12 PRIMARY INDUSTRIES AND ENERGY
12.1.1 Livestock and Pastoral
12.1.2 Crops
12.1.4 Petroleum
12.2.2 Rural
The major reason for reduced outlays under this program is the reduction from $98 million to $9 million in the special appropriations made under the Wool International Act 1993. These are the woolgrower-funded payments to Wool International, the body responsible for managing the wool stockpile and repaying the associated debt.
Following a review announced in May 1995, the then Minister for Primary Industries Sen. Hon. Bob Collins announced on 25 January 1996, that the debt component of the wool tax arrangements, would be abolished with effect from 1 July 1996. Prior to that producers were levied 4.5% of the value of production to assist in repaying the stockpile debt.
Of the various categories of outlays in the agriculture, forestry and fishing group, the wool industry has accounted for the largest commodity specific outlays for many years, however the large bulk of this has been sourced from grower contributions. In 1996-97 wool outlays, which peaked in real terms in 1990-91 with the crisis in the industry, are expected to be at their lowest for more than ten years and on a par with other categories in this group. Both these outcomes are estimated to continue for the forward years.
The large bulk of outlays in the crops sub-program are made under special appropriations and represent statutory grower contributions to research and development and marketing activities. Although these payments are largely responsible for the 4% increase in outlays, there are a number of other policy developments to note in the savings made in several other areas.
Tasmanian Wheat Freight Scheme (TWFS)
The TWFS provides a subsidy to Tasmanian cereal processors and consumers on the cost of shipping wheat from the mainland to Tasmania. Outlays for the shipping subsidy component of the TWFS for the current year and the forward estimates for 1997-98 and 1998-99 will be $1 million lower than previously budgeted. The amount now budgeted for each year is $1.2 million. This compares with outlays of $2.7 million in 1994-95 and $2.2 million in 1995-96 and means a reduction in the available subsidy. Funding for this item had been reduced by the previous Government with the 1994-95 Department of Primary Industries and Energy Additional Estimates recording both the introduction of a capital works component to the TWFS and reductions of $0.75 million in the forward estimates for the shipping subsidy for each of 1997-98 and 1998-99.
The capital component of the TWFS was announced as a grant to upgrade Devonport wheat storage facilities. Total Commonwealth expenditure of $13.5 million was scheduled over five years and although allocations were made on 1994-95 and 1995-96, no payments had been made. As a result of this savings measure, the Commonwealth will not be contributing to the upgrade of grain storage facilities in Tasmania.
Half of the savings made on this measure will be transferred to the outlays for the Tasmanian Freight Equalisation Scheme with the Government advising that the subsidy will be based on the cost of shipping wheat across Bass Strait.
Grants to Winemakers
This scheme has been terminated one year earlier than planned resulting in savings of $3.6 million in 1996-97. It was introduced to offset the expected effects of an increase in wholesales sales tax (WST) on wine from 20% in 1993 to 26% in July 1995. Under the scheme, winemaking enterprises with a WST obligation of $10 000 or more received cash grants of $1500 in 1994-95 and $4500 in 1995-96 and were due to receive a final payment of $6000 in 1996-97.
Despite the increased WST, the wine industry has continued to grow strongly, particularly in export markets. The Government considers the buoyant market conditions have more than offset the impact of the higher WST and its decision implies that the termination of the scheme is not expected to adversely effect the financial performance of the industry.
Citrus Market Diversification Program (CMDP)
The purpose of the CMDP is to promote adjustment in the citrus industry by reducing its reliance on the domestic juice concentrate market and increasing sales of fresh fruit and fresh fruit juice, particularly in export markets. Funding for the CMDP has been reduced by 10% per annum over the program's three remaining years resulting in total savings of $600 000 in 1996-97 through to 1998-99. The CMDP was introduced in 1994 with planned expenditure totalling $9 million over the five years 1994-95 to 1998-99. As a substantial proportion of the remaining funds is unallocated, the Government considers that with careful targeting the savings can be achieved without a significant impact on export market access and development activities.
Australian Horticultural Corporation (AHC)
Savings of $0.75 million have been made through termination of the AHC's operating subsidy one year earlier than originally scheduled. A four year phase-out of this grant had been announced in 1994. Prior to that annual supplementary funding of approximately $1.5 million had been provided to the AHC since its inception in 1988.
