eyre Peninsula, and my family have grown a lot of wheat, so I have some experience and feeling for the wheat-growing industry. Of course, my electorate of Barker has huge amounts of wheat in a normal year, although I would estimate that last year was probably the smallest wheat crop in my electorate ever, certainly in my living memory. Because of the drought there was hardly a grain of wheat delivered to silos anywhere in my electorate in comparison with normal years, so we probably did not have some of the problems that other areas with large amounts of wheat to export faced last year. We all know that in the past the Australian Wheat Board has had a monopoly on export wheat sales. In fact, at one stage they had a monopoly on all wheat sales, whether they were for export or for the home market—but the home market was removed. I remember a lot of people saying that when that happened the sky would fall in. Of course, it has not.

Looking at the problems we face in the wheat industry, I think we all acknowledge that the AWB could not fulfil its duty as a monopoly wheat exporter because they could not sell into one of our largest markets—I think our third largest market—Iraq. It is pretty understandable that Iraq did not want to deal with AWB. I do not need to go through the reasons; we all know the reasons. We really only had three choices as a government and as a wheat industry about where to go. We could have gone for total deregulation. I failed to see any member of the Labor Party promote that idea; they certainly have not had the guts to take that first choice. The second choice was to keep the status quo. No-one from the Labor Party has suggested that we keep the status quo for our wheat-marketing exports in Australia. The only other choice was a mixture or derivation of what we have done. If somebody can point out another direction that we could have taken other than those three choices, I would be glad to hear it. We had the choice of total deregulation, no deregulation at all—the status quo—or the path that we have taken. We have taken that path after very close consultation with the wheat industry. I hear Labor member after Labor member say we have not consulted the wheat industry. Hello! What was the Ralph report about? It was about consultation with the wheat industry and the wheat growers.

About two-thirds of the wheat growers in Australia told us that they wanted to keep a single desk, but only 20 per cent of those growers wanted AWB to keep the monopoly export status, so we took a path where we said, ‘We will no longer accept AWB Ltd in the future having monopoly status on wheat exports.’ We took that stance, after consulting with the wheat industry, because of fears that they could not fulfil the conditions of being a monopoly wheat exporter by exporting to Iraq, which is one of our larger markets. We said to the industry in the interim, because it is going to take a fair while to set up a new body: ‘We will give you until 1 March next year to come up with a new body, a new single desk, to manage exports in Australia with a few changes. For example, bags and bulk exports can now go without the veto power of AWB on the basis that we make sure that we have quality control.’ We have given the industry its choice. The Australian Wheat Board says they will be looking at a demerger proposal. I have my doubts about whether that will happen. We have given the industry nine months to come up with another model for next year’s wheat marketing, but in the interim we have to use what we have already got because you cannot make an international wheat exporter out of nothing.

So we have given it to industry to come up with a choice for the future. If they do not come up with that choice then, of course, all bets are off. If, by 1 March next year, they do not come up with something that is going to work then obviously we will look at different options. In the meantime, it will be the Minister for Agriculture, Fisheries and Forestry who decides who gets the bulk of the export licences. Certainly, in the foreseeable future, the Australian Wheat Board, with its corporate knowledge and its industry know-how, will be a large player in the wheat market. But the Australian Wheat Board will no longer be able to veto exports from other companies. That will be a decision for the minister until 30 June 2008.

I rise to speak on the Wheat Marketing Amendment Bill 2007 after a very long 18 months. The wheat-marketing issue has indeed been an extremely difficult one to work through because of the strong and differing views held by wheat farmers at an electorate level, from my own electorate to right across Australia. Much time in my electorate of Barker has been spent discussing the state of the industry and its marketing future with wheat growers, who supported anything from the status quo to complete deregulation because of the behaviour of AWB both in Iraq and at a local level to keeping AWB monopoly status for the single desk. I have gone through this process until we have made the decision that we have.

It is typical of Labor to respond that it is the government that should have the answer. That is a very socialist, big government view. I do not hold to it. I believe that individuals in the industry should decide where they are going, not government. Individuals in the industry know better than governments ever will how to run their industry. This whole process over the last 18 months has certainly made determining the direction that the wheat industry wanted us to take no easy challenge for me and my esteemed colleagues, including the federal Minister for Agriculture, Fisheries and Forestry. But we acknowledge that it was a process that had to take its full and proper course, although I am fully aware of the toll it took on growers who were contemplating the future of wheat marketing and the future of their enterprises as drought took its toll in many areas.

