Bills Digest No. 220 1997-98
Wheat Marketing Legislation Amendment Bill 1998
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
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details
Wheat Marketing Legislation Amendment Bill 1998
Date Introduced: 14 May
1998
House: House of Representatives
Portfolio: Primary Industries
and Energy
Commencement: The amendments
to the Wheat Marketing Act 1989 (items 1-21) and repeal
of section 18 of the Wheat Marketing Amendment Act 1997 (item
22) commence on 1 July 1999. The remaining provisions commence 28
days after this Bill receives Royal Assent.
Introduction
On 26 June 1997 the Government introduced legislation
which continued the major changes to Australia's wheat marketing arrangements
first given effect to in the Wheat Marketing Act 1984 and continued
under legislation passed in 1989 and 1992. That legislation, the Wheat
Marketing Amendment Act 1997, followed the announcement on 17 April
1997 by the Minister for Primary Industries and Energy of a new commercial
structure for wheat marketing in Australia.
The key element of the new arrangement is the Government's
intention that by 1 July 1999, its only involvement in the wheat industry
will be in relation to the export monopoly which is to be conferred on
an independent grower-owned company.
The Wheat Marketing Amendment Act 1997 was the
first part of a two stage process. Major features of that Act included:
- retention of the Australian Wheat Board (AWB) functions of controlling
the export of wheat from Australia and the marketing overseas of Australian
wheat
- repeal of AWB powers to: buy wheat in Australia or overseas; import
wheat into Australia; and to sell or dispose of wheat, or arrange to
sell or dispose of wheat, in Australia
- terminate on 30 June 1999 the Wheat Industry Fund (WIF) component
of the levy on wheat sales and amounts of that levy payable by the Commonwealth
to the AWB
- establishment of three wholly owned subsidiaries of the AWB to which
the AWB's wheat marketing and financing functions are being transferred
- 'nominated company A' the most important of the subsidiaries was created
and given the power to subscribe for, acquire and hold shares in nominated
companies B and C. (Also, nominated company A can enter into arrangements
with one of its wholly-owned subsidiaries (other than nominated company
B) to perform its functions.)
- directorships of nominated company A or one of its wholly-owned subsidiaries
require the approval of the Minister
- the constitutions of nominated companies cannot be changed without
approval of the Minister.
The Bill represents the second stage of the process.
Once this process is complete, Australia's legislative arrangements for
wheat marketing will, with the major exception of the continuation of
an export monopoly, bear little, if any resemblance to the provisions
which have characterised the wheat industry for many decades. Consequently
this Digest, as that for the Wheat Marketing Amendment Bill 1997, contains
an extended discussion on the history of wheat marketing arrangements(1)
and comment on some current industry issues.
The major provisions of the Bill provide for:
- the establishment of the Wheat Export Authority (WEA) on 1 July 1999
which replaces the AWB and will have the functions of controlling the
export of wheat from Australian and monitoring nominated company B's
performance in relation to the export of wheat
- provide for B class shares in nominated company A to be issued to
WIF equity holders and for such shares to be issued at the rate of one
B class share for each WIF unit;
- provide nominated company B with power to export wheat without WEA
authority until 1 July 2004
- exempt nominated company B from Part IV of the Trade Practices
Act 1974
- require the AWB immediately before 1 July 1999 to divest itself of
all assets, liabilities, rights of employees that could have been transferred
- on 1 July 1999 vest in nominated company A, AWB money in the WIF,
an investment of the WIF and any other asset that was acquired using
WIF money.
Early Federal Government Intervention in the
Wheat Industry
Wartime Arrangements
The Federal Government's first involvement in Australia's
wheat industry occurred during World War I when temporary war-time measures
were instituted. These included establishment of the Australian Wheat
Board in 1915. Similar measures were implemented during World War II.
The war-time measures were attractive to producers because
they were freed from the dominance of wheat merchants. Several Government
inquiries in the early part of this century refer to the existence and
impact of price and shipping cartels whose collusive actions depressed
prices and controlled transport. This exploitation of farmers was facilitated
partly by difficulties experienced with storage and transport arrangements
during a period of rapid expansion and technological advancement.
