The Press WEDNESDAY, JUNE 16, 1971. A subsidy on wool in Australia?

Press, Volume CXI, Issue 32634, 16 June 1971, Page 16

The Press WEDNESDAY, JUNE 16, 1971. A subsidy on wool in Australia?

In Sydney last week woolgrowers’ representatives agreed to ask the Australian Government for a subsidy on the price of wool. The prospect should cause a good deal of concern to New Zealand wool-

growers—and other New Zealanders. Because of the size of the Australian wool clip the effects of a subsidy would certainly be felt on the international market for wool, where supply already outstrips demand. This is not another scheme to stabilise wool prices, even at their present weak level It is designed to raise the woolgrowers’ price from an average of 30 cents per lb to 40 cents by way of a Government subsidy that would cost between $lOO million and $2OO million a year for three years. Australian woolgrowers oppose any quota arrangement to control production; the Deputy Prime Minister and leader of the Country Party, Mr Anthony, supports the scheme; and its advocates hope to see provision for a subsidy in the Australian Budget in August in time for the new wool-selling season.

The Australian Prime Minister (Mr McMahon) recently hinted that he does not favour production subsidies; but his Government has yet to declare its policy. In the meantime, Australian economic and financial writers are losing no opportunity of pointing out the dangers in this proposal Not only the pocket of the Australian taxpayer is threatened. A scheme to sustain, and even increase, the uneconomic production of wool for a market that shows no sign of recovery might reduce the return of every other wool producer in the world. New Zealand dairy farmers know what European subsidies on milk and butter mean to them. Uneconomically low as the price of wool now is, the best hope for woolgrowers lies in stable prices, in efficient production, and in the promotion of wool for its recognised special qualities.

Many Australian dairy producers are already in serious trouble because of domestic subsidies; and their Government is trying to help uneconomic producers to get out of business. If some Australian woolgrowers cannot survive on present-day prices it would be far better for them, for Australia, and for the whole industry if they were helped to stop producing what the market does not want Last month the Japan Wool Spinners’ Association reported a drop in its use of wool and retracted its earlier forecast that Japan’s demand for wool would increase in the early 19705. Even if Mr Anthony were to stick to his original idea that Australia’s wool output should be controlled, the subsidy scheme would dangerously interfere with normal market forces and obstruct efforts to rationalise the farming industry in Australia. It is a symptom of unsound economic thinking among Australian primary producers.