Our inquiries indicated that a good two-thirds of growers preferred the single-desk option, but only 20 per cent wanted the AWB to remain the manager with the monopoly status and the veto powers. So the government has listened and followed this course of action in preparing the Wheat Marketing Amendment Bill. That is something I wish to highlight: the coalition government has listened to the country’s wheat growers affected by this complex issue so as to make the best decision possible. And I will be first to admit that not every wheat grower in my electorate is going to agree with this action. I have had wheat growers ring me up and say, ‘I think you should go on a total deregulation basis.’ I have had wheat growers say to me, ‘We should just keep it as it is with the monopoly status,’ and suggesting ‘wink-wink, nudge-nudge’ that the AWB in Iraq was only doing what other wheat industries from around the world have done.

I cannot hold to that view. I cannot condone the actions of the AWB, and I could not possibly go with any action that would reward the actions of the AWB. Growers have told us they want to take control of their industry. Growers have told us overwhelmingly that they want a single desk and that they want the single desk to be managed by an entity separate from AWB Ltd. Today the growers have their answer. In this legislation a combination of their requests are answered. It gives the opportunity for the industry to take the bull by the horns, so to speak, and drive this change. It must be noted—and, hopefully, growers will appreciate it—that the government has allowed significant time for the establishment of a grower owned entity, as it is not possible that it can be formed immediately. It will take time. It is as simple as that. You cannot create a single desk overnight. It takes time.

Growers need the certainty that there will be a body—whether it is the AWB and whether they like it or not—that will at least be there to manage the export of the vast majority of Australian wheat and that it will be open to other competitors on the basis that it brings the best price to the growers. I think some of the argument has been lost on this, in that we need to look at what gives the best returns to wheat growers in Australia. That has to be our ultimate aim. No matter whether you are on the Labor side, are on our side or are anyone in the industry, the ultimate aim has to be the best returns to the growers. That is the No. 1 aim—and probably the only one.

This bill also proposes to deregulate the export of wheat in bags and containers, but with the addition of a quality assurance requirement to safeguard the reputation of Australian wheat. And Australian wheat is well recognised all over the world. The Iraqi people love our wheat, and they want it. But they were not prepared to deal with AWB Ltd. That is why we had to have the three sisters operation for exports last year. In providing greater certainty and opportunity to those seeking to develop niche and new market opportunities, bag and container exports make up but a small proportion of Australia’s wheat exports—roughly three per cent to five per cent—but can often deliver a higher return to growers than the bulk export market can. One person in my electorate whom I call a friend does that. I did not make this decision based on him being a friend; he has become a friend through my dealings with him and the fact that he has been able to get better returns for my crops, whether they be wheat, lupins, barley or whatever.

Previously, wheat exported in bags and containers was required to have valid consent from the Wheat Export Authority. This amendment removes that requirement. In its place, the exporter will be required to comply with the conditions of a quality assurance scheme to be developed by the WEA. This will not dictate the quality of the wheat that can be exported but will make sure that exporters are meeting the specification of their contracts with customers so as to protect the good reputation of Australian wheat from the errant behaviour of rogue traders.

Exports in bags and containers are at a competitive disadvantage to bulk exports because of the higher freight costs in comparison to bulk. They face the added capacity of constraint due to a limited number of available containers. As such, there is a structural limitation to the total volume of wheat that could be exported in bags and containers. Growers also very clearly see exports in bags and containers differently to bulk exports. What this means is that this amendment in the bill will not undermine the single desk. The single desk will still account for 95 to 97 per cent of the Australian wheat market for export.

An important part of this bill that I need to highlight today is the extension of the temporary veto power of the Minister for Agriculture, Fisheries and Forestry over non-AWB (International) Ltd bulk exports until 30 June 2008. It must be reiterated that the minister will continue to exercise this duty in the public interest of all Australian wheat growers and in a way that treats any application for a licence on its merits. The minister’s role will be to direct the industry regulator, the Wheat Export Authority, to approve or reject bulk wheat export applications. This has been, and will continue to be, on a case-by-case basis. Importantly, this extension ensures that the power of veto over bulk exports does not revert to AWB (International) Ltd on 30 June this year. While we acknowledge that AWBI is the only entity that could realistically manage the 2007-08 harvest, it will not hold the power of veto over bulk exports.