The Depression Years
The Great Depression severely impacted on Australia's
external trading position. In 1930, the Commonwealth Government sought
to overcome these economic difficulties through an expansion in primary
production, especially wheat-growing. Early in 1930 Australian wheat growers
were urged to grow more wheat. The appeal was instigated and supported
at the highest levels of Government. This was the first time that political
factors interfered with farmers production decisions.
The 'grow more wheat' campaign was accompanied by obvious
patriotic overtones and included the particularly attractive offer of
a price guarantee of 4 shillings per bushel. Political leaders were unable
to keep their end of the bargain with the Senate rejecting Australia's
first Wheat Marketing Bill on July 4, 1930.
During 1930, however, world wheat prices declined significantly
and, with most producers in the eastern States already in a financially
weakened condition, the industry entered a severe economic slump. Several
other legislative initiatives providing for assistance to the wheat industry
were attempted during 1930 and 1931. The role and powers of the States
were significant issues in the failure of most of these proposals.
Although one measure, providing a price guarantee of
3 shillings per bushel, was actually enacted, it was 'still-born' because
no funds for the bounty were available.
Wheat-growers finally received their first Federal assistance
following passage of the Wheat Bounty (No. 2) Act was assented
to on November 25, 1931. This provided a bounty of 4 1/2 pence per bushel
on all wheat marketed in 1931/32. Further bounty and debt relief measures
were provided by the Commonwealth Government during the 1930s. The States
also became financially involved with direct and indirect measures to
assist wheat-growers.
Wheat Marketing Legislation
Major long-standing features
The comprehensive marketing arrangements which have been
a feature of the Australian wheat industry for most of the post-war period
were first brought together in the Wheat Industry Stabilisation Act
1948 which was assented to late in that year. The Act embodied four
main features arising from concepts of price stabilisation and orderly
marketing (that is the removal of competition between producers in the
output market) - guaranteed prices, a home consumption price, the Australian
Wheat Board and stabilisation arrangements. These remained fundamental
objectives of most subsequent legislation.
The 1948 Act provided for measures contained therein
to last five years and this pattern has been repeated in each subsequent
Act. In all, eight fairly similar wheat marketing plans, as they were
often referred to, were enacted from World War II to 1984. Each was enacted
in time to give continuity of the major provisions and hence there was
never any real prospect of alternative arrangements operating in that
period. All plans shared some common features such as granting the AWB
sole receival and marketing powers for virtually all wheat grown in Australia;
discriminatory pricing of wheat sold domestically; pooling of sales revenue
and marketing costs and assistance provisions which transfer some (if
not all) of the risk of adverse (downward) price movements to the Government.
Change in the wheat industry
The momentum for major changes to wheat marketing arrangements
appears to have been well established prior to the 1984 legislation with
several important High Court rulings in the late 1970s; a highly critical
report in 1979 from the Senate Standing Committee on Finance and Government
Operations questioning the AWB's competence and accountability; adverse
reports by the Auditor General's Office; a 1981 report which was highly
scathing of grain handling in NSW; and, the Industries Assistance Commission's
(IAC) 1978 and 1983 reports on the wheat industry.
1984
The Wheat Marketing Act 1984 was the first of
three wheat marketing plans instituted under the previous Labor Government.
It was developed at a time of great financial pressures in the industry
following, firstly, a severe drought over much of Eastern Australia in
1982 which caused production to plummet and the importation of wheat into
Victoria from Western Australia, and secondly, in the following season,
heavy rains at harvest time in many areas causing a marked deterioration
in crop quality.
Key changes introduced in 1984 were:
- a system of permits issued by the AWB for wheat used for stockfeed,
where producers and consumers could trade directly but under guidelines
and regulations
- alterations to the Guaranteed Minimum Price arrangements which sent
increased market 'signals' to producers
- five separate categories of wheat for which prices were underwritten
(as against one previously) to reduce cross subsidisation
- prior to the next wheat package there were two other very important
reports which served as catalysts for debate concerning the wheat industry.
