Annette Hurley (SA, Australian Labor Party, Shadow Minister for Citizenship and Multicultural Affairs) Share this | Link to this | Hansard source

Before the break in my speech, I was talking about the government’s failure to provide adequate safeguards for wheat growers on the price of their grain and for the many of them who have shareholdings in AWB. The government did this by being complicit, with the AWB, in failing to provide any alternatives or deal with the imminent threat of the end of the single desk. The government was found out earlier than it wanted to be, because of the cracks appearing in the structure of AWB and its single desk marketing arm. Those cracks were obvious to anyone, yet the senior management of AWB—as, it appears, was their wont—refused to look at a plan B. They refused to look at any alternative or at any response to the competitors that were knocking at their door. Competitors like CBH and ABB are large grain marketing outfits that are perfectly capable of dealing with bulk wheat shipments in the international market, but the AWB refused to address this issue.

What we got from the government was repeated inquiries into the single desk. We had economists at 60 paces, and we got no result whatsoever. It was put off and off, until finally the government has been forced to face what has happened with the Cole inquiry and the collapse of the single desk. This is despite Prime Minister John Howard having promised at the last election to maintain the single desk. The government has failed on repeated occasions. What do we see now from this creaky coalition? We see some inadequate compromise for six months—another putting-off. The Leader of the Nationals, Senator Boswell, has now put the onus on the growers to come back with a solution. We have had years and years of inquiry after inquiry—everyone has known that there is this pressure—and now Senator Boswell says to the wheat growers around Australia: ‘It’s up to you. You have to come back with a single unified solution that is workable.’

These wheat farmers are having to cope with the drought and the fact that they will probably get less from AWB for their wheat crop this year and the fact that the value of their shareholding in AWB has plummeted. But they are also having to get together and determine a sophisticated, international marketing structure for their wheat into the future. Is this not a monumental failure by the government and by the party that is meant to represent the cockies out there, the National Party? It is a monumental failure not to have dealt with this issue previously and not to have had some plan for what might happen if the single desk collapsed.

This is in the face of international pressure, from the United States and elsewhere, on the single desk. There are not only the internal pressures and problems that we knew existed that led to the cracks in the edifice; there is also the international pressure to get rid of it. But the government did not deal with the issue; they refused to deal with it. They cosied up with their mates in AWB and refused to look at the issue. They stuck their heads in the sand, and in doing so they have let down the wheat growers of Australia as they have not adequately provided for them, particularly for their long-term future.

I think the government should hang its head in shame over this. Agriculture has been the mainstay of our country since its inception, and the government has let down one of the chief elements of our agricultural industry. It has let it down in many ways, but the marketing arm is the particular way by which it has done so. I hope wheat growers do indeed, as Senator Boswell exhorted, contact their members of parliament to tell them what a failure the government has been in this instance, that they expect much better of government members and that they expect to have a model that they can be properly consulted by the government on and can vote on and that the government will not turn its failure against the wheat growers of Australia.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

In speaking to the Wheat Marketing Amendment Bill 2006, I point out that when the Cole report came down I was immediately certain that the legal framework under which AWB had been operating would need to change completely. The single-desk concept does not exist if the veto is taken away from AWB. The veto gives AWB the effective monopoly, the effective sole right, to export wheat. In the year 2000 a majority of the High Court found in the NEAT Domestic Trading Pty Ltd case that:

The legislation confers upon AWB(I) a practical monopoly on the bulk export of wheat save to the extent to which the authority, which is to issue guidelines, and AWB(I), which is not bound by the guidelines but whose conduct is subject to review and report, are prepared to relax the monopoly.

Of course they have not been prepared to relax the monopoly. Nobody can export wheat from Australia without the written consent of the Australian Wheat Export Authority, which is a statutory board. However, that consent must not be given by the Australian Wheat Export Authority without the approval of AWB(I), as per section 57 of the act. I have not checked the latest statistics, but up to 10 months ago the AWEA had never given consent for anyone other than AWB(I) to export wheat although there had been 45 applications to do so, according to Leon Bradley, who is the Chairman of PGA Western Graingrowers. So the veto and AWB were inextricably bound together and that has resulted in an effective monopoly and an effective single desk.

The problem for me, as a Western Australian senator, has been that WA wheat farmers’ current crop has been under threat. This year’s wheat crop is around four million tonnes. Ninety-five per cent of the wheat produced in WA is exported. Because of the drought, WA will end up supplying almost all the export wheat from Australia this season. Western Australian growers in very large numbers—apparently about 90 per cent of them—have not been providing their crop to AWB on the principal ground of disaffection with AWB because of corruption and reputational loss, the dangers of farmers losing their crop income if AWB is put into administration or is sued or prosecuted and AWB being perceived to have a diminishing ability to trade as it is regarded as a distressed seller. So my immediate concern as a Western Australian senator was that we had to move WA’s crop.

