Wednesday, 4 June 2008
Wheat Export Marketing Bill 2008; Wheat Export Marketing (Repeal and Consequential Amendments) Bill 2008
Debate resumed from 3 June, on motion by Mr Burke:
That this bill be now read a second time.
This is in fact a profoundly important bill for the future of wheat export marketing and does implement another one of Labor’s election commitments. Wheat growers have faced great uncertainty for a number of years now due not only to the effects of the drought but also because of the destabilising effects of the AWB Iraqi wheat scandal. That scandal saw almost $300 million worth of secret payments made to the Iraqi regime led by Saddam Hussein and irretrievably destroyed the credibility of the AWB’s export marketing monopoly for Australian wheat. It also underscored, of course, an appalling failure by the Howard government to take responsibility for its own incompetence in the oversight of export wheat marketing policy. Who could forget the then Deputy Prime Minister, Minister for Trade and Leader of the National Party, Mr Vaile, I think on no less than 42 occasions in his evidence to the Cole royal commission, indicating in response to questioning that he could not recall or did not remember? Australian wheat growers deserve far better than this from their government, and this bill provides for much-needed certainty concerning marketing arrangements for wheat growers.
Under arrangements installed by the previous government, the minister for agriculture’s temporary power of veto over wheat exports expires on 30 June this year, and, without new arrangements, the Export Wheat Commission would be responsible for issuing export consents, and AWB (International) would remain exempt from seeking such consent and would retain its privileged position in the wheat market. The Liberal Party’s decision not to oppose this bill is a welcome clarification of their position after all this time, but the National Party does not appear to be able to recognise the reality and necessity of change. The National Party does not seem to understand, importantly, that the current legislation, once 30 June has passed, changes everything.
The concept of the single desk that the National Party claims they wish to keep would actually effectively disappear if the current arrangements were to continue, but there would be no effective and appropriate alternative regulation and oversight of wheat exports. If this legislation is not passed, the Export Wheat Commission will become effectively the sole determinant of whether or not an export permit should be issued, and the test it will have to apply is the one in the existing act, which is whether or not the application for a bulk permit will complement the objectives of AWB (International) in the running of the national pool or whether it develops niche markets. This, of course is an extremely restrictive position. That aside, however, the retention of the existing arrangements would also mean that the Export Wheat Commission would have no clear obligation to assess the probity of potential wheat exporters, and this is a fundamental objective of the bill.
The legislation establishes a new industry regulator, Wheat Exports Australia, with the power to develop, amend and administer an accreditation scheme for bulk wheat exports. The bill will set the broad policy parameters under which Wheat Exports Australia will design and administer the accreditation scheme. WEA will only accredit companies that meet stringent probity and performance tests. Key criteria that the WEA will consider include the financial resources available to the company, its risk management systems, and the demonstrated behaviour of the company and its executives. In light of the AWB’s performance over recent years, these are extremely important accreditation criteria. Wheat Exports Australia will also have the necessary investigative powers to perform its regulatory, monitoring and enforcement responsibilities. There will also be severe penalties for breaching the conditions of the scheme or individual accreditations. WEA will also be able to suspend or revoke accreditations. In the end, the new arrangements contained in this bill are designed to benefit the entire wheat industry, particularly growers, by providing greater contestability and selling options for growers, more cost-efficient marketing services, greater transparency of price and cost information, and reducing the risks associated with relying on a single seller.
There were, of course, many problems with the old system. There was no effective separation of the management of the listed company, AWB Ltd, and the subsidiary, AWB (International). Secondly, the export monopoly resulted in a lack of contestability in services, to state the obvious. This means that returns to growers from the national pool were not effectively maximised because there were poor incentives to minimise the costs of operating the pool. The Nationals continue to maintain that the export monopoly or the single desk delivers for farmers. But you have to look for the evidence for this. Neither the 2000 national competition policy review, the 2006 ACIL Tasman study, nor a more recent ABARE analysis could find compelling evidence that single-desk marketing could deliver price premiums in the international marketplace.
What these studies did find is that the export monopoly had an inhibiting effect on both innovation in marketing and the realisation of cost savings in grain transport and handling. The single desk increased the risk for wheat growers by forcing them to rely on a single exporter. This was seen in the aftermath of the wheat for oil scandal when Australian growers were effectively locked out of the critically important Iraqi market. But why didn’t the previous government make the necessary changes after the Cole commission revealed the flaws in the previous system? You can only conclude that it is because both of the parties within the coalition were divided over this issue. Of course the coalition are still divided and disunified in their policy response to this important question. Even the AWB has described the current temporary arrangements as unworkable. The AWB Ltd managing director has stated:
This government is not going to be blinkered, as the previous government was. It has proposed that the Productivity Commission will conduct an independent evaluation of these arrangements, commencing in 2010.