Royal Commission Into Grain Storage, Handling and Transport
In response to the rural recession of the mid 1980s,
the Government presented its Economic and Rural Policy Statement in April
1986. One of the measures proposed therein was a Royal Commission into
grain storage, handling and transport. On the basis of an agreement between
the Commonwealth and State Governments, the Royal Commission, chaired
by Mr Jim McColl, commenced in late 1986 and continued through 1987. This
landmark inquiry was required to advise on the most efficient and cost-effective
integrated grain distribution system for Australia's future needs and
to make recommendations about implementing such a system.
The inquiry focused on the legislative and administrative
arrangements within which grain distribution services were being provided.
It found that, for the most part, the system of grain distribution did
not meet the criteria of economic efficiency, cost effectiveness and integration.
A quantitative evaluation suggested that cost savings of approximately
$10 per tonne could be achieved nationally by adopting a system which
provided for the greatest choice and flexibility in all aspects of the
grain distribution system.
The Royal Commission's key recommendations were:
- marketing authorities to deal with a deregulated distribution system
and being specifically required to minimise storage, handling and transport
costs
- removal of the requirement that marketing authorities grant sole receival
rights to State agencies for storage and handling, thereby allowing
them to utilise those agencies providing services at least cost
- removal of all restrictions and impediments to the transport of grain
by road
- dissagregation of port service and sea transport costs with charges
to growers and other users to reflect actual port costs. ie reforms
to allow charges for port and shipping services to more closely reflect
actual costs incurred.
1988 IAC wheat industry report
In February 1988, the IAC completed its third review
of the wheat industry.(2) The focus of its investigations was on whether
future assistance should be provided to the wheat industry and, if so,
the nature, duration and extent of such assistance.
The IAC made sixteen specific recommendations as well
as commenting on other matters associated with Australia's wheat marketing
arrangements. It outlined a preferred course of action
...designed to improve the wheat industry's competitiveness by removing
those regulations which impede growers and buyers of Australian wheat
from responding flexibly to market developments.(3)
The IAC's major recommendations were:
- limiting the AWB's power to control exports to prescribed markets
- extending the grower-to-buyer and permit arrangements to export sales
- extending permit arrangements to cover all domestic sales and with
no restraints on reselling in the domestic market
- removing the AWB's obligation to supply the domestic market
- discontinuation of the administrative domestic pricing mechanism
- discontinuation of underwriting provisions
- advance payments to be a declared proportion of the season's expected
market returns with the option of negotiable certificates in lieu
- as far as practicable, individual payments to growers reflect actual
market returns and associated costs.
1989
Debate during 1988-89 over the future of wheat marketing
was possibly the most controversial in fifty years and generated considerable
hostility both within industry ranks and between the industry and the
Government. The resultant legislative package probably contained the most
significant changes ever made to Australian wheat marketing arrangements
and included:
- deregulation the domestic wheat market through the removal of the
AWB's compulsory acquisition powers and termination of administered
domestic pricing arrangements
- introduction of a fixed government guarantee on AWB borrowings in
relation to pool wheat for advance payments, payments in lieu of final
payments and operational expenses associated with sales where the AWB's
borrowing liability exceeds money available for repayment of the borrowing
- removal of the requirement that there be a majority of growers among
Board members
- establishment of a Wheat Industry Fund (WIF), funded principally from
a minimum 2 per cent grower levy, to generate a capital base for financing
the AWB's marketing activities
- the AWB objective of maximising net returns to producers by minimising
storage, handling and transport costs with costs to be passed back to
individual growers wherever possible.
In addition, the AWB was permitted to trade in grains
other than wheat, the composition of the Board changed from primarily
growers to commercial expertise and there was no sunset provision on the
life of the AWB.
1992
Amendments in 1992 extended until 31 June 1999 the Commonwealth
guarantee of AWB borrowings at a rate of 85% of estimated net pool returns;
continued accumulation of the WIF; and established an AWB subsidiary for
the provision of grains based value adding services.
