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
Wool International Amendment Bill 1996
Date Introduced: 30 October 1996
House: House of Representatives
Portfolio: Primary Industries and Energy
Commencement: 1 January 1997
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.
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.
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>
- Minister for Primary Industries and Energy, Media
Release, 30 August 1996.
- The Land, 21 November 1996, p. 113.
- Australian Commodities, vol. 3, no. 3, September 1996,
p. 324.
- ibid.
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
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ISSN 1323-9031
© Commonwealth of Australia 1996
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Published by the Department of the Parliamentary Library, 1996.
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Last updated: 6 December 1996
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