The three year $25 million Fuel Ethanol Bounty Scheme was initiated in 1994-95 to assist the development of a competitive, robust and ecologically sustainable fuel ethanol industry. The bounty is set at 18 cents/litre of fuel ethanol produced for use in Australia's transport industry. A mixture of anhydrous ethanol (10%) and petrol (90%) can be used to fuel petrol vehicles without significant mechanical modification.
Savings of $21.3 million in 1996-97 are anticipated through the discontinuation of the fuel ethanol bounty from 1 July 1996, one year earlier than originally planned because the Government believes that the objectives proposed for the scheme have not been met:
An appropriation of $0.4 million has been made in the 1996-97 Budget to provide for outstanding claims for eligible fuel ethanol production from 1995-96.
In response to the decision to discontinue the bounty, the Fuel Ethanol Association of Australia (FEAA) has claimed that the Government's decision is based on faulty research. Specifically, the FEAA has challenged the claim by the Government that the scheme was not cost-effective in reducing emissions of greenhouse gases and environmental pollutants.
The Bureau of Resource Sciences has observed that commercially viable technology to convert woody material into fermentable sugars has yet to be developed. Development of this lateral technology is some years away but it could improve the cost competitiveness and ecological sustainability of the fuel ethanol industry. Assistance may then be warranted and attention given to a more targeted approach. In the meantime, the Government has baulked at subsidising unproven technology.
A theme-urging the private sector to take more of the running and funding of resources and energy initiatives-is evident in the decisions by the Government in its 1996 Budget on the Ethanol Bounty and other energy and resources issues.
Drought and Rural Adjustment Schemes
With the substantial easing of the long running drought in eastern Australia, the Government expects to reduce its outlays for drought assistance to farmers in 1996-97 by almost $43 million. Farmers in areas which had their Drought Exceptional Circumstances status revoked in mid-June will cease receiving Drought Relief Payments in mid-December. Consequently outlays for the farm family income support component of Commonwealth expenditures on drought relief, which are made under the Farm Household Support Act 1992, will fall from $130 million in 1995-96 to $87 million this year. The districts currently experiencing Drought Exceptional Circumstances are in the central and western regions of both NSW and Queensland.
Payments to the States totalling $124 million for assistance under the Rural Adjustment Scheme (RAS) will account for about half of total expenditure under this Sub-program in 1996-97. This is an increase of $9 million over last year and includes normal RAS funding and $48 million for RAS Drought Exceptional Circumstances provisions.
The other major contribution to the reduction in outlays for this sub-program, some $26 million, comes from expected repayments by Queensland, NSW and Victoria of liabilities under previous Rural Adjustment Schemes.
The Government has also decided to terminate the Farm Household Support (FHS) Scheme resulting in savings of $2.5 million in the current year and each year of the forward estimates. The FHS came into operation in March 1993. It was targeted at farmers unable to access commercial finance to meet day-to-day living expenses and provided income support while farmers worked to make their farm viable or arranged its sale. In ending FHS, the Government has noted that demand has been falling since October 1993 with fewer than one hundred farm families helped since August 1995 and less than fifty in recent months. Farm families affected by the termination of FHS will be eligible to apply for other social welfare related schemes. Longer term welfare issues affecting farm families, a perennial rural policy problem in most countries, are being examined by a special Rural Task Force being established by the Minister for Social Security.
Other measures
Several initiatives announced by the previous Government after the 1995-96 Budget have been rescinded in this Budget resulting in savings of $4.7 million in 1996-97 and $5.3 million in 1997-98. The measures affected are the revised funding formula for rural research and development (this had not been implemented) and the continuation of the Clean Food Export Program and the Perishable Food Exports Program. Although the last two measures are to cease, the Government intends that transport and handling issues for perishable products will be included in its new Supermarket to Asia strategy.
There will be $3.4 million in funding for the Supermarket to Asia Strategy over each of the next three years although some of the expenditure will be through the Department of Industry, Science and Technology. This Strategy largely comprises what was previously known as the Agri-Food Asian Export Strategy. $1.4 million will contribute to the running costs of an industry / government Council which is to address impediments to international competitiveness in the food chain. The remaining funds will be used to fund a Technical Market Access Program by the Australian Quarantine Inspection Service.
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