Bills Digest 161 1996-97
Wool International Amendment Bill 1997
WARNING:
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 Bill.
CONTENTS
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 2.
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 government-guaranteed debt.
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, 1997.
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 of.
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 it.
Items 1 to 11 in Schedule 1 amend the Objects of the Wool
International Act 1993 and the functions of Wool International.
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 International;
- 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 them.
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 exceeded $20.
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 stockpile.
New Part 4E deals with two new functions for Wool International.
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 the fund.
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 either:
- wool production;
- administration and disposal of assets; or
- business management.
Bronwyn Young
30 June 1997
Bills Digest Service
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This Digest does not have any official legal status. Other sources should
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ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library, 1997.
This page was prepared by the Parliamentary Library, Commonwealth of
Australia
Last updated: 14 July 1997
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