From 1 March 2008, this bill will grant the minister the power to designate a company as the holder of the single-desk export privilege. This ability did exist once but was removed from the act in previous amendments. As part of this, the government will require that the new entity is completely legally separate from AWB Ltd and has a strategy developed to allow the company to take over the single-desk management before the 2008-09 harvest. Exactly when the minister may exercise his power after 1 March will depend on a number of factors: taking into account the progress growers make in developing and establishing a new entity, the capabilities of the new entity at a given point in time, the need for AWBI to finalise sales from 2007-08 pools and obvious transition arrangements involved in the handover of the single-desk entitlement to a new entity. I take this opportunity to stress that the government must be satisfied with the financial viability and capacity of any new entity proposed to take over as the manager of the single desk.

Australian wheat growers, including many from my own electorate, have had a few tough knocks this past 18 months. But I am confident that this bill will offer direction and guidance to pick this industry up and get it going in the right direction once again. Our wheat growers have a fair bit ahead of them to meet the 1 March deadline, but there is no doubt we are looking at a change for the better.

8:41 pm

Photo of Robert McClellandRobert McClelland (Barton, Australian Labor Party, Shadow Minister for Foreign Affairs) Share this | | Hansard source

The member for Barker, whom I have considerable time for in the House, indicated that wheat growers in his electorate had in recent times suffered some hard knocks. They should be aware that these hard knocks, and indeed the bill that we are considering, arise directly from the activities of the Australian Wheat Board during the now infamous wheat for weapons scandal that was the subject of the Cole commission of inquiry.

In my remarks I wish to address in particular the second reading amendment that was moved by the member for Hotham earlier in this debate. I will be focusing on the clauses of that proposed amendment. The first clause of the amendment notes that the bill that we are considering, the Wheat Marketing Amendment Bill 2007, arises directly from the Australian Wheat Board’s role in the now infamous wheat for weapons scandal, as I have indicated. Members would be aware that the scandal involved illicit payments of approximately $300 million to the regime of Saddam Hussein. The wheat for weapons scandal is a national disgrace. The AWB were in fact world-champion bribers. No other company paid more to the regime of Saddam Hussein than the Australian Wheat Board.

The second clause of the member for Hotham’s amendment calls for the government to be held accountable for its role in the Australian Wheat Board scandal. In particular, the member for Hotham’s amendment refers to the fact that the government failed to act on at least 34 substantial warnings about the role of the Australian Wheat Board in the scandal. Those warnings have been documented partly in the text of the report of the Cole commission of inquiry, but I would also refer interested listeners and readers to the work of Caroline Overington, in her book titled Kickback, which documents those warnings.

Evidence before the Cole commission of inquiry established that the Australian intelligence community, for instance, knew as far back as 1998 that Alia, the Jordanian trucking company at the heart of the AWB scandal, was part owned by the Iraqi government—indeed, by a member of Saddam Hussein’s family. They were also aware that Alia was involved in circumventing United Nations sanctions.

Cables documenting the knowledge of our intelligence community were sent to the Department of Foreign Affairs and Trade, the Department of Defence and the Department of the Prime Minister and Cabinet. There is no suggestion that our intelligence officers did not do the work that was required of them nor communicate appropriately to the government of the day, as was their duty.

The evidence indicates that many public servants also had access to and were aware of information on the activities of AWB in the oil for food scandal. As early as 1999, Australian diplomats in Amman knew that AWB was getting favoured treatment for undisclosed help to the Iraq regime. In 2000, Austrade representatives in Washington reported continuing concerns about ‘irregular’ payments between AWB and the Iraq Grains Board. In 2003, an Australian representative on the coalition provincial authority in Iraq received a memorandum of instructions requiring him to investigate potential kickbacks to the regime of Saddam Hussein—in other words, there was certainly, at that stage, at the very least lukewarm knowledge. As a result of those investigations, intelligence and other information, it became generally known in the coalition provincial authority that AWB was rorting the weapons for food program. In 2004, another Australian representative on the coalition provincial authority, Colonel Mike Kelly, informed the Australian Embassy in Baghdad:

… the jig is up on AWB …

Specifically, Colonel Kelly told the Iraq task force:

… AWB were ‘up to their eyeballs’ in the illicit payments …

Colonel Kelly referred to the fact that AWB had an understanding of where the money was going—and that was to the regime of Saddam Hussein.

