Bills Digest 60 1996-97 Wool International Amendment Bill 1996


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WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest was available from 26 November 1996.

CONTENTS

Passage History

Wool International Amendment Bill 1996

Date Introduced: 30 October 1996
House: House of Representatives
Portfolio: Primary Industries and Energy
Commencement: 1 January 1997

Purpose

The major amendment proposed by this Bill provides for a new wool stockpile disposal schedule which requires:

  • Wool International to dispose of all the wool stockpile by 31 December 2000;
  • Wool International to for the quarters starting on 1 January and 1 April 1997 of a minimum of 135 000 bales of wool;
  • Wool International to dispose for a quarter starting from 1 July 1997 of a minimum of 90 000 bales of wool; and
  • Wool International not to dispose of more than 350 000 bales of wool in a quarter.

The Bill also makes it a function of Wool International to dispose of the wool stockpile in a way that maximise the net return to wool growers from the sale of stockpile wool and fresh wool.

Background

Origin of Bill

The amendments proposed by the Bill give effect to a package of recommendations relating to wool stockpile management and associated debt agreed to by wool industry leaders and the Government in August 1996.

The package of recommendations on future wool stockpile management and associated debt included:

  • quarterly minimum disposal to be set at 135 000 bales from 1 January 1997, lowering to 90 000 bales on 1 July 1997;
  • an upper cap on sales from 1 January 1997 of 350 000 bales per quarter;
  • a target date of end 1998 for the retirement of the debt associated with the wool stockpile and a legislated end date for the sale and delivery of the wool stockpile of 31 December 2000; and
  • Wool International's charter to include a requirement that its sales objective is to maximise the net return to the Australian wool growing industry (including sales of fresh wool and sales from the stockpile) subject to the upper and lower sales limits, plus the target of retiring the debt by December 1998.(1)

The underlying rationale for the recommendations was woolgrower concerns that Wool International's marketing practices were undermining fresh wool prices.

Industry Reaction to Proposals

Media reporting of industry reaction to the proposals for the future management of the wool stockpile and associated debt has been limited. It is reported in The Land of 5 September 1996 that Wool International, the Wool Council of Australia, the International Wool Secretariat, the International Wool Textile Organisation, and the Australian Association of Stud Merino Breeders were satisfied with the proposed changes.

While industry reaction to the proposals can be said to be overwhelmingly favourable, a number of concerns have been raised, including:

  • expected benefits from the proposed stockpile reduction schedule is predicated on demand increasing; and
  • with a release maximum of 350 000 bales, Wool International is still able to put downward pressure on prices.

The Wool Stockpile

As at 21 November 1996 the wool stockpile stood at 2 million bales.(2)

Market Forecast

Prices are forecast to average about the same in 1996-97 as in 1995-96. The Australian Bureau of Agricultural and Resource Economics (ABARE) considers that the buildup of stocks by producers will result in increased wool available for sale in 1996-97 despite forecast lower production. Exports are forecast to rise by approximately 13% in 1996-97.(3) ABARE considers that the major risk to the 1996-97 export forecast is the timing of an expected recovery in economic activity in Western Europe.(4)

Select Statistical Overview


1994-95 1995-96 (p) 1995-96 (f)
Auction price (greasy) Ac/kg 503 387 387
Wool Production
total kg
731 688 684
Wool Exports
volume kt
value A4m

837
4216

788
3623

889
3838


Source: Australian Commodities, vol. 3, no. 3, September 1996, p. 323. p Preliminary. f Forecast.

Main Provisions

Schedule 1 - Amendment of the Wool International Act 1993

Objects of the Wool International Act 1993

Item 1 of Schedule 1 amends the object section of the Wool International Act 1993 (the Principal Act) by omitting the term 'long-term' from subsection 3(1) which provides 'The object of this Act is to foster the long-term profitability and efficiency of the Australian wool industry by'

Note: The rationale given by the Government in the Explanatory Memorandum for this amendment is to more clearly reflect the Principal Act's intentions in relation to the wool industry's short, medium and long term health. </ ul>

The effect of item 2 of Schedule 1 is to make it an object of the Principal Act to provide for the disposal and management of the wool stockpile in a way that maximises the net return to the Australian wool grower from the sale of stockpile wool and fresh wool.