The other important consideration—there were some comments about this in the House last night—is the level of consultation that the government has undertaken in relation to the formulation of this bill. The minister for agriculture has undertaken an extensive series of consultations, and in this industry, with the significance of this change, this is extremely important. We have seen the release of an exposure draft for public comment. The Senate rural and regional affairs and transport committee has held an inquiry and the government has established a wheat industry export group. Minister Burke has also met with all of the major state farming organisations and the major bulk handling and trading companies, especially in relation to the issues of access and storage infrastructure. Demonstrating that this is genuine consultation, which of course it is, a number of amendments have been made to the draft legislation to reflect the comments made. The government has gone about the business of trying to build consensus and support and take on board criticisms in the formulation of this legislation.
Changes that have been made include the addition of an objects clause, a civil penalties regime and enabling cooperatives to be eligible for accreditation. This government is committed to a viable rural sector and has worked very cooperatively with the industry to refine the legislation and examine the future of wheat exports in a rational manner. I have been around this industry too, although it surprises some of those opposite from time to time, given they seem to see me in a particularly singular role from my former career in the union movement. I have been around the wheat industry for a long time as well, and I know the importance of this to wheat growers. Even though it is a difficult transition—
I have listened—these are extremely important and meritorious changes, which I support. Just as farmers continue to benefit from the trade reforms and the deregulated domestic wheat market introduced by the Hawke-Keating government, I firmly believe and the government believes that the industry will benefit from the reforms contained in this bill. Effectively, for the first time since 1948, Australian wheat growers will be able to choose who they sell their grain to and at what price. The fact is that once again it falls to the Labor Party to implement important industry reforms. I commend this bill to the House.
I rise to oppose the Wheat Export Marketing Bill 2008. We have just had an indication from the member for Charlton as to what the agenda really is here, and I would encourage people to read the first part of his speech. If they do, they will start to see what the real agenda is in relation to this particular legislation. It is not about wheat marketing at all; it is about politics and placating some of the rent seekers. It is about putting people in positions in the food chain of the production of food, where many others will make money and the growers will be left out of the equation.
The now Prime Minister came to Tamworth a bit over two years ago when the Cole inquiry was being held. He rang me and said he was travelling through that part of the world and wanted to speak to wheat growers. I said to him, ‘Look, rather than just driving down the road, I’ll put a group of growers together for you to talk to.’ I did, and we had breakfast together and talked about a number of issues. That meeting was held at a little silo south of Tamworth and about 40 or 50 growers turned up. There was a family represented at that meeting called Barwick. The Prime Minister met the Barwicks. The member for Charlton mentioned 1948. The member for Charlton, if he has a memory in relation to this, and others would remember that Don Barwick was one of the original founders of the Australian Wheat Board. Don Barwick was also a very good supporter of mine in my first campaign back in 1991. He was instrumental in mentoring me, in a sense, to prevent the then Liberal state government, the Greiner government, from selling off the grain handling system to international grain traders, who would have been the highest bidders. The member for Charlton may well remember some of this history.
I note with some degree of interest that the morphed organisation that was saved at that particular time from being sold out by the Liberals is one of those that will seek accreditation to become one of the accredited exporters under this legislation. It was at a time, in 1991, when there was a hung parliament and the then Greiner government had committed to sell it off, just as the current federal Liberal opposition have agreed to let it all go, and it was the Labor Party in New South Wales that was opposed to it. In my mind we have this interesting position developing—that is, that over that period of time there has been an evolution of the politics of the Liberal and Labor parties. If anybody had any doubt that the two parties are almost identical, then I think the way in which they have acted in relation to this particular bill and both parties’ shoddy treatment of country people is an indication that they do not really care about the people who live in those particular areas.
I listened to the member for Kennedy last night and his condemnation of the National Party in what he called its sell-out on most other industries. He said that they were here standing up on one of the last remaining industries that they have had some influence in. Maybe I am not as hard as the member for Kennedy, but I think there is an opportunity here for the National Party. If they stay within the Liberal coalition after this treatment then they deserve to die as a representative group. I challenge them to break links with this pathetic group that they have associated themselves with and have allowed themselves to be sold down the drain by. More importantly the people they represent have been sold down the drain, whether it is on Telstra, on this particular piece of legislation or on many other pieces of legislation.
So it seems that the rent seekers have won. This has not been about marketing; this has not been about consultation. Prime Minister Rudd, when he was shadow minister for foreign affairs, at that meeting in Tamworth made the statement—and it is readily available on tape—that he believed that before any changes to export wheat marketing arrangements took place there should be a poll of all registered wheat growers. He has not done that. Mark Vaile, the member for Lyne and Deputy Prime Minister when the previous government was in power, said, at Warracknabeal in Victoria, that before any changes took place there should be a poll of all registered wheat growers. He did not do that. I think if the member for Lyne, the then Deputy Prime Minister, had taken the initiative and actually sought a clear expression from growers then we would not be debating this farce today.
