This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Wool International Amendment Bill 1997
Date Introduced: 28 May 1997
House: House of Representatives
Portfolio: Primary Industries and Energy
Commencement: On 1 July 1997, except for the
provisions reducing the board of Wool International from 8 to 2.
These come into effect from 1 January 1998
- To liquidate Wool International once the wool stockpile has
been disposed of and the debt retired, with equity being returned
to wool-tax payers;
- To allow wool growers to trade their future entitlements to
equity, or use it as security for a loan;
- To gradually reduce the functions of Wool International as the
stockpile disappears, and pare back the size of the board from 8 to
Wool International was set up by the Wool International Act
1993. It is a commercially-oriented statutory body which took
over from the Australian Wool Realisation Commission. Its main
function is to reduce the wool stockpile, and repay the
The stockpile was the result of the spectacular collapse in wool
prices six years ago, coupled with high levels of production which
were largely triggered by the policy of maintaining a wool reserve
price at 870c/kg clean, and later 700c/kg - even when the price of
wool dropped to a low of around 380c/kg.
By 1991, the stockpile stood at 4.72 million bales, associated
debt, at $2.8 billion, and something had to be done.
For most of its history the wool reserve price scheme had been
funded by growers through a modest levy on wool sales. At one stage
during the 'wool crisis' the levy reached 25 per cent.
The Wool Realisation Commission was established in 1991 to sell
off the stockpile, essentially according to a debt-reduction
schedule. That was then scrapped, and between 1993 and 1996, wool
was sold at the fixed rate of 180,000 bales per quarter. At the end
of last year, it was decided to take a more commercially oriented
approach, with quarterly sales of between 90,000 and 250,000
depending on the market, with all the stockpile to be sold by the
end of the year 2000.
The stockpile has gradually shrunk, and now stands at about 1.6
million bales, with associated debt at under $660 million. The
price of wool has also recovered somewhat, with the Eastern market
indicator standing at 753c/kg at the week ending Thursday, June 19,
Under this Bill, wool growers who paid more than $20 towards the
debt will be entitled to get back money. In order to do this, they
will be given equity in Wool International, apportioned to growers
as the authority is wound down. The first payment will be of $81
million, with the total pay-out estimated to be about $850 million.
The last payments will be made before Wool International and its
assets are liquidated, and after the stockpile has been disposed
Wool growers paid a total of about $351 million under the levy.
So, if expectations are met, that will represent a return of about
$2.4 for every $1 paid.
The Bill will also allow farmers to trade their future
entitlements, or pledge them to a financial institution as security
for a loan. The loan facility is to be negotiated by Wool
International by 31 December 1997.
Traditional rivals Wesfarmers Dalgety and Elders Australia have
proposed establishing a new wool logistics and merchanting vehicle
in conjunction with wool growers, called Global Wool. The Bill
enables growers to invest their initial pay-out in Global Wool,
through a growers trust. Wool International is empowered, with the
permission of the Minister for Primary Industries, to establish the
trust, and invest up to $1 million in establishing the investment
vehicle and developing the Global Wool proposal. Its involvement is
to cease by 30 June 1998.
The proposal needs the approval of the Australian Competition
and Consumer Commission because it would give Wesfarmers and Elders
a 60 per cent share of the market. The commission is considering
Items 1 to 11 in Schedule 1 amend the Objects
of the Wool International Act 1993 and the functions of
Item 3 repeals subsection 3(3) and inserts a
new one. The new subsection says the Act is intended to:
- give wool growers who contributed to the management of the
stockpile the right to share in the surplus funds of Wool
- make it easier for wool-tax payers to obtain loans using their
entitlement to the surplus funds as security;
- encourage investment by wool-tax payers in Global Wool,
although the company is not mentioned by name.
Item 9 inserts a new section 5A which defines
what 'contributions to Wool International' means. This is important
because the entitlement to equity in Wool International is governed
by this definition. It ensures that the assessment will be made
according to the amount of money paid as the debt component of the
wool tax from 1 July 1993 to 30 June 1995, including voluntary
contributions between 1 July 1993 and 20 June 1995.
Item 10 repeals subsection 8(1)(f), (g), and
(h) and inserts new subsections 8(1)(f) and (g). The new
subsections say it is a function of Wool International to keep a
register of equity holders, and to distribute surplus money to
Item 12 inserts new Parts 4A, 4B, 4C,
4D and 4E into the Act.
New Part 4A spells out who is entitled to a
share in the money from Wool International.
New section 22B obliges Wool International to
keep a register of equity holders.
New section 22C spells out who is entitled to
equity, specifying that an individual's contribution must have
New section 22D obliges Wool International to
allocate units of equity to anyone included on the register. New
section 22F makes it clear that any registered
equity holder is entitled to receive a share of any money
distributed by Wool International.
New section 22G gives the formula by which each
unit of equity will be calculated.
New section 22H allows an equity holder to
transfer her/his rights to another.
New section 22J specifies that a charge may be
taken out over a unit of equity, and details how the charge should
be recorded on the register.
New Part 4B deals with the distribution of
money among registered equity holders.
New section 22O says money not required for
other functions may be distributed to equity holders. The first
distribution is to take place before 1 January 1998, with a further
distribution or distributions after the repayment of accumulated
debt, and a final distribution after the disposal of the wool
New Part 4E deals with two new functions for
New section 22ZB authorises Wool International
to negotiate a loan facility for wool-growers wanting to use their
future equity entitlements as security.
New section 22ZC authorises Wool International
to conduct a feasibility study into Global Wool, although the
entity is not mentioned by name. If the study is favourable, Wool
International must, with the approval of the Minister, establish a
unit trust to enable wool growers to invest in Global Wool.
New section 22ZE limits to $1 million the
amount Wool International may spend on the study and establishing
Part 2 of Schedule 1, items 15 to 19 reduce the
number of members on the board of Wool International from eight to
two, and specifies that the members must have expertise in
- wool production;
- administration and disposal of assets; or
- business management.
30 June 1997
Bills Digest Service
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© Commonwealth of Australia 1997
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Last updated: 14 July 1997
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