From 1992 to 1997
Moves towards a substantially new structure for the AWB
had their origins in 1989 when the Grains Council of Australia (GCA) initiated
the Grains 2000 project. This was in recognition of the need for strategic
planning for the future of the grains industry. One of the main events
early in this process was the Grains 2000 Conference in 1991. To the extent
that the status of a conference is reflected in the line up of speakers,
then this one rated very highly. It was opened by Prime Minister Hawke
and addressed by three Ministers as well as the Head of the EU Delegation
in Australia, a senior representative from the US Department of Agriculture
and the Secretary of the Treasury. In addition a significant body of commissioned
supporting research was presented and provided a basis for debate.
At the conference it was recognised that the AWB would
need much greater flexibility to be successful in the medium to longer
term given the changes occurring both internationally and domestically.
Subsequently in late 1993 the grains industry established the National
Grain Marketing Strategic Planning Unit (NGMSPU). Membership of this body
comprised the GCA, the AWB, the Australian Grain Marketing Federation,
the Bulk Handling Authorities of Australia, Australian Flour Millers,
the National Agricultural Commodities Marketing Association, Australian
Maltsters and Brewers, the Department of Primary Industries and Energy,
and the Grains Research and Development Corporation (GRDC).
The NGMSPU process included the Milling Wheat project
which had as one of its major components consideration of the AWB's structure.
In February 1994, consultants Booz Allen and Hamilton began a ten-month
study, funded by the GRDC, designed to culminate in a strategic plan for
the Australian milling wheat industry. Their report was published in January
1995. Later that year the GCA issued a discussion paper and instigated
an extensive schedule of grower meetings in September/October that year.
The main options canvassed during these consultations were re-regulation,
deregulation, maintaining the current structure, corporatisation with
retention of single desk and privatisation with retention of the single
desk.
The GCA subsequently identified as key objectives for
any AWB restructure:
- retention of single desk selling for exports
- grower control / ownership
- an adequate capital base to maintain the existing level of harvest
payments
- increased commercial flexibility
- industry self determination.
It also expressed support for a structure based on a
statutory authority and a wholly owned subsidiary company. The next part
of the process was the establishment of a GCA/AWB/DPIE working group which
was given six months to recommend on:
- initial and future requirements of the subsidiary
- future of WIF/revolvement/potential conversion of WIF to shares
- the extent to which a statutory authority can raise finance for harvest
payments
- structural options for the subsidiary
- the implementation and trialing of enhanced business rules and a tender
system for pool sales on the domestic market.
The Working Group appointed independent financial and
legal advisers, Bankers Trust and Mallesons Stephen Jacques to provide
advice on the appropriate corporate and financial structure for the AWB
in line with the objectives listed above. Other possible corporate/financial
models, including the dual class and grower corporate models were later
added to the advisers' brief.
After much deliberation and newspaper headlines using
terms such as 'impasse' and 'crisis' the working party finally agreed
to recommend the grower corporate model to the Minister for Primary Industries
and Energy and this was essentially the structure announced by the Minister
on 17 April. Finalisation of a preferred option by the working party proved
an extremely difficult task. This was due in part to differences between
the AWB and the GCA but also to lack of unanimity amongst the GCA's state
affiliates. The most vocal internal GCA critics has been the Western Australian
Farmers Federation (WAFF) who have identified eight areas of concern with
the proposed AWB structure.
WAFF considered in particular that under the proposed
structure they would disadvantaged by the weighting of A Class shares
which was based largely on the 'one grower, one vote' system. WAFF's view
is based on the fact that, on average, WA growers produce considerably
more wheat than growers in other States. Indeed, such is the strength
of the WAFF's dissatisfaction that in August it resolved to terminate
its membership of the GCA effective 31 March 1988. This outcome would
now appear unlikely given a reported substantial compromise within the
GCA whereby shares will now be allocated on a delivery basis.(4)
1997
On 26 June 1997 the Government introduced the Wheat Marketing
Amendment Bill 1997. The Bill represented the first of a two stage process
of providing the framework for the restructure of Australia's wheat marketing
arrangements. The main features of the Bill were:
- Retention of AWB functions of controlling the export of wheat from
Australia and the marketing overseas of Australian wheat.