I discussed these matters with Liberal Western Australian senators, who I know have been deeply concerned with this matter, and the Australian Greens WA senator, Senator Siewert. Following publication of the Cole report, I was convinced that politically the coalition would find it difficult to come to a rapid policy decision. There is a clear policy disagreement between large numbers of Liberal members of the coalition and large numbers of National members of the coalition. If that were the political reality, what circuit breaker could I provide?

What was needed was a short-term temporary solution for Western Australian farmers who were disenchanted with AWB and were not prepared to provide them with their crop. Three weeks ago, I thought we would need legislative change in this chamber in these last sitting weeks of the year. I discussed that fact as I saw it with ministers, and I thought that from a cash flow and revenue perspective WA wheat farmers needed an urgent resolution. The solution that I came up with and proposed to the government was that they should overturn AWB’s veto power in the short term and that they could do that in one of two ways. They could give the veto power to the Australian Wheat Export Authority—which I did not favour because I believe it has been proven to be weak and inefficient—or they could give the veto power override to a senior member of the cabinet—I was suggesting the Treasurer—and that would result in a quick political decision-making process which I thought was better in these specific circumstances.

I discussed those options with WA Liberal senators and the WA Greens senator. Once that had been done and I had advised the government and various ministers of my views, and once we had discussed it in our party room, the Democrats came to the view that this was a desirable solution to support as a whole. On 30 November, with Senator Siewert, I moved a motion. That motion read:

That the Senate—

(a)

notes that:

(i)

the Government will need time to consider possible legislative changes to the wheat export regime, following the report of the Cole Commission of Inquiry, but

(ii)

from a cash flow and revenue perspective, Western Australian wheat growers need urgent resolution in 2006 to present export impediments; and

(b)

asks the Government to consider introducing legislation into the Senate in the sitting week commencing 4 December 2006 to provide that for a period of 15 months or two seasons the final approval power for wheat export licences be transferred to the Treasurer.

The essence of my recommendation, which is a circuit-breaker, has been accepted by the government. They are providing a temporary cessation of the single desk for a period of six months. They will consult with the growers in the industry to establish how to move the next phase onwards in terms of policy, and I am hopeful that as a result of this move and this initiative the WA export crop will be able to be moved.

As the chamber knows, there is a campaign on to save AWB and to save the single desk, and there is another campaign to end the single desk—not necessarily to destroy the AWB but just to leave them as one of the export licensed bodies. Wheat farmers and their organisations are split on the issue. I take into account the various vested interests on all sides. I am particularly careful where there is a clear conflict of interest in any grower who is also a shareholder or director in AWB, which does bother me when I get those emails. Frankly, if a vote comes before the Senate next year which tries to keep the single desk, I will argue against it, but I do not have at this time a determination as to what should replace it. I am of the view that farmers are entitled, like anyone else in the community, to have choice as to who exports their crop, so I will look with great interest at what proposal is hammered out between the National Party and the Liberal Party following consultation.

In my view—and I am strongly influenced by the Cole commission of inquiry—the single desk in the hands of AWB is simply history. AWB has deceived the United Nations, it has deceived the Australian government and it has detrimentally affected the interests of the people of Australia by its conduct. There have been very serious findings by the Cole commission, and I expect there to be very serious consequences. It is too early to see the exact consequences that will ensue, but AWB’s companies, officers, advisers, management and directors are all facing the possibility of domestic legal action, both civil and criminal, and may even face international legal action, judging by media reports of those circumstances. The ATO may make claims for hundreds of millions of dollars for substantial recovery of tax concessions wrongly claimed. There may be claims for hundreds of millions of dollars compensation as a result of class actions. We cannot foresee anything else but that there will be legal action against individuals and those entities in some form. There is therefore contingent risk to the assets and viability of AWB and entities, and any wheat exporter forced to deliver their crop to AWB may be subjecting their own revenue to contingent risk. So I am not surprised that independent arrangements have been made to warehouse the wheat crop.

In these circumstances, an Australian government that continued to legally oblige wheat exporters to sell their crop through AWB, after they had been advised that the findings of the Cole commission had been made known, would, I think, expose themselves—in other words, expose taxpayers—to claims of compensation by wheat growers who did not want to give their crop over to AWB for export or who suffered detriment as a result of that circumstance. I think the government have recognised that danger and they have very wisely taken the veto away from the existing holders of that veto and given it to the cabinet.

Of course, we in the chamber should all recognise that under no circumstances will the minister who has direct responsibility through this legislation be able to take unilateral action. He will obviously, as is typical with these things, consult with his senior colleagues in the cabinet, and that is right and proper. It is in my view completely unacceptable for AWB to retain a veto power over any other body seeking a licence to export wheat. The conflict of interest is massive. The veto has to be removed, and the government are to be congratulated on removing it.