The motives in this particular legislation are not about improvement. They are not about the Australian Wheat Board at all. I personally believe that many in the Australian Wheat Board should be spending time in jail, but this particular legislation, in the ‘fit and proper’ clause, allows the Australian Wheat Board back into the game. It is absolutely designed to have the wheat board in there as a player. The minister for agriculture and the Prime Minister stood up in here some weeks ago and said that this would not have happened had the Australian Wheat Board not done what it did—and the member for Charlton, Mr Combet, referred to it again today—and here we have a bill that is designed to put it back in the game. The reason for the legislation, for the changes, is supposed to be that you can only have fit and proper conduct for companies—or for individuals, if the coalition’s amendment gets through—yet here we are allowing the so-called thief in the night, the very reason for this bill being brought on, to be a very important clause in the legislation. I just cannot understand how the minister could allow that sort of activity to happen and try and have some credibility in terms of some of the access provisions, and other provisions, within the legislation.
The motives behind this are purely political. There is a lot of payback in this. The Labor Party could see that the Nationals and Liberals were split traditionally over this and this is about exposing those weaknesses. It is not about the wheat growers. If people were interested in what the wheat growers thought, they would have consulted with them. Well, I did. The Prime Minister may have said that he would have, the former Deputy Prime Minister may have said that he would have and did not, but I did, and I think that for the record those results should be indicated.
Before reading the results out I should say, just for the academics, that the research that was done here is of a sample of 2,819 that will give this study a 1.7 per cent confidence interval at a 95 per cent confidence level based on the 20,845 distributed survey forms in Australia. This is—and this is the important point—basically saying that if you conducted the same survey 100 times, 95 out of the 100 wheat growers should yield results within plus or minus 1.7 per cent of the published number of the percentage. I notice the member for Farrer made some passing reference to this poll, but she obviously has not carried out any political polls in the past. If she had, she would understand that these findings are highly significant. Essentially, growers were asked in all states which option best represented their views—a single-desk option, the government’s deregulated marketing system with a multilicensing arrangement, or a fully deregulated marketing arrangement. 80.2 per cent of respondents argued that they wanted the single desk maintained. So, when people say there has been consultation that is absolute nonsense. 14.9 per cent supported the government’s position. Western Australia is very dependent on wheat exports. It does not have the domestic market that the eastern states have in terms of the competitive markets that are available. The Prime Minister again stood up and said, ‘Oh, we are doing this because the Western Australians want it.’ Well, people in Western Australia were asked that specific question. In their answers, 71.4 per cent said they wanted a single desk whereas 22 per cent—not even a quarter—wanted what the government is presenting.
Some have suggested, ‘Oh well, it’s only those little growers that are weak in the marketplace that are being protected by this vestige of the past. We have got to allow the industry to flex its wings. The bigger players are being restricted by this old time single desk arrangement.’ If you split it by production, however, those who supported the single desk were 83.9 per cent of respondents in the 0- to 500-tonne production range, 84.6 per cent of respondents in the 500- to 1,000-tonne production range wanted a single desk, 77 per cent from the 1,000- to 5,000-tonne production range wanted a single desk and even in the over 5,000-tonne producers—the bigger growers—62.6 per cent wanted a single desk. Not a quarter wanted what the government is proposing: 23.1 per cent in the over 5,000-tonne production range wanted the government’s proposal, and that government proposal is being supported by the Liberal Party.
Some people have said, ‘We have to allow the younger farmers to express themselves because of the new age marketing systems.’ The Leader of the Opposition waffled on about GPS in tractors and various other technology and tried to draw some analogy with improved marketing techniques. This is the split by age. Across Australia—that is, all states—of those aged 31 to 40, 79 per cent supported a single desk; of those aged under 30, 72.5 per cent supported it; and of those aged 31 to 40, 75.8 per cent supported it. Those showing the most support for the government’s initiative, the multilicensing arrangement, were those aged 41 to 50, at 17.5 per cent. As I said, they consulted with growers—that is, there has been consultation with those who are going to make money out of the production chain. That is hypocritical of the Labor Party, particularly because of their view on collective arrangements. This supports those who make money out of food production. There are issues at the moment in food and fuel and the carbon footprint of transportation. Those who make money out of food production will continue to make money out of food production. In fact, as the pressure on world food commodities increases, they will make more. But those who produce the food—the growers—will not necessarily be part of that process.
If you need any evidence, look at what is happening in chemical and fertiliser prices in line with the boost in grain prices of the last 12 months. Look at the rent seekers who are ripping more out of the marketplace now. Some of the people the minister for agriculture, and I presume others in the government, has been dealing with behind the scenes, who purported to be representatives of grain growers—that is, some of those in the grain-handling system, some of those in the National Farmers Federation and some of those in some of the state based bodies—have positioned themselves to receive rent from the work of others. That is the appalling position that the Labor Party has presented. As the member for Kennedy said last night, they won the election on the right of workers to collectively bargain. This is the wheat growers’ industry. They are not asking the government for any money in relation to this; this is not a begging bowl arrangement. It is their industry and they have not been consulted. Those who will profit from their industry—not those who actually do the work—have been involved in the consultative phase. If this government stands up again and argues the right of the worker, it will have a fairly hollow ring in my view.