- Repeal of AWB powers to: buy wheat in Australia or overseas; import
wheat into Australia; and to sell or dispose of wheat, or arrange to
sell or dispose of wheat, in Australia.
- Establishment of three wholly owned subsidiaries of the AWB to which
the AWB's wheat marketing and financing functions are being transferred.
- 'Nominated company A' is the most important of the subsidiaries being
created as it is given the power to subscribe for, acquire and hold
shares in nominated companies B and C. Also, nominated company A can
enter into arrangements with one of its wholly-owned subsidiaries (other
than nominated company B) to perform its functions.
- The AWB is to be treated as the agent of nominated companies A or
B in respect of new season wheat transactions (ie. wheat of a season
that began on or after 1 July 1997). The transactions affected include:
pooling and related transactions, futures and hedging contracts, investments
and operational expenses.
- Directorships of nominated company A or one of its wholly-owned subsidiaries
require the approval of the Minister.
- The constitutions of nominated companies cannot be changed without
the approval of the Minister.
- The AWB to be responsible for the purchase of wheat for pools and
payments for wheat in respect of old season wheat (ie. pre - 1 July
1997 season) and nominated company B in respect of new season wheat
(ie. 1997 and subsequent seasons).
- Terminate on 30 June 1999 the Wheat Industry Fund component of the
levy on wheat sales and amounts of that levy payable by the Commonwealth
to the AWB.
For additional information on the provisions of the Wheat
Marketing Amendment Bill 1997 refer to the Digest for that Bill (No. 43
of 1997-98).
The proposed commercial structure for wheat marketing
On 17 April 1997 the Minister for Primary Industries
and Energy announced the proposed commercial structure for wheat marketing
post 1 July 1999. The main features of the commercial structure announced
were:
A Corporations Law company under grower ownership and control will commence
on 1 July 1999 and be responsible for all commercial aspects of wheat
marketing.
The company will operate as one holding company with two subsidiaries,
a wheat pooling/export subsidiary and a commercial subsidiary.
Shares in the holding company will be issued in two classes: A-class shares
will be issued to all growers and the Wheat Industry Fund (WIF) will be
converted to B-class shares.
A-class shares will be issued only to wheat growers. They will be issued
at a nominal value, be non-transferable and redeemed as holders leave
the industry or fail to qualify as a wheat grower. The will not attract
dividends or other returns. A-class shares will confer voting rights to
elect the majority of directors of the holding company, and hence control
of the holding company.
B-class shares will be issued to WIF equity holders in proportion to their
equity in WIF and will provide the company's capital base. As the provider
of equity B-class shareholders will have the right to elect a minority
of directors. B-class shareholders will receive a commercial rate of return
and B-class shares will only be tradeable amongst growers until the outcome
of the National Competition Policy (NCP) review of the single export desk.(5)
On 31 March 1998 the Minister for Primary Industries
and Energy announced that the Government had endorsed the proposed commercial
structure for wheat marketing post 1 July 1999. The Minister said:
A-class shares, issued only to growers, will give them the power to elect
a majority of the Board of Directors of the new AWB, and enable growers
to exercise control directly through this majority.
B-class shares will be issued on the basis of Wheat Industry Fund (WIF)
equity, enabling shareholders to initially elect two - ultimately, four
- directors of the 13 member Board.(6)
Other contributions to the debate
Although most attention in the debate on the future of
wheat marketing arrangements has focussed on the GCA, the AWB and the
Working Party there have been contributions from a range of other parties.
In October 1995 a group of grain user and private grain trading organisations
presented their views on future marketing arrangements for wheat and other
grains.(7) The principles they espoused included a fully competitive and
deregulated grains market, both domestic and export, and continuation
of grower owned organisations but without statutory provisions and on
an equal basis with private sector operators. The main features of their
plan were immediate privatisation of the AWB's commercial activities;
establishment of Australian Grain Industry Corporation to administer export
licences (this would be the single desk operation for markets where premiums
are obtainable) and quality programs and be responsible for market development
and generic promotion.
While there was nothing fundamentally new in the proposal
it was advanced in an environment quite different to any previous debate.
