Mr Tony Burke (Watson, Australian Labor Party, Minister for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

by leave—Australia’s export wheat marketing arrangements are in desperate need of reform. The current arrangements are a shambles and have failed growers on several levels—the governance arrangements have failed, the management of the single desk has failed and, importantly, the arrangements have also failed growers morally.

The arrangement put in place in 1999 by the previous government—the granting of a legislative monopoly to a private corporation, AWB Ltd—was always destined to fail as it put in place inappropriate incentives without the necessary checks and balances.

The subsequent bandaids applied to the arrangements to get them through the current situation are exactly that—bandaids that have merely patched up an ineffective and inefficient system without remedying the underlying defects.

You have to ask: why do we have the current governance arrangements? A statutory authority, the Australian Wheat Board, was privatised in 1999 and the legislative monopoly for the export of wheat was handed to a private corporation. When a government entity holding a monopoly or a dominant market position is privatised it should be common practice to put in place strong regulatory arrangements.

But in this instance, what did growers get? The Wheat Export Authority (WEA), a body with few powers and which was hamstrung from the start—an organisation that Senator Heffernan famously referred to as ‘a bed of pansies, when what’s needed is a 1,000-pound gorilla’.

The WEA was limited to reporting to growers after the fact, was restricted in the information that it could obtain from AWB and was restricted in what it could report to growers because AWB claimed all information as ‘commercial-in-confidence’. It was the regulator you had when you were not having a regulator.

The member for O’Connor and other members opposite could see the flaws in the arrangements in 1999 and said so in this House on numerous occasions.

Without a strong, effective regulator it is no surprise that things unfolded as they did. The incentives for AWB Ltd to exploit its position and behave as a law unto itself were unfettered.

It is growers who should be most disturbed by what has happened. Their trust in the former management of AWB Ltd was betrayed.

As Commissioner Cole said in his report:

A government grant, by legislation, of a monopoly power confers on the recipient a great privilege. It carries with it a commensurate obligation. That obligation is to conduct itself in accordance with high ethical standards. The reason such an obligation is imposed is because, by law, persons are denied choice with whom they may deal.

Sadly, as has been extensively chronicled, the former management of AWB Ltd did not live up to these obligations.

The actions of former AWB executives cost Australian wheat growers and the Australian economy enormously. The reputation of Australia as a fair trading nation was tarnished. The time to repair that damage is now.

Supporters of the single desk argue that the monopoly power extracts a price premium on the world market and this is passed onto growers.

The evidence to support this theory is lacking.

In normal years, Australia accounts for around 15 per cent of the world wheat trade, which is not enough to exert any significant monopoly power. The ACCC, in its merger guidelines, sets 40 per cent market share as the level for exerting monopoly power.

While Australian wheat does obtain a price premium in the market, this is due to its superior milling characteristics. We get a price premium because we have the best wheat.

There have been numerous studies and reports on the single desk over the years. One report, however, stands out for its independence and that is the National Competition Policy review of the Wheat Marketing Act 1989 held in 2000.

That review, by Mr Malcolm Irving, Mr Jeff Arney and Professor Bob Lindner, could not find any clear, credible evidence that the export wheat marketing arrangements were of benefit to the Australian community. In fact, they said:

On balance, the Committee came to the view that the introduction of more competition into export wheat marketing in the future would more likely deliver net benefits to growers and to the wider community than continuation of the current arrangements ... (page 7)

While some growers believe that the single desk has operated in their interests, you only have to peruse the recent reports of the Export Wheat Commission to see this has not been the case. For example, a recent report by the Export Wheat Commission estimates that growers were worse off by $14 million on ship-chartering costs because of the absence of competitive forces in the transport supply chain.

The industry needs significant reform to increase the level of competition. Competitive forces are needed so that costs in the marketing and logistics sectors are minimised. Only then will returns to growers be maximised.

And, worst of all, as Commissioner Cole noted, many growers have no option. Those in the west are tied to the single desk. At least in the eastern states growers have the option of selling their wheat into the domestic market—and in recent years have shown their willingness to use that option.