The poll shows some resistance in New South Wales—and no wonder—as 87.8 per cent of wheat growers want a single desk; only 8.8 per cent prefer what the government and now the Liberal Party prefer. If anybody had bothered to ask—if the member for Lyne had bothered, if the Prime Minister had bothered or if the minister for agriculture had bothered—they would have got exactly the same answers. The reason they did not bother is that they did not want to know. They know the answer. They are clearly defying the majority of an industry group that has made clear time and time again what they want for the export of their bulk-marketing wheat. They have allowed containers and bagged wheat to go—and this indicates that they did want bagged and containerised wheat to go—but they want a single desk structure for bulk export wheat.
This is about structure, Minister. I do not necessarily mean the Australian Wheat Board. I would not give it to the Australian Wheat Board. I would not give it to them because I think their behaviour was appalling. But you do not throw the baby out with the bathwater. The minister for agriculture has endorsed a structure. The minister for agriculture has not given anybody the marketing arrangements yet. He may give them to one organisation. He may give them to the Australian Wheat Board or the Wheat Export Authority. He has not endorsed anybody, yet he, the member for Charlton and the Prime Minister have based their whole argument on the Australian Wheat Board. That is not a structure. The legislation should be about the structure that the majority of wheat growers want. Time and time again you see examples where, if individuals or smaller groups go out into the world market, they get beaten up. Look at what happened to the coal industry some years ago. They went overseas as individual companies and bid each other down. They kept bidding each other down in Japan.
Some academics have been used to come up with this logic that there are no substantive gains to be had through a single desk marketing arrangement. If you look through the various boards of some of the groups that are going to be accredited, they are there. Some of the people in the Grains Council, for instance, are there. The only people in the wheat industry, in my view, who can hold their heads up high—the Grains Council cannot, the National Farmers Federation cannot; some people in the New South Wales Farmers Association can but the majority of the body cannot—are those in Western Australia who have genuinely fought a cause for those they represent. Many others have suddenly slipped behind the tree. That is what we saw here yesterday with the Liberal Party leader. He is a man who can make a speech without any notes, but he is so committed to the poor, downtrodden farmer that he had to read nearly every word he said on this legislation!
It is a sad day for the wheat industry but it is a sadder day for politics, in my view, because today, for all to see, there is no division in politics in this place. There are two ‘Liberal’ parties. They exist on both sides of this chamber and there is a very weak junior coalition party which has allowed itself to be run over by both of them, to be assumed by both of them for decades, a junior coalition party which now has an opportunity. The question is: will they take that opportunity or just occupy the benches and move on when their individual times are up?
If we are so concerned about the global market and choice, what is the government going to do when a carbon footprint starts to be implanted on the movement of grain internationally? What is the government going to do about the taxation and excise arrangements which are currently on grain based ethanol, for instance? Are we going to tax a renewable fuel or allow free interchange to take place? These additional questions should have been answered quite clearly before this legislation was even brought into the House. (Time expired)
I rise to speak today in support of the Wheat Export Marketing Bill 2008, not just as a government member for the seat which contains the Kwinana export terminal but also as a member, albeit by marriage, of an extended wheat-farming family from Western Australia. To pick up some of the points made by the member for New England, it is clear from discussions I have had in my family that there is a generational difference between views on this proposal. The younger the farmer—such as my brother-in-law Rod Birch—the more vocal the support for this legislation, the more thoughtful his consideration and support for this legislation. The older the farmer, I find less confidence. The older the farmer, I accept that there is nervousness about these proposals. Having said that, when I speak of my family, of course it is extremely extended and the member for O’Connor is part of that family, too. His support for this bill is unique among that generation. My father-in-law, Peter Walsh, who spent many years on his tractor up at Doodlakine, tends to take the view that anything that happened in the world since the ABC went from black-and-white to colour is not to be trusted.
As a Western Australian, I am aware of the significance of this bill to the sustainability and future of the Western Australia wheat belt. This bill will introduce competition into the bulk wheat market export industry. It will support farming communities and farming families. We hear lots in this place about working families and there are farming families, too.
WA has a strong history of agricultural achievement in challenging conditions. Colonists arrived in WA in 1829 and planted grain they brought from England. Colonial farmers recorded their first wheat harvest in WA in 1831. Of course the grain had been developed in English conditions and frequently failed to provide reliable and substantial crops. The failure of these first crops was inevitable. In isolated areas such as the Victoria District at Champion Bay near what we now call Geraldton, it was even known that starvation deaths followed crop failure. I quote from Sister Mary Albertus Bain:
By the end of 1873 it could correctly be claimed that there had only been one good season since 1867. The most promising harvest since that date had that year been attacked again by red rust and almost the entire crop in the district was a failure ...
Malnutrition, worry and heat gradually took its toll in the district. The greatest number of deaths from 1870 to 1894 was amongst the children and the most common cause was ‘marasmus’—inability to thrive due to a protein deficiency—
Such was the skill of successive generations of farmers in the Western Australia grain belt that, from failed first crops and starvation, the industry we have today has progressed to a sophisticated, science based, satellite guided, machine driven export industry. The realisation that cheap and efficient bulk-handling systems could reduce handling costs, made effective through the establishment of Co-operative Bulk Handling, known by its acronym as CBH. In 1933, CBH was registered by the wheat pool of WA and divided into 100,000 shares of £1 each. This effectively created the co-operative bulk handling system for grain growers.