The main relevant new factors were National Competition Policy; the failure
of one of the last bastions of statutory marketing - the wool stockpile;
the political pressure on the Government arising from the cancellation
of the imported grain trials; and, the equivocal analysis used to 'prove'
the benefits of the AWB's single desk status.
Others grain industry participant and analysts have called
an end to the AWB's export monopoly or at least questioned its value include.
Clinton Condon, the previous chairman of the AWB and now chair of private
commodity traders Bustan International has said that that the single desk
arrangements for wheat should not be confused with the AWB's export monopoly.
He believes it is possible to retain the single desk but improve flexibility
and retain premiums.(8)
Earlier this year the Managing Director of Clyde Agriculture,
one of Australia's largest wheat growers, claimed that if the export monopoly
was removed, private grain traders would be able to secure higher prices.(9)
Shortly thereafter the head of one of the world's largest commodity traders,
Cargill Inc claimed that removal of the AWB's export monopoly would benefit
Australian grain growers.(10)
Another regular critic of statutory marketing, particularly
the AWB's export monopoly is The Australian Financial Review's Stephen
Wyatt(11) while the Centre for International Economics recently criticised
'adherence to outdated cultures such as price pooling and generic promotion'
and argued that when account was taken of the effect of the AWB's single
desk export power, the 'the relatively small net benefit achieved by the
AWB's single desk, in dollars a tonne terms, would be negligible'.(12)
State Legislation
Apart from the relevant Commonwealth legislation, state
legislation also impacts on the wheat industry. In the first instance,
complementary State legislation exists to transfer certain powers to the
Commonwealth thereby giving effect to the AWB's powers of pricing and
acquisition. With the exception of Queensland, each State's wheat marketing
legislation is broadly similar to the Commonwealth's.
State governments are also heavily involved in the transport,
storage and handling of wheat. Traditionally the bulk handling authority
(BHA) in each state was appointed as the sole authorised receiver to accept
wheat and co-ordinate handling and storage on behalf of the AWB in that
State. However, an amendment to the Commonwealth's Wheat Marketing
Act 1988 allowed the AWB to deal with whomever it chooses in regard
to the provision of storage and handling services.
The Australian Wheat Board
The AWB is a statutory marketing authority which has
existed continuously since 1948. During that period it has become possibly
Australia's largest single exporter and one of its largest commercial
entities. As mentioned previously, some of its powers arise from complementary
legislation passed by the States.
The AWB's principal function is to control the export
and overseas marketing of Australian wheat. Its other functions include
domestic trading in wheat and to export (but not control) and trade in
other grains. The AWB is required to discharge these functions with the
objectives of:
- maximising the net returns to wheat growers who use AWB pools by securing,
developing and maintaining markets, and, maximising returns to growers
- operating in a commercial manner to provide grain growers, especially
wheat growers, with a choice of marketing options
- participating in value adding activities for the benefit of grain
growers.
Some current issues
Competition policy
The Government has announced that the review of the wheat
industry under the National Competition Policy (NCP) Principles agreed
between the Commonwealth and State Governments will be conducted in 1999-2000.
The timing of the review has drawn criticism from the National Competition
Council (NCC), the independent review body whose functions include assessment
of governments' progress in competition policy reform. The NCC has urged
governments to give priority to reforms likely to deliver greatest gain.
In its 1995-96 Annual Report, however, the NCC has cited the Commonwealth's
decision to review the Wheat Marketing Act 1989 in 1999-2000, which
is near the end of the period for all such reviews, as an example of failure
to schedule an early review of important legislation.
The purpose of the review of the wheat legislation will
be to determine whether there are net benefits accruing to Australia from
the AWB's wheat export monopoly. The overriding principle applying to
all legislative reviews is that legislation should not restrict competition
unless it can be demonstrated that the benefits outweigh the costs and
the particular policy objectives can only be achieved by restricting competition.