It is now time to remedy these defects.

The latest bandaid applied to the Wheat Marketing Act 1989 is about to expire. The power for me as minister to grant or refuse export permits expires on 30 June 2008.

At that point, the Export Wheat Commission will become the final arbiter on whether an export permit should be issued. The Leader of the Nationals just described this as a relief. Let us look at what will happen. Growers will face considerable uncertainty about the marketing of their wheat on issues such as who may be granted permits and how AWB will be able to manage its obligations under the act to run pools.

Worse, under the current legislation—without the government’s proposed reforms—there will be no protection for growers in the form of a probity test, and there will be no protection for growers from possible anticompetitive behaviour. But the Leader of the Nationals describes this date, 30 June this year, as a relief.

Even AWB Ltd considers this situation undesirable. As Mr Gordon Davis, the CEO of AWB Ltd, said on 6 March:

If the [draft legislation] is not approved in the Senate, wheat growers will be left in a twilight zone where AWB is expected to run a national pool without the bulk veto and bulk export permits can be issued to other marketers and traders by the regulator.

In these circumstances, AWB would have the responsibility to maximise returns to wheat growers but lack the ability to do so effectively. No responsible board of directors would agree to continue running a national pool in these circumstances and in the current US sub-prime environment.

Yet that is the situation that was described a moment ago by the Leader of the Nationals as a relief. Increasingly growers are accepting the need for change. The recent vote by A-class shareholders in AWB Ltd for reform of the company, while not reaching the 75 per cent threshold for success, did exceed 60 per cent.

Last Wednesday I released exposure drafts of the bills to implement our reforms that deliver on our election commitment.

The bills outline how the new arrangements will work. They explain the establishment of the new regulator, Wheat Exports Australia, and detail the criteria that WEA must consider in whether a company should be accredited to export bulk wheat.

There are clear probity requirements that must be met before a company can be accredited. These relate to the financial resources of the company, the skills of its management, the systems it has in place to manage risks associated with the trade in wheat and the demonstrated behaviour of the company and its executives.

We need to ensure we do not replace a single wheat export monopoly with three regional monopolies at the ports. I have therefore included a special requirement for any company that operates a bulk grain handling facility at a port terminal. On applying for accreditation they will be required to grant access to that port terminal facility to other exporters as a condition of their accreditation.

WEA will also have the power to audit accredited companies to make sure they are complying with the conditions of their accreditation and to obtain information from them.

Severe penalties will apply for exporting wheat in bulk without accreditation and for making false or misleading statements to WEA.

I have invited public comments on the exposure drafts and given all interested parties until 3 April to provide those comments. I have also spoken with a range of key stakeholders about the draft legislation, including state farm organisations, bulk handlers and potential exporters. While not all support the new policy direction, I am encouraged by their engagement in the process and their willingness to help achieve the best possible system.

I note the comments from several organisations that support our policy and the draft bills. Of particular note are the statements from the major trading companies and grower groups including the Grains Council of Australia, AWB Ltd, ABB Grain Ltd, CBH Ltd and GrainCorp. Madam Deputy Speaker, I table supporting documents.

Warren Truss (Wide Bay, National Party, Shadow Minister for Infrastructure and Transport and Local Government) Share this | Link to this | Hansard source

What about WEMA?

Mr Tony Burke (Watson, Australian Labor Party, Minister for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

If only the Leader of the Nationals had read the release yesterday, he would know that WEMA is being wound up.

During consultation, concern was raised as to whether the changes would have an impact on the willingness of the banks to lend money to growers. To that end, I have met with the Australian Bankers Association, who have confirmed that the marketing changes will have no detrimental impact on growers obtaining finance.

As part of the reform process I have established an industry expert group to advise me on the provision of industry good functions under the new arrangements. Some of these functions were previously provided by AWB Ltd. The industry expert group is actually issuing its discussion paper today.