From the 1920s to the 1960s, there was significant improvement in Western Australian grain yields through the use of superphosphate fertiliser and identification and amelioration of trace element deficiencies such as zinc, copper and manganese. Science and increasing efficiencies combined with good harvests have seen the grain industry propel itself into the 21st century.
Western Australian agriculture prides itself on being science based. The Western Australian wheat belt not only supports WA’s food needs but also creates an exportable surplus representing 90 per cent of its total grain production. Today, Western Australian grain is now exported to over 20 countries, with major shipments to Japan, South Korea, Indonesia, Iran, Pakistan and China. In WA, as we speak, seeding is still underway with many farmers having a poor start to the season and there is growing concern that this may not be a good year, despite good prices. The rains have not yet arrived.
Farming has few certainties but one thing is for sure: farmers deserve to know how they will market their crop before they put it in and, understandably, want some certainty in what the marketing rules will be before the next harvest. After 30 June this year, if this parliament does not change the current rules, the ministerial veto will disappear and the single desk that the National Party want to keep will vanish under the current law. The law as it stands leaves us with the worst of all worlds and no-one wants that to happen, not even the AWB. We need to create certainty. In the Productivity Commission’s submission to the National Competition Policy review of the Wheat Marketing Act 1989, it was the commission’s view that:
It is unlikely that the current wheat export marketing monopoly generates net benefits for Australia or, indeed, wheat producers themselves. The fundamental reasons for this assessment are that:
- the current lack of choice for wheat growers is likely to be impairing efficiency and innovation within the industry, and—
The industry in Western Australia prides itself on its efficiency and innovation—
- most if not all of the potential benefits of the AWB’s single desk could be achieved under competitive selling arrangements.
This bill will remove the fundamental problem with the current arrangements that have created a restriction on participation in the export wheat market and, subsequently, a lack of competition. The Rudd government is committed to addressing the problems associated with export wheat marketing arrangements. Farmers are used to dealing with uncertainty—whether it is their machinery, the supply chain, the weather or varying prices. This government acknowledges that the new arrangements contained in this bill, while market oriented, while providing a new start for wheat marketing after Iraq, will include an element of uncertainty as farmers learn to adapt to life in a competitive selling market.
Of course, farmers already survive in a moving market with a range of market costs and pressures such as labour costs and availability, fertiliser costs that are heavily dependent on the price of fossil fuels and ammonia, diesel costs and exchange rate variability. These often volatile forces make it difficult but necessary to sell in an open market, just as farm inputs are at prices set in open markets. I acknowledge that risks and uncertainties are inherent in surviving in the global marketplace. The government is committed to ensuring support, where possible, is provided to farmers, especially in the transition period. That is why the government has announced new funding of almost $10 million over three years to assist with the transition to the new arrangements, including funding for information sessions for growers and customers, collection and publication of marketing data, seed funding for Wheat Exports Australia, technical market support grants for new exporters and assistance to the National Agricultural Commodities Marketing Association to develop an industry code of conduct.
This bill delivers on the government’s election commitment to give growers more certainty, more choice, to minimise costs, to boost innovation and efficiency, and develop new export markets. These reforms effectively further deregulate the market and replace the single desk marketing arrangements that currently exist with the Australian Wheat Board. This bill has undergone extensive consultation processes, including the release of an exposure draft of the legislation, a Senate inquiry, the work of an independent expert group and private industry and grower briefings.
WA has come a long way since the days when early settlers suffered starvation at Champion Bay. Today, not only do we feed ourselves but we feed the rest of the world. Today it is Australia and Western Australian farmers who are champions. This bill will see the WA wheat belt continue to be a world leader in innovation and ensure that the industry can adapt to the changing global wheat market. I commend the bill to the House.
I rise to oppose the Wheat Export Marketing Bill 2008. For many in this House and this debate, last night and today, this has been an academic debate. But for me it is extremely personal. My family has been growing wheat since the 1800s. My brother is still farming on a property that has been held by our family since 1913. I personally helped plant my first wheat crop when I was 10 years old and I have been involved in the industry ever since. Last year and the year before, when the wheat farmers became the sacrificial lambs of the 2007 federal election over the Cole inquiry, I was sitting on a tractor trying to grow a crop. I represent an electorate that has just under 3,000 wheat growers, and I would suggest that they are possibly the most advanced wheat growers in the most productive area for wheat in the world.
As children growing up, when we would ask my father for a bedtime story, the scariest bedtime story that he could ever come up with, that absolutely scared the pants off us, was about his earlier days in the late 1930s when he was kicking off. He was trying to pay off a farm by shearing off-farm and trying to grow a crop, only to find that he was at the mercy of unscrupulous grain traders. He was a great supporter of Don Barwick and the crew that set up the Australian Wheat Board. Until the day he died earlier this year he was a great proponent of orderly wheat marketing. We have to understand that we have moved on. In the 1930s, when my father was trying to market wheat, he had a party line and virtually no access to the outside world. The farmers in my area are very much in tune with world markets. Thanks to the previous government they now have broadband connections. Last year when I was harvesting my crop I was marketing it on a mobile phone while I was still on the header. Farmers are now using marketing tools like forward selling and whatnot.