Last week in the Main Committee, the Minister for Foreign Affairs regrettably misrepresented the nature of Colonel Kelly’s warnings. If repeated outside the parliament, I dare say there is a possibility that he would be impugning the motives and character of Colonel Kelly, and in respect of that would be regarded with grave concern. The foreign minister claimed that Colonel Kelly was not called before the Cole commission of inquiry because other evidence contradicted his. The minister also, unfortunately, as I have indicated, impugned the motivations of Colonel Kelly. In fact, an examination of the report of the Cole commission expressly contradicts the minister’s account of the actual situation. I refer listeners and readers to page 75 of volume 4 of the report by the Cole commission of inquiry, where it clearly establishes that Colonel Kelly was not called because:

… officers of both DFAT and Attorney General’s Department were well aware of the allegations relating to the manipulation of the Oil-for-Food Programme

We are talking about 2004 here and it was therefore unnecessary in Commissioner Cole’s view to resolve:

… marginally differing recollections about what Colonel Kelly said …

If a senior military officer provides advice about the activities of AWB—advice provided in the clearest of terms—why didn’t the minister’s department act at the highest level? According to any standard of basic ministerial administrative competence, it should have done so. Time does not permit me to detail the numerous other warnings from the United Nations, including several from Bronte Moules, an Australian representative with the Australian Permanent Mission to the United Nations. In addition, the Department of Foreign Affairs was put on notice numerous times. In 2000, the Iraq task force within DFAT wrote to the United Nations noting that phase VIII, for instance, of the oil for food program had been ‘identified by the coalition provincial authority as the phase when the so-called 10 per cent kickback came in’.

Also in 2004, DFAT prepared a ministerial submission for the Minister for Foreign Affairs and also the Minister for Trade warning of the impending United Nations inquiry and that AWB was likely to face scrutiny. In fact, the memo said: ‘AWB concedes, however, that the Jordanian company handling local transport might, of its own volition, have provided kickbacks to the regime.’ The fact that no action was taken in the light of such specific advice is nothing short of a national disgrace. More outrageous is the fact that no minister has been held accountable for that inaction.

The amendment moved by my colleague the member for Hotham also states the government:

failed to utilise the clear mechanism available to insist that the AWB reveal all information in its possession regarding its role in the AWB scandal …

As Commissioner Cole noted in his report, the minister had clear power under the Customs (Prohibited Exports) Regulations. Commissioner Cole said:

Although DFAT did not have any specific investigatory powers conferred on it, one avenue open to it in the event that it received information suggesting a breach or potential breach of sanctions was to request specific information from the relevant exporting company. If the information was not forthcoming, it would be open to the Minister to refuse to grant permission to export or to revoke an existing permission on the basis that, without the information, he could not be satisfied that the exportation would not infringe Australia’s international obligations. This was potentially a powerful threat that could have been effectively used by DFAT in order to investigate allegations had its suspicions been aroused that AWB was acting in breach of United Nations sanctions.

Again, for the reasons I have given, clearly suspicions should have been more than aroused. On any reasonable analysis of the facts, that was the case. Clearly, the minister had power under regulation 13CA to require not only the provision of oral information but also access to documentation in order to find out precisely what AWB was up to.

Any competent decision maker is required to make a decision based on ‘findings or inferences of fact which are supported by some probative material or logical grounds’. Despite ample evidence that would have evoked any reasonable person’s suspicion, the minister failed in this very basic of responsibilities. In the face of overwhelming and direct evidence of AWB’s involvement in the wheat for weapons scandal, the simple denial that the minister received from AWB was totally inadequate. Clearly he should have exercised the powers that were available to him under the Customs (Prohibited Exports) Regulations. It constitutes gross neglect of duty, which enabled the greatest bribery scandal in Australia’s history to continue to unfold.

The next issue raised in the motion from the member for Hotham is that the government failed to adopt practical and sensible measures to oversee the role of AWB during the period of the wheat for weapons scandal. Commissioner Cole noted at paragraph 12.41 of his report that a December 1996 pamphlet issued by DFAT provided that DFAT would submit the notification and contract documentation to the United Nations overseeing committee ‘once satisfied’—this is a quote from the 1996 pamphlet—‘that the form has been properly completed and that the transaction does not infringe the sanctions regime’. The commissioner indicated the impression gained from that documentation. He said:

DFAT would form a view that the contract did not infringe the sanctions.