I am pleased to inform the House that yesterday our colleagues in the other place agreed to refer the bill to the Senate rural and regional affairs and transport committee for inquiry.

I understand the committee is working to be on the road consulting with wheat growers from 25 March.

At the request of Senator Scullion, the shadow minister, the inquiry has been extended by a further two weeks, to report back by 24 April.

I understand the committee is planning to travel to every wheat-growing state during the consultation period.

I urge all members to support the bills when they are introduced into the House. If they do not pass through parliament in time for a 1 July commencement date then growers will be faced with enormous uncertainty.

I can confirm that Labor members in this place will be voting to support the passage of this important legislation.

The opposition needs to clearly understand that if we do not change the legislation which the previous government have left us with, there will be no protection for growers from the possibility of anticompetitive behaviour, and there will be no protection for growers in the form of a probity test.

Growers need the certainty of knowing that the buyers of their wheat have the reputation and financial backing to pay for their crop. That certainty can be delivered today by the opposition declaring its support for these changes.

The opposition failed to deliver this reform in government. Should they continue to frustrate this reform from opposition then they must be prepared to stand up and accept the responsibility for the consequent impact to growers and their families.

The Australian wheat industry has a positive future under our proposed reforms but not under the existing legislation. It is imperative that these bills, once introduced, be passed by the parliament without delay—an imperative that both sides of politics today provide growers with certainty.

I ask leave of the House to move a motion to allow the member for Wide Bay to speak for 14 minutes.

Leave granted.

I move:

That so much of the standing orders be suspended as would prevent Mr Truss speaking for a period not exceeding 14 minutes.

Question agreed to.

Warren Truss (Wide Bay, National Party, Shadow Minister for Infrastructure and Transport and Local Government) Share this | Link to this | Hansard source

Today we have seen another abuse of the ministerial statements process. We listened to ministers give long and, in many instances today, interesting ministerial statements during question time. But now, when it comes to the actual time for ministerial statements, we have a comment by the Minister for Agriculture, Fisheries and Forestry which contains nothing new. It is the kind of speech that should have been made at the time of second reading or, alternatively, in one of his partisan press releases. Ministerial statements are supposed to be considered contributions to matters of substance, and they should be factual. Unfortunately, this statement failed on both counts.

The minister acknowledges that he does not know much about farming, and I give him credit for making that acknowledgement. But, unfortunately, it seems he knows so little about it that he is not even aware that the text prepared for him contains fundamental factual flaws. I hope he will take the time between now and when the bill comes into the parliament to better understand the industry and to make sure that the legislation he is proposing to introduce into parliament will in fact be in the interests of Australian wheat growers and the nation as a whole and not just following some dodgy ideological cause.

Can I go through some of the statements made by the minister and point out their flaws. Early in his statement he said:

The arrangement put in place in 1999 by the previous government—the granting of a legislative monopoly to a private corporation, AWB Ltd—was always destined to fail ...

He then went on to comment about some members of the former government who had some reservations about the arrangements. I had some myself. However, what he failed to acknowledge was that Labor voted for the bill. So, if it was destined to fail, why in fact was it supported by Labor at that time? There is a clear demonstration of inconsistency here by the minister and his party.

Then he went on to make the comment that AWB Ltd did not live up to its obligations as the manager of the single desk. Of course that is true. All growers are very disappointed about the revelations about the organisation’s work in Iraq. The behaviour of certain of its staff in relation to those sales is unacceptable. It also, however, has to be acknowledged that the AWB was recognised around the world as a very effective sales organisation. It competed against, and made sales of Australian wheat against, the subsidised suppliers from countries around the world. It was also very effective in being able to put Australian wheat into the marketplace, even against the corruption that was occurring in the market and the badmouthing of Australian wheat, particularly by certain US suppliers. It has been successful in a whole range of its activities, and that also needs to be acknowledged. Let me say that it was acknowledged by the minister’s predecessors: Labor’s spokesman on agriculture, Gavan O’Connor, frequently lauded the achievements of the AWB, and Senator O’Brien frequently spoke about the achievements of the AWB and chided the government for daring to in any way interfere with its activities. So the reality is that Labor was a public supporter of the AWB during all of its period as a manager of the single desk.