Note: Item 2 repealed the words 'will enhance the value of the asset represented by the stockpile'. The rationale given by the Government in the Explanatory Memorandum for this amendment is that it believes that Wool International needs to have regard to the impact on the wool market of the disposal of the stockpile. </ ul>

The effect of item 3 of Schedule 1 is to make it an object of the Principal Act to adopt measures for the progressive reduction of the accumulated debt and aiming to have it eliminated by 31 December 1998.

Note: Item 3 repealed the words 'adopting measures directed towards the progressive reduction, and eventual elimination, of the accumulated debt;'. There is no rationale given by the Government in the Explanatory Memorandum for this amendment. However, the Minister in the Second Reading Speech to the Bill states that 'as a means of ensuring a steady retirement of the debt, a target date of 31 December 1998 has been set for the final repayment of the debt.' </ ul>

Functions of Wool International

Item 4 of Schedule 1 substitutes a new subsection 8(1)(a) in the Principal Act which makes it a function of Wool International to dispose, in accordance with the disposal schedule, of the wool stockpile in a way that maximise the net return to wool growers from the sale of stockpile wool and fresh wool.

Note: Item 4 repeals Wool International's function of undertaking the disposal of the wool stockpile in a way that enhances the value of the stockpile as much as possible, having regard to its obligation to comply with the disposal schedule. No rationale is given by the Government in the Explanatory Memorandum for this amendment. However, it is clear from the Minister's Second Reading Speech to the Bill that the Government's rationale for the amendment is to ensure Wool International takes account of the effect of the disposal of the stockpile on the Australian wool market, or in plain English, returns to growers. </ ul>

Item 5 of Schedule 1 substitutes a new subsection 8(1)(d) in the Principal Act which makes it a function of Wool International to prepare and implement a strategy for the management of the accumulated debt with the aim of repaying it by 31 December 1998.

Note: Item 5 repeals Wool International's function of preparing and implementing a strategy for the management and progressive repayment of the accumulated debt. The rationale given by the Government in the Explanatory Memorandum for this amendment is to remain consistent with item 3 (see above). </ ul>

Wool Stockpile Disposal Schedule

Item 8 of Schedule 1 substitutes a new wool stockpile disposal schedule in the Principal Act. Under the proposed schedule:

  • Wool International must dispose of all the wool stockpile by 31 December 2000;
  • Wool International must dispose for the quarters starting on 1 January and 1 April 1997 of a minimum of 135 000 bales of wool;
  • Wool International must dispose for a quarter starting from 1 July 1997 of a minimum of 90 000 bales of wool; and
  • Wool International cannot dispose of more than 350 000 bales of wool in a quarter.

Only certain transactions undertaken by Wool International will be treated as reducing the wool stockpile. These are sales made during a quarter under contracts requiring immediate delivery; sales made under forward contracts requiring delivery to be made during the quarter; and prescribed transactions.

Note: Under the existing wool stockpile disposal schedule Wool International must reduce the wool stockpile by a minimum of 27 700 bales or a maximum of 29 100 bales per month between 1 July 1994 and 31 December 1994; and a minimum of 182 000 bales or a maximum of 192 000 bales per quarter from 1 January 1995. </ ul>

Endnotes

  1. Minister for Primary Industries and Energy, Media Release, 30 August 1996.
  2. The Land, 21 November 1996, p. 113.
  3. Australian Commodities, vol. 3, no. 3, September 1996, p. 324.
  4. ibid.

Contact Officer and Copyright Details

Ian Ireland Ph. 06 277 2438
21 November 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9031
© Commonwealth of Australia 1996

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 6 December 1996

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