While you might think that in an area like that they might be considered free traders, and many do, there are just a couple of things I would like to highlight to the House that I think have slewed the argument. One of them is that for the last seven or eight years we have not produced a large wheat crop in Australia. Many of the farmers that have been fortunate enough to grow a crop—and they have grown a crop because they are at the cutting edge of technology—have largely been able to market it domestically. Some of the farmers in my area have exported in containers and have found markets right across the world, boutique markets, for grain. There is one thing that does concern them—and this is pretty well universal, although the member for Brand spoke about a generation gap. I have been meeting with wheat farmers right throughout the electorate since I became elected, to try to gauge their feelings. Even the most innovative marketers and the younger farmers are terribly concerned about what is happening. The logistics involved in what this bill would bring in—and there is talk of multiple sellers in an international market—is just not possible when you are talking about large volumes of wheat.
The money in wheat is the knowledge of where that wheat is and the specifications of that wheat. If you are Fred Nerk, grain trader from Gunnedah, and you are loading a ship of 50,000 tonnes out of Newcastle, you cannot just find 50,000 tonnes and get it to Newcastle. Logistically that does not happen. You have to source wheat from a large area and you need trains to get it there. Exporting wheat, by the logistic nature of it, is a job for a large company.
The concern is that in New South Wales GrainCorp presently control most of the up-country storage. They control the terminals, and there is a fair indication that they are going to have an interest in the grain trains that are running. At the moment Cargill owns a percentage of GrainCorp and there is nothing to stop that increasing. My growers are terribly concerned that we are going to hand over the Australian wheat handling system and, by default, the marketing system to an overseas company. In the last 12 months the farmers have become very aware of the dangers. What happens when fertiliser becomes the domain of one company? Fertiliser prices have gone up by 100 per cent this year purely due to the predatory nature of a monopoly and the indication that there might be solid prices for grain. Farmers have been paying through the neck for fertiliser and many of them still have not had planting rain. So they are well aware of what happens when a monopoly takes control.
My farmers are forward thinking; they are not looking to the past—we have to move on. But the problem is that what is on offer is not going to help them; it is going to be detrimental. In 1991, the member for New England was a member of a selection panel that chose me to go to America on a Rotary group study exchange. He did not know I was a National then—his ingrained hatred of the National Party had not been honed to the fine point it has today! During that trip I spent two weeks as the guest of an American grain company, Continental Grain. I started in Chicago and spent time on the floor of the Chicago Board of Trade. I went to Memphis and spent a couple of days with grain buyers on the Mississippi, and then I finished up at their terminal in New Orleans. That terminal exported 17 million tonnes of grain—one American company; 17 million tonnes. That is not that different from an average Australian wheat crop. Certainly, that is what we would hope to grow on the eastern side in a good year.
That system was not set up to help the American farmers. They had barges and were relying on the Mississippi. They were taking 36,000 tonnes on one barge with a crew of three, and the only time they had to start the motor was to slow down to go around corners and negotiate bridges. They could put that grain on a ship in New Orleans and send it to anywhere in the world. One of the people with me was a grain buyer at the time. He worked out that he could buy grain in Illinois, float it down the Mississippi, put it on a ship and send it to Sydney for about the same freight charge as you would pay from Moree to Newcastle. So the idea that, if you are a farmer and you have 10,000 tonnes of wheat you are a world player, is just not right.
You have to understand that the Australian wheat industry has some great advantages. The disadvantages are that we are on the opposite side of the world to most of our markets, so we have enormous freight charges, and we have a variable climate. Our advantages are that we grow extremely high-quality wheat and we have managed to open up markets in the Middle East and other places through very innovative work, mainly by the AWB, with the construction of flour mills and port facilities. Australian farmers, by backing the AWB in previous times, have managed to set up this world market. You have to understand that not only was Australia a single desk seller; a lot of our customers are single desk buyers. They will only deal with a single desk representative of Australia. There has been no indication as to how that is going to be overcome by the new legislation.
I am pleased that the minister has attended the House for this entire debate, but I am disappointed that we have not been able to come up with a more workable solution. There is a bit of good news this week in my electorate—we have had up to 40 millilitres of rain and there are massive plantings going on now. My electorate covers areas like Walgett, Coonamble, Moree, Croppa Creek, North Star and Weemelah, which are massive wheat areas. If we pull off a large crop there is great concern that, come December, we are going to have large piles of wheat under canvas at Walgett, Coonamble and places like that with no organised marketing structure to meet the world market. Then we will be at the mercy of the international grain traders.
I strongly oppose this bill and hope that the minister could at least reconsider his position.
I have some things in common with the previous speaker. I too went on a Rotary group study exchange to America, in 1986. Thankfully, the member for New England was not on the panel, otherwise I might not have been able to get that trip, but certainly I have similarities to the member for Parkes. I am a wheat grower myself, my father was a wheat grower, my grandfather was a wheat grower and my son is a wheat grower, so I think I speak with some experience.