I recognise that the Democrats did support the single-desk concept. They traditionally supported it for the export of Australian wheat because it was generally thought that it was the best way to obtain the best price for wheat against big market competitors where subsidies to farmers make their wheat more competitively priced. That approach is not consistent with general Democrats policy, which is a support for more open and more competitive markets, as with most agricultural goods.

Speaking for myself, I am no longer of the view that the single desk is sustainable, but I stress that I recognise that I need to be flexible about what replaces it, and that is in view of the industry interests that are involved and in view of the transitional arrangements that need to be arrived at. But I will not support the return to the single desk in the form that it has been previously.

Whether any others simultaneously had the idea for the circuit-breaker that has come through, I do not know. I am prepared to claim credit for this initiative, because I think it is a good one. I am hopeful that, time having been bought with this particular change to the legislation, a long-term and beneficial result for wheat exporters will occur in the future.

Judith Adams (WA, Liberal Party) Share this | Link to this | Hansard source

I rise this evening to speak on the Wheat Marketing Legislation Amendment Bill 2006. First, I would like to say that I am a Western Australian wheat grower and our family and partnership do not hold any shares in AWB. I think it is important for me to say that.

I concur with the remarks of Senator Murray. A lot of what I have to say he has already said. Western Australian farmers are in a dilemma. On the front page of the West Australian today it says, ‘West Australian farmers in limbo’.

I come now to the bill and what it will do. The Wheat Marketing Act 1989—the act—establishes the Wheat Export Authority and defines the arrangements for controlling export wheat from Australia. This Wheat Marketing Legislation Amendment Bill 2006 is required to enact temporary arrangements in the enabling legislation. The purpose of this bill is to amend the act through the transfer, on a temporary basis, of the right to veto bulk wheat export applications from AWB International Ltd—AWBI—to the Minister for Agriculture, Fisheries and Forestry. This transfer will be effective until 30 June 2007.

These changes do not amend the function or role of the Wheat Export Authority other than in the fact that it needs to seek the agreement of the minister for each application it receives. AWBI can still engage in export activities but no longer holds the right of veto. The reasons for these temporary changes are that the current system grants a monopoly to AWBI in the bulk export of wheat from Australia. Growers are compelled by law to consign their wheat to AWBI if it is to be sold internationally. In the present circumstances of drought caused low productivity, in my opinion this system is undermining growers’ profitability.

In Western Australia, some 95 per cent of the wheat produced is exported. This is also true of the vast majority of wheat produced in South Australia. This means that wheat growers in these two states are almost totally dependent upon the export market for their annual income. The dependence upon exports is not shared to anywhere near the same extent by wheat growers in other states, as most of that wheat is produced for the domestic market. Therefore, wheat growers in Western Australia and South Australia are left with no choice but to pay the fees extracted by AWB Ltd as the service agent for its fully owned subsidiary company, AWB International.

Whilst the Cole inquiry has brought significant media attention to the export wheat monopoly, I believe the system has been failing growers for many years. There is an inherent conflict of interest for AWBI between satisfying shareholders and maximising grower returns. This conflict, combined with excessive supply chain costs and marketing costs, particularly in low-production years, and an underinvestment in the industry, has led to a situation where wheat growers are at the bottom of the food chain in terms of receiving the true market value for their crops.

In addition, the Cole inquiry has revealed the significant contingent liabilities overhanging AWBI. With harvests well under way, Western Australian wheat growers are expected to deliver around five million tonnes of wheat from the current crop. That figure was released by ABARE this week. Because of the drought, this figure is well down on last year’s figure of 15 million tonnes. This year, Western Australia will supply almost all of the export wheat from Australia due to the drought in the eastern states. This, of course, also means that Western Australian wheat growers will be shouldering most of the cost burden if they are forced to deliver their wheat to AWBI.

Currently, Western Australian growers are consigning over 80 per cent of their wheat to grain marketers other than AWB or are warehousing their wheat. Normally around 80 per cent of wheat would go directly to AWBI, so it is plain to see that Western Australian wheat growers have voted with their wheat about what they believe to be the best option for their financial futures.

Leon Bradley of the Western Australian Pastoralists and Graziers Association was quoted in the Australian on 21 November 2006 as saying:

Normally farmers can’t wait to get their crop off and give it to the AWB, because they need the money to pay off their overdrafts, which reach a seasonal peak at this time of year.

He went on:

This year, even though they are under financial pressures, more than 70 per cent of farmers are refusing to deal with AWB, and we can understand it …

Growers must have a path to export their wheat other than through AWB before the end of the 2006-07 harvest, and this legislation provides it. I believe it is imperative that the legislation is enacted as a matter of urgency to allow greater competition in the marketing of export wheat.

