Restructuring Basic Need In Australia

Press, Volume CX, Issue 32393, 4 September 1970, Page 8

Restructuring Basic Need In Australia

The restructuring of the wool growing industry in Australia is seen as the basic solution of the current problems of the industry by the Committee for Economic Development of Australia, which recently issued a policy statement on the industry, a copy of which has been handed on to “The Press.”

C.E.D.A. is an independent organisation of responsible business leaders and academic people dedicated to the economic growth of Australia. The committee is con. cerned that the industry lacks a co-ordinated longterm economic policy and fears that this may result in short - term decisions that make the inevitable longterm adjustment even more difficult and painful than it now threatens to be. Restructuring of the industry, it says, has become an urgent necessity. The immediate postwar years, it says, were an era of great change. Many woolgrowers endeavoured to build up their flocks quickly to take advantage of good markets and especially rising prides for wool. . . . This often necessitated the purchase or retention of aged sheep and culls- that would normally have gone to the butcher. Even Merino breeders were strengthening the quality of their wool type often by the introduction of different strains into the bloodlines of their flocks which had been a closed preserve for generations. A well-bred wool was often regarded as of secondary importance and deterioration of style became evident in the endeavour to produce greater weights of wool. Quantity replaced quality as the major objective. Drought years followed and to boost incomes people turned to wheat and other cash crops. The fragmenting of properties and flocks had now reached serious proportions in terms of the long run future of the industry. Signs of deterioration of wool quality and of preparation standards were now apparent. Now about 80 per cent of holdings carried less than 2000 sheep. The policy statement places much emphasis on the need for applied research. “We need applied research and in particular we need research in terms of the economics of the industry, both on the market-

ing-demand side and on the farm management side,” it says . . . “If there is any major criticism of wool industry research, it is that it is not sufficiently guided by the real economic needs of the industry.” The committee also lays down the corrective action that it thinks should be taken. It would like to see the Federal Government set up a widely representative standing advisory committee on the wool industry with wide responsibilities, for production and economic research and to see that it is evaluated and carried through to the grower and also to advise the Government and assist in .the formulation of future plans for the industry. Saying that all the indications are that restructuring of the industry is essential, CEDA says that the standing committee should urgently consider what forms of restructuring are necessary or desirable and should formulate a plan to be implemented with the support of the industry and the Government. This would have among its objectives the prevention of the further deterioration in the quality of wool production and to implement acceptable methods for recreating units of production which are economically sound. The first step in any ordered plan of aggregation, the committee says, is a review by state governments of their land laws to remove the technical barriers to change. The committee says that in general terms it seems proven that a Merino flock of less than 3000 is unlikely to be maintained at a consistent standard for any appreciable number of years. The task, said the committee, was to determine what today might be an economic sheep and wool producing property in any particular area and then add an appreciable margin to ensure that any plan of aggregation would be effective for a considerable number of years. The grower himself had

to be convinced of the advisability of seeking some form of aggregation, as the most effective method of implementing this would be through voluntary agreement of individuals. One of the means by which aggregation might be arranged was by forming several holdings into a company with the land ownership being unchanged. Finance to facilitate this restructuring, the committee said, would need to be reasonably long term—it was suggested that the term might be 15 years at say 6j per cent. If the terms of loans were unduly favourable the effort to achieve the objectives might become less intense. As the restructuring plan was designed to strengthen the industry and ensure its future it was felt that any logical and basically sound proposition was unlikely to be left unfunded, so that the financial organisations now in existence should prove competent to meet the task. On research, the committee says that the immediacy of the problems confronting the industry suggests that a revised research plan should be considered, under which problems of direct application to the cost-induc-ing difficulties in sheep management should be given urgent priority. The incidence of fly strike, footrot, foot abscess and intestinal worms represented a large annual loss to the grower and it seemed logical fbr a substantial part of the production research effort to be pplied solely to seeking economic means for mitigating this cost Attention was also required to overcoming the problem of communicating research results to the woolgrower in appropriate form and language and to provide him with means of becoming better informed in economic and management aspects. While the committee com siders that price subsidies inevitably cause misallocation of resources and such forms of support to rural industries wrongly sustain the inefficient and perpetuate basic weaknesses, it does, however, suggest that consideration should be given to introducing suitable restructuring incentives, and it mentions among these selective taxation provisions, Government grants to incoming and outgoing participants in an aggregation scheme, and direct cash incentives granted by Government to facilitate improved productivity or aggregation through increased availability of cash resources.