Whilst I grow wheat, I also grow barley. Up until recently, we had a go-it-alone stake with a monopoly on the sale of barley within South Australia. But many of us who live near the Victorian border use section 92 of the Constitution to export our wheat via Victoria—often at better prices. Even in South Australia we no longer have that arrangement with the Australian Barley Board because they no longer have those monopoly powers.
It is interesting that, if you talk to other farmers—as I obviously have, because I represent a very large rural seat—you will find that there has been quite a change in view on this idea of a monopoly single desk with the Australian Wheat Board in recent years. If you had asked wheat farmers in my area 10 years ago, probably 90 per cent would have said that they wanted a single desk. I think that now you would be lucky to find nine per cent of farmers that want a single desk. As previous members of this chamber have said, there is almost a generational difference between farmers. The older farmers tend to want to hold on to what they have had all their lives—the single desk and the AWB whereas younger farmers tend to want—and this is not black and white; it never is in these sorts of things—to use the experiences they have had with other grains. As I said, I am a barley grower. I have not used the pool set-up in South Australia for probably 10 years, and now it no longer exists in the form that it did. I also grow canola. I have never had a single desk for that. I grow lucerne. I have never had a single desk for that. I grow many things—lucerne seed, beans, oats—without a single desk, and I do it quite successfully. Personally, I have never had a real tie to a monopoly status for the Australian Wheat Board.
Certainly, over the past few years this debate has been raging within the wheat industry, and I will admit that I think there are differences between states. Western Australia is probably even more in favour of this legislation than Queensland or New South Wales. I am willing to accept that. The previous two speakers were from New South Wales, and I thought there would have been a bit more support for the Australian Wheat Board monopoly status that has been in existence for quite a while. But the debate has been sometimes bitter and divisive and it certainly has had widespread coverage in the rural press in my electorate. Deregulation of the wheat market challenges the very foundations of monopoly controlled marketing within Australia but, at the same time, has focused attention on many of the inefficiencies in the distribution system that has grown up around that monopoly.
Government involvement in the wheat industry began in the first years of white settlement in the eastern states when grain production, storage and marketing was socialised under a system of public farming. This subsequently failed, and the Governor of New South Wales then allowed private settlement agriculture to produce grain, with the Governor being the sole buyer. Of course, a black market in grain soon developed, and the government marketing scheme was abandoned. Thereafter, during the 1800s, government involvement was directed mainly at granting land and providing railways. The effect was to develop a wheat-farming community which was undercapitalised and dependent on government for its land and transport services. The Commonwealth government first became involved in wheat marketing when it compulsorily acquired the crop during World War I as a temporary wartime measure. During the 1920s, the wartime pools were replaced with some voluntary and some compulsory state pools, depending on the state, but growers consistently received higher returns from private traders, so the pools faded away.
With the advent of the Second World War, compulsory wheat pooling and acquisition by the government was introduced under emergency wartime powers. Since World War II, there have been at least eight wheat marketing plans. All plans have shared some common features, such as granting the Australian Wheat Board sole receiving and marketing powers for virtually all wheat grown in Australia, discriminatory pricing of wheat sold domestically, pooling of sales revenue and marketing costs, and assistance provisions which transfer some of the risk of adverse price movements to the government. Marketing arrangements for Australian wheat have changed substantially over the past decade or so. Domestic wheat marketing has been opened to competition and the AWB was re-established as a private corporation, with explicit allocation of shares to wheat producers-cum-owners. I do not dispute that these and other changes improved the efficiency of marketing and related activities with consequential benefits to wheat growers. Then we had the release of the Cole report, which had clear implications for the operation of the single desk system for Australian wheat exports. This in turn caused significant concerns for growers, both at the time and through to today.
However, the relevant question today is whether the remaining monopoly over wheat exports is helping or hindering Australia’s major export industry. In my own electorate of Barker, a large wheat-growing area, a number of producers continue to support the single export desk for wheat. At the same time, a large and growing number are keen to explore alternative marketing arrangements. I listen to their reasons and, for some, their opposition to change partly reflects an attachment to accustomed ways of doing things. Some growers tell me that they are concerned that they will be compelled to perform unfamiliar marketing functions themselves or forced to deal with international commodity traders and processors. Some producers tell me of their fear of being worse off due to reduced wheat prices or removal of the implicit cross-subsidisation that typically occurs under a single desk averaging arrangement. But, as I say to many of these farmers, they still have the option of using a pool. The Australian Wheat Board has announced quite clearly that they will still run a pool so that option is still available to those growers.
Other growers might fear a reduction in asset value and profits if competition is allowed, as well as loss of their control over marketing functions. But if you then ask them whether they fear the same thing with barley, canola, lupins, peas or any of the other many agricultural products that they grow, they have no similar fear. Given the number of significant exporters and producers of wheat internationally and the erosion of buying monopolies, it seems unlikely that Australia possesses sufficient market power in world markets to justify continuation of the export monopoly. The Australian wine industry, which is a very significant industry in the electorate of Barker, is an example of an industry that very successfully undertakes significant amounts of market development and value-adding without recourse to monopoly marketing.