With the commencement of the review still some time off,
let alone any findings, members of the Government have clearly signalled
what they expect the post-review situation to be. The Deputy Prime Minister
is reported as saying the AWB's export monopoly 'should stay beyond the
1999 National Competition Policy review' while the Minister for Primary
Industries and Energy has referred to 'the Government's firm commitment
to continue the wheat export monopoly'.(13)
While the view has been expressed that, as the AWB's
monopoly only applied to exports it should not be subject to review, this
may not a correct interpretation of competition policy principles. Given
the dominance of exports in the wheat industry, there is a strong correlation
between domestic and export prices. Thus the AWB's export monopoly influences
domestic market outcomes and should qualify as legislation affecting competition.
World Trade Organisation
Another issue which may arise in the medium to longer
term is whether the proposed statutory arrangements comply with changes
concerning state trading arrangements, if any, arising from future World
Trade Organisation (WTO) negotiations. While Australia's current statutory
marketing arrangements are permitted under the WTO, the United States
has signalled that it intends to pursue the issue of state trading arrangements
in this forum. While it is believed that these moves are aimed primarily
at import organisations, and any developments are a long way off, the
possibility that there may be consequences in the long term for the AWB's
export monopoly cannot be ruled out.
The principal effect of clause 5 is to require
the Minister to make a determination by 31 March 1999 amending the constitutions
of the nominated companies (ie. A-C). As noted in the Explanatory Memorandum
to the Bill the amendments will govern, initially, the operations of nominated
companies A-C after the relevant stakeholders become shareholders after
the transfer time (ie. 1 July 1999).(14)
Clause 6 provides for the cancellation, immediately
before the transfer time, of all shares in nominated company A (ie. shares
held by the AWB).
Clause 7 provides for B class shares in nominated
company A to be issued to WIF equity holders. Shares will be issued at
the rate of one B Class share for each WIF unit.
Amendments to the Wheat Marketing Act 1989
Item 4 of the Schedule repeals Parts 2, 3 and
3A and substitutes a new Part 2 (proposed sections 4-16)
in the Wheat Marketing Act 1989 (the Principal Act). Parts 2 and
3 of the Principal Act contain provisions dealing with the AWB and Part
3A provision dealing with the companies which took over the commercial
activities of the AWB (ie. nominated companies A-C).
Proposed section 4 provides for continued existence
of the AWB, after the commencement of the Bill, but to be known as the
Wheat Export Authority (WEA).
The proposed functions and powers of the WEA are to:
- control the export of wheat from Australia
- monitor nominated company B's performance in relation to the export
of wheat (proposed section 5).
Proposed section 6 provides that the membership
of the WEA is to comprise a Chairperson, one member nominated by the Grains
Council and one government member. Members will be appointed by the Minister
for a specified term up to a maximum of three years and hold office on
a part-time basis.
Proposed section 11 provides that money of the
WEA may only be spent in certain circumstances, including:
- on expenses and liabilities incurred by the WEA in the performance
of its functions
- payment of remuneration and allowances
- reimbursing the Grains Council for expenses reasonably incurred by
it in connection with proposed section 15 meetings.
Ministerial approval will be required for WEA borrowings
(proposed section 12).
Proposed section 15 requires the Chairperson of
the WEA where the annual report of the WEA has been tabled in Parliament
to:
- present the annual report to a meeting of the Grains Council within
six months of the year to which the report relates
- report to the meeting on the operations of the WEA during the year
to which the report relates
- make themselves available to answer questions arising from the annual
report.
The above requirements will also apply in respect to
an interim report of the WEA. In addition to reporting to the Grains Council
in respect to annual and interim reports, the WEA must report to:
- other meetings of the Grains Council at least once every six months
on its operations
- may arrange with the Grains Council to report to other meetings of
the Grains Council on its operations.
Proposed section 16 deals with WEA operational
plans. The proposed section requires the WEA at the start of each financial
year to prepare an operational plan for they year and give it to the Minister.
The plan must include details of strategies and policies to be followed
by the WEA in performing its functions. The Chairperson must keep the
Minister informed of changes to the plan and matters that might affect
significantly the WEA's ability to perform its functions in accordance
with the plan. The Minister is accorded power to give the Chairperson
guidelines for determining when a matter/s might affect significantly
the WEA's ability to perform its functions in accordance with the plan.