The minister then went on to question whether or not the AWB had actually, through the single desk, extracted on the world market a price premium that was passed on to growers. Unfortunately, he has been listening to a few too many Treasury commentators. I have listened to them as well. Let me tell him that not one of them grows any wheat, and they have not got a clue. The reality is that every review that was conducted into the single desk found that there were benefits to wheat growers from the operation of the single desk. There were differences in the range of how much the benefit would be, and those ranges went from $4 or $5 to as high as $70 in one case. I think both of the extremities are discountable. But every single review found that there were advantages to Australian wheat growers from the operation of the single desk.

You do not just have to rely on me to make that comment. In fact, I would like to refer to an authority that might be near to the heart of the Minister for Agriculture, Fisheries and Forestry, and that is a man called Kevin Rudd. Kevin Rudd wrote to many farmers within the last 12 months as Leader of the Opposition, and he said:

A study by Econtech of the premium attributed to the single desk indicates that on the benchmark of Australian premium white grade of wheat, the single desk captures a premium of between $15 and $30 a tonne. The total annual value to Australian growers of this premium on Australian premium white is $80 million. On all grades the average premium attributed to the single desk is $13 a tonne and the total annual value of the premium on all grades—

Debate interrupted; adjournment proposed and negatived.

I will conclude that quote from the now Prime Minister:

On all grades the average premium attributed to the single desk is $13 a tonne and the total annual value of the premium on all grades is $200 million.

Kevin Rudd said when he was Leader of the Opposition that this single desk was delivering premiums to Australian wheat growers. Frankly, he was quoting the expert research and the economic analysis. What he was saying was right then and it is right today. Therefore what the minister said in his statement is a complete reversal of Labor’s view on this issue over many years and in fact clearly does not recognise the work and the studies that have been done in relation to this issue.

Let us move on to his example of how the single desk was detracting from growers’ returns, the wheat commission estimate that growers were $14 million worse off because of the absence of competition in shipping. The single desk does not do the shipping. The single desk has nothing to do with the shipping. It is true that a lack of competition in shipping may make it a little less competitive. It is also true that the lack of competition in handling may make it a little less competitive, and that is in fact the issue that was being raised in these reports: the lack of competition at the handling level was raising farmers’ costs. But the reforms that the government is proposing to make through its legislation will do nothing to address any of those issues; in fact it will make them worse because we will have the monopoly state handling authorities referred to by the minister in his comments actually marketing as well as handling. It is hard to believe how you could put a regulatory system in place which will give a fair go to those organisations that do not own the handling system, that do not control the stocks, that do not understand the issues that are involved. You are relying on an ACCC that actually approved the amalgamation of the east coast handling authorities. If that is their view of competition reform, one wonders how they could manage this issue.

Then we go on to the need for legislative change, and the minister made the point that it is important for farmers to have a probity test. This minister’s first attempt at a probity test was to grant a permit for 300,000 tonnes of Australian wheat to Iraq to a company called Glencorp. Glencorp had to pay restitution to the United Nations for corruptly abusing the oil for food program. This is a company that abused the oil for food program. It was named by the CIA as having paid bribes to the Saddam Hussein regime. It has frequently been accused of breaking UN sanctions in relation to oil supplies. This is the company that this minister gave a permit to.

Mr Tony Burke (Watson, Australian Labor Party, Minister for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

Mr Burke interjecting

Warren Truss (Wide Bay, National Party, Shadow Minister for Infrastructure and Transport and Local Government) Share this | Link to this | Hansard source

Of course you should have refused the permit. If you believe in probity, you have set the test exceptionally low. You gave your very first permit—and the only substantial one—to a company that has been guilty of frequent corruption. So that clearly demonstrates that when it comes to probity the Labor Party cannot be counted on for any kind of standard— ask the people of Wollongong if you have got any doubt.