Australia is a modern, open-market, competitive economy. As a matter of public policy, monopolies are not desirable and need to carry strong public interest arguments for their imposition or retention. It now makes sense to make that argument for export wheat, particularly when all other grains and rural products are happily exported, with a choice of exporters, in normal open-market arrangements. If a single desk is not needed for all other agricultural and trade products, the question must be asked: why is it in the public interest for it to be retained for wheat? I share the view of the South Australian Farmers Federation that it just cannot be business as usual, as if the Iraqi wheat scandal never happened. The pathway forward, as provided by the Wheat Export Marketing Bill 2008, will allow the wheat marketing industry to recover and prosper in the future, with viable and competitive participants.
in reply—I commence by thanking all members of parliament for their contributions to this debate on the Wheat Export Marketing Bill 2008. Anyone who has travelled and heard the different views and the lack of consensus around the country from wheat growers would have to agree that the debate within this parliament has at least ensured that everybody’s view has been represented and that everybody’s view has been represented somewhat passionately. I have been hoping for some time to be able to provide certainty for Australian wheat growers. I thank the Leader of the Opposition for the comments he made last night which provided an opportunity for wheat growers, whether they are supporters of the change or not, to at least now have some certainty as to the rules which will apply to their current crop. I would have preferred if that certainty could have been given to them three months ago when the exposure drafts were first put out. Indeed, that was the idea of putting the exposure drafts out, so that we could have some certainty, but at least we have it now.
The views of growers do differ around the country. There has been some discussion already about views differing between young growers and old growers. It is also true that opposition to these measures is strongest among those who sell to the domestic market and that support for these measures is strongest among those who export. A lot has been said about the protection which is provided by the averaging systems of a national pool. I just remind the House that averaging works both ways. Averaging not only serves for people to be brought up; it also involves a process where those who had grown a high-value wheat end with a lower return. Some growers will want to continue to work collectively. The legislation allows them to do so. Pools will still exist. We have extended, as I mentioned in my second reading speech, the original requirement to have to operate through a corporation to also now apply to cooperatives.
A point has been made throughout the debate about the fact that many of our overseas buyers are single desks. I had the opportunity earlier in the year to meet directly with the single-desk buyers in Japan. I have to say the fears that they will refuse to deal with a system of multiple traders certainly are not well founded and do not reflect the discussions that my officials have been having around the world.
The domestic market in wheat for some time has been deregulated. Domestic exports, if they are done in bags, are already deregulated. Domestic exports, if they are done through containers, are already deregulated. The same growers who grow wheat will very regularly grow a variety of crops, as in the example by the member for Barker. In those other crops they are already deregulated. These reforms allow, for the first time, growers who want to be involved in bulk exports, but would rather do so without operating through a pool system, to have the option of doing so.
The bills before the House constitute a major economic reform. We are talking about a $5 billion industry, roughly half of which is involved directly in exports. To make sure that we had the policy development right, and carrying forward what was an election commitment, there has been extensive consultation. The consultation began in visits to growers on their own properties over summer. That consultation resulted in my concern to make sure that we did not replace a national export monopoly with three regional monopolies with respect to GrainCorp, CBH and ABB. That was the reason for arriving at the ACCC undertakings, which appeared then in the exposure draft. Before the exposure draft went out, consultation was made with growers groups, with the state farming organisations and with other affected parties. The exposure draft process then went forward.
We also went forward with the independent expert group and with the Senate inquiry. The opposition spokesperson from the Senate made a request that that Senate inquiry go for longer than what was originally anticipated and we allowed that to occur. Of the recommendations from the Senate inquiry: they asked for an objects clause and we amended the legislation to do that; they wanted an amended definition of an executive officer and we did that; they wanted to require WEA to follow due process before varying an accreditation and that change was made; they wanted to allow cooperatives to be accredited and the legislation was changed; they wanted a register of exporters to be included on conditions on accreditation and that was done. They also wanted information sessions to be provided for growers and that is happening.
In addition, there are responses to that Senate inquiry from Liberal senators. They asked for WEA to be required to pay for audits it has ordered. That change was made. They asked for a review of arrangements to be included in the legislation, and that is now included. Both the Senate majority report and the Liberal senators’ comments also asked for us to go down a higher road of regulation. We did not do that. I now understand, from comments made by the Leader of the Opposition last night, that Liberal amendments, instead of asking for a higher level of regulation, are going to be asking for a lower level of regulation. We accept in good faith the need to work cooperatively as we go forward to get the best economic outcome on this and the best deal for growers. We have an open mind on those proposed amendments and will certainly look at them when they come to us in a final form in the Senate debate.
I thank all members for their participation in this debate, particularly where they have gone from the policy detail—and I note in particular the member for Mallee—to the real-life stories of many people who are in a situation following years of bitter drought. I thank all members for their contribution and commend the bills to the House.
That this bill be now read a second time.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.