Section 57 of the Principal Act provides the AWB with
sole power to authorise wheat exports. The major amendments proposed by
Part 4 of the Schedule to the Bill (items 6-21) include:
- substitution of references to the AWB with that of the WEA
- provide nominated company B with the power to export wheat without
WEA authority until 1 July 2004
- require the WEA prior to authorising a wheat export to consult nominated
company B
- prohibit the WEA, prior to 1 July 2004, from authorising a bulk-export
without the prior approval of nominated company B
- require that export applications be accompanied by the prescribed
fee
- exempting nominated company B from Part IV of the Trade Practices
Act 1974 (ie. restrictive trade practices).
A new section 84 is substituted in the Principal
Act by item 16 of the Schedule which requires nominated company
B to buy all wheat offered to it, which meets the standards required by
nominated company B, for inclusion in a pool operated by it. Proposed
section 84 also requires that nominated company B pay a reasonable price
for such wheat, and that the price be calculated by reference to the net
return for the pool in which the particular wheat is included. The requirement
that nominated company B purchase all wheat etc., will not apply to any
offer made after 1 July 1999.
Amendments to the Wheat Marketing Amendment Act 1997
Section 18 of the Wheat Marketing Amendment Act 1997
ensured that transferred AWB employees to nominated company A retain mobility
rights under Part IV of the Public Service Act 1922 (The Public
Service Act 1922 confers mobility rights to employees of approved
statutory authorities that are staffed outside the Public Service Act
1922. Item 22 of the Schedule repeals section 18. The rationale
given in the Explanatory Memorandum to the Bill for this repeal is that
from 1 July 1999 nominated company A will no longer be considered a Commonwealth
authority for the purposes of Part IV of the Public Service Act 1922.
The amendments proposed by item 23 of the Schedule
are transitional provisions, the major effects of which are:
- to require the AWB immediately before 1 July 1999 to divest itself
of all assets, liabilities, rights of employees that could have been
transferred
- to require the AWB to retain an amount up to $5 million as determined
by the Minister
- on 1 July 1999 vest in nominated company A, AWB money in the WIF,
an investment of the WIF and any other asset that was acquired using
WIF money.
- Recommended reading for those interested in an extended history and
analysis of wheat marketing and related issues: Dunsdorfs, E., The
Australian Wheat-growing Industry 1788-1948, Melbourne, Melbourne
University Press, 1956; Stillwell G. and Sydenham D., A Shared Harvest:
the Australian Wheat Industry, 1939-1989, Melbourne, MacMillan Educational
Australia, 1991 and Watson A.S., Principles of grain marketing: some
lessons from Australian experience, ACIAR Technical Reports no.
38, 1996.
- Industries Assistance Commission, The Wheat Industry, Report
No. 411, 25 February 1988.
- Industries Assistance Commission op. cit, 19.
- Wheat growers resolve industry split, The Australian Financial
Review, 3 September 1997.
- Anderson announces new commercial structure for wheat marketing, DPIE
Press Release 97/37A, 17 April 1997.
- Anderson announces government support for new commercial Australian
Wheat Board, DPIE Press Release 9832A, 31 March 1998.
- Stockfeed Manufacturers Association of Australia and others, The
Australian Wheat Industry: proposals for the future (the commercial
alternative), October 1995.
- Condon questions monopoly, The Australian Financial Review,
19 February 1996.
- Monopoly on wheat exports attacked, The Sydney Morning Herald,
6 February.
- Cargill head boost grain deregulation, The Australian Financial
Review, 28 February, 1997.
- See for example, 'Dinosaurs' continue to stomp on agriculture, The
Australian Financial Review, 28 July, 1997.
- Marketing bodies 'outdated', The Land, 31 July 1997.
- Anderson announces new commercial structure for wheat marketing, DPIE
Press Release 97/37A, 17 April, 1997.
- Wheat Marketing Legislation Amendment Bill 1998, Explanatory Memorandum,
7.
Ian Ireland
26 May 1998
Bills Digest Service
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