If the restrictions that force growers to consign their export wheat to AWB pools are lifted, growers will be freed from the contingency risks impacting on AWB. It will also have the following advantages: there will be greater liquidity in the wheat industry, cash prices will be increased by opening the system to competition, competition will increase investment in agriculture and there will be better risk management opportunities as well as cost savings in the supply chain.

By amending the Wheat Marketing Act 1989 to remove the power of veto from AWBI and transferring it to the minister it is to be hoped other industry accredited wheat exporters will be able to seek licences to bid for growers’ wheat. This competition will allow greater freedom of choice for wheat growers to maximise the return on their crops. The proposed amendments do not prevent AWBI from continuing to provide exactly the same services to growers as they currently do.

In conclusion, I am somewhat concerned about the AWB service fee of $39.7 million and who will be responsible for it. I do not want to see Western Australian wheat growers being left to service this debt.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

The reason we have a single desk is twofold: firstly, the advantages to our growers domestically and, secondly, the advantages to the marketing of the product overseas. We have heard a lot of argument and contention about the advantages or disadvantages domestically but the facts stand that, on the 2006 census from Rural Press, about 73 per cent want a single desk. In fact, 69 per cent of them want it to be run by the AWB.

We have a campaign in Western Australia that is based on the fear that if you present your grain you will not get payment and that inordinate liabilities are hanging over the head of AWB. I think this fear campaign has been strategically placed to come out during the Cole inquiry with the result that it breaks the single desk. No doubt anybody can cherry-pick a market in such a way as to get a certain section of the market, a certain period of time in the middle of a drought when the wheat crop is low, supply their own mills in another country and say that they have created a situation that no longer spells the relevance of the single desk. But over a period of time that will prove to be completely and utterly wrong. Furthermore, the results of the advantages of the single desk are that the marketing of this product throughout the world has been built on the work of a company called AWB. Since 1939 the AWBI has built up the marketing of this product. Anybody can go into an established market of another person and say, ‘If I can basically steal some of your market, I can get the same price or better than what you have, because you’ll be left with all the contingent liabilities and I’ll get the benefit of the revenue.’ That is what is happening here.

AWB, in the marketing of the product, has to take a long-term position in the market; it is the diligent and safe thing to do. In taking a long-term position in the market, you take out the troughs but you can also take out some of the peaks. Nonetheless, today we see that CBH, which has been put up as the shining light of where this is all going, offered a price that is basically approximate to what the AWB offers in any case. Even with all that, the AWB is still basically on the mark, and the AWB is always conservative in its price. In fact, it has gone below it only once; that was in 1990.

What we give up if we lose the single desk is no better enunciated than by our major competitors. People such as Pascal Lamy from the EU, Senator Norm Coleman from Minnesota or Tom Harkin, Democrat senator in charge of the agriculture committee of the congress, want to get rid of our single desk. They want to get rid of it for one specific reason: it is a strategic market advantage that they feel compromises the price they can get—not the price we can get but the price they can get. On destruction of the single desk there is only one person who will lose and that is the Australian wheat grower. To have a single desk you must have integrity of the pool. The integrity of the pool relies on the power of veto. You cannot ask a certain company to be the buyer of last resort yet not give them the integrity of the pool. If we get the destruction of this, we will have a case where we can have certain deals for certain mates and other deals for other people. What I do agree with is that we must have greater transparency in the single desk. We must have a move back to grower owned directors. But to get rid of it, to throw the baby out with the bathwater—to prove a point for a very peculiar, specific period of time based on the fear of an inquiry into the actions of certain people in the executive of a company, who are now sacked—is blatantly ridiculous. If you do that, you are creating a great mischief in the lives of people.

However, we could see the numbers. I do not know where the Greens were on this issue; I suspect that they want to get rid of the single desk. I know that the Democrats have been clearly on the record that they want to get rid of it. The private member’s bill was being put forward by a number of members of the Liberal Party, so the obvious reality was that we were about to have a total deregulation and I think that would have been an extremely unfortunate outcome.

But we have a period of time. It is a fact that, if no other legislation is passed through this parliament, on expiry of the six-month period of time the single desk will revert to the status quo and then it is back with AWBI. As a final statement, I say that it is up the growers who write to me from Western Australia—from Bob Ifler to all the local growers in New South Wales. I also am a wheat grower. I do not have shares in AWB, but I am a small wheat grower nonetheless. I did not have a crop because we had a drought, and the insinuation that it was somehow hidden or warehoused is slanderous. The fact is that we got eight tonnes from 350 acres of seed wheat for next year—that was it—and then we stopped the headers because there was no point in going on. The position is that growers must be absolutely open and vociferous in their campaign to protect the single desk. Ambivalence or saying nothing will be taken as a vote to get rid of the single desk.

Debate interrupted.