Commissioner Cole indicated:

… one would expect that this would require, at the very least, an examination of the contract terms.

Commissioner Cole noted, further, that in fact there was no such examination of the contract documentation undertaken by DFAT as a matter of practice and that in January 2001 a new version of the pamphlet was issued to, if you like, justify their inaction in examining the terms of the contracts. Commissioner Cole noted that the new pamphlet ‘stated that DFAT would submit the documentation to the United Nations once it was satisfied that the form had been properly completed and that the transaction did not appear to infringe the UN sanctions regime’. In noting that, the commissioner himself highlighted the word ‘appear’. He said in his report that the change in wording gave a new impression. He said:

… DFAT’s scrutiny of the transaction was limited to seeing if anything in the documentation obviously suggested that the transaction was in breach of the sanctions. The instruction suggests that it was unnecessary for DFAT to positively satisfy itself that the transaction did not infringe the sanctions, only that it did not appear to do so.

In that context it is quite remarkable that there has been no explanation by the minister or his department for the change of wording in those pamphlets. Clearly, if the terms of the original 1996 pamphlet had been complied with by the minister’s department there is every likelihood that the wheat for weapons scandal would not have unfolded as it regrettably did.

The next clause of the member for Hotham’s motion that I wish to discuss is the notation that the government limited the terms of reference of the Cole inquiry to such an extent that it was unable to meaningfully evaluate the culpability of the government in the wheat for weapons scandal. In fact, all government ministers including the Prime Minister rely on the findings of the Cole royal commission as exonerating or vindicating the position they took during the wheat for weapons scandal. In fact, an examination of the report shows that nothing could be further from the truth. It is simply the case that, under its terms of reference, the Cole royal commission was not charged with the responsibility for examining misconduct, neglect of duty or worse on the part of public servants and ministers of the Crown.

Again the report of Commissioner Cole makes this point very clear. At paragraph 30.7 on page 22 of volume 4 of the report, Commissioner Cole states:

It is immaterial—

under the terms of reference—

that the Commonwealth may have had the means or ability to find out that the information was misleading, or that it ought reasonably to have known that the information was misleading.

That is, the information provided by AWB. He continued:

It is also immaterial that the Commonwealth, at the time it conferred the benefit or advantage, suspected but did not know that the information was misleading … accordingly, the question whether the Commonwealth may have had constructive knowledge (in the sense that it ought reasonably to have known the truth or that it have the means and ability to find out the truth) is immaterial.

The reference by Commissioner Cole to the concept of constructive knowledge is significant. In the 1992 case of Baden it was determined:

Constructive knowledge may be imputed where a person wilfully shuts his or her eyes to the obvious, wilfully and recklessly fails to make such inquiries as an honest and reasonable person would make, has knowledge of circumstances that would indicate the facts to an honest and reasonable person, or has knowledge of the circumstances which would put an honest and reasonable person on inquiry.

I will leave it to others to judge whether the Commonwealth, through its departments and its ministers, had such constructive knowledge. I would have thought that the case was compelling.

Before concluding I would like to underline the seriousness of the conduct and the failure of senior public servants and ministers to take the necessary action to shut down the wheat for weapons scandal. I refer in particular to section 11(2) of the Commonwealth Criminal Code, which provides:

A person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly.

In fact, a recent criminal text says:

Where a person has a duty to act and fails to do so, the omission may make them liable as an accessory. A person may be liable for a failure to act where he or she is in a position of power or control, is aware that an offence is about to be committed or is being committed, has reasonable opportunity to intervene, and fails to take reasonable steps to prevent the offence being committed.

Again, I will leave it to others to draw their own conclusions regarding the inaction of senior public servants, and indeed ministers, in the face of what I have said is a very strong case of constructive knowledge of the activities of AWB.

At the end of the day, despite technical responsibility and despite neglect of duty, we have seen principles that we would expect to be held not being held by the government. Indeed, in the book to which I have referred, The Foundations of Governance in the Australian Public Service, produced by the Public Service Commission, Caroline Overington states:

Under the Australian system of responsible government, ministers are responsible to P arliament for the overall administration of their portfolios …

She goes on:

Under normal, or at least, the historical rules of ministerial accountability, Downer—

I apologise for the quote— (Time expired)