Then we move on to the minister’s statements later in relation to the bodies that allegedly support his legislation. It is true that a number of farmers are resigned to the fact that their long-loved single desk is to be abolished by this government. That does not mean they are pleased about it; they are angry about it across the country. But they know that this power-hungry government is determined to implement this legislation—not because the minister believes that it is good but because he inherited it as an election promise by his dud predecessor. His predecessor as spokesman for agriculture was such a failure that he was relegated to the back bench and the current minister was put into this position, so he inherited the policy. He has never been able to make any kind of independent determination, and he has admitted as much to the grower groups that have come to see him. He said to them, to discount their concerns: ‘This is the policy. You’re stuck with it.’ The minister may not think it is any good—although I acknowledge he did not say that—but, whether or not he thinks it is any good, this is the policy and everyone is stuck with it.

Perhaps he should also have tabled the statement from WEMA the other day. This is the Wheat Export Marketing Alliance, the body that was set up to put in place new arrangements to market wheat in Australia. It met with Minister Burke in Canberra on 4 March. It took him until just eight or 10 days ago to meet the body charged with setting up the new infrastructure for the wheat industry. It took him to just 10 days ago to even meet it. The NFF and a whole stack of other organisations have found this same locked door when it comes to access to this minister, but here he is dealing with important wheat legislation, about to distribute a draft bill, and he did not even bother to consult in advance with the very organisation that has spent months trying to put together an alternative to the current arrangements. Let me quote one paragraph from this statement:

Unfortunately the Minister and his advisers merely confirmed our long held view that the Government had sold out to the big end of town in a well scripted plan that will see many small to medium sized wheat producers put under enormous financial pressure.

So much for the Labor cliche of looking after working families.

And that reflects the tone of the press statement. So the reality is that wheat growers are not happy with the proposals being put forward by the minister. The Prime Minister acknowledged as much yesterday. He said that he knows that there will be some wheat growers against it. Let me say to you: virtually all wheat growers are against the legislation that you are putting forward. It is true that some would favour total deregulation; others want a return to the old arrangements. But there are few who consider that the arrangements being put in place by this government are an appropriate response to the issues facing the wheat industry in the years ahead.

I welcome the fact that the minister has granted a couple of extra weeks for the Senate inquiry, and I thank him for that response because there are a lot of issues to be raised. I want this Senate committee and the minister to consider a number of very serious issues before he brings the legislation to parliament. How will the new legislation ensure that returns to growers are maximised in every season? How will the premiums for quality Australian wheat be preserved and returned to growers? Have we, in fact, traded off these premiums to overseas multinational grain traders and taken them away from Australian farmers? How will Australian wheat stocks be managed and moved on time to port when there are many buyers and many exporters? How will the profits from blending be distributed? How will the industry-good functions, formerly required of the single-desk manager, be continued? How will the multitude of licensed exporters be able to compete effectively against subsidised US and EU growers, especially to single-desk buyers?

Bear in mind that most of the buyers around the world are single-desk buyers. We will have multiple sellers, many of them foreign owned, selling Australian wheat to single-desk buyers. How do you expect to retain the premiums for Australian wheat in those sorts of circumstances? Who will be the buyer of last resort? Who will fund the crop carryovers that occur every year? Around a third of the crop is generally carried over. Who is going to fund that? Which growers are going to be held responsible? How can Australia, in the absence of a national pool, sign long-term contracts that can be honoured and maintained? Are we going to throw away our best markets because we have become an unreliable supplier? Are the new arrangements compliant with Australia’s WTO and FTA negotiations?

These are critical issues. They all need to be addressed and, frankly, they have not yet been addressed by the government. They are not covered adequately in this statement or in any of the comments that have been made before. I want the premiums for growing quality Australian wheat to go to Australian farmers and the Australian economy; I do not want them distributed to multinational grain buyers around the world. (Time expired)