Labor may use its loaf to end Coalition's inept wheat marketing policy

While not complete deregulation, the ALP's plan is a huge leap forward

Professor Paul Kerin

Melbourne Business School

IF Labor wins on Saturday, we'll witness long-overdue reforms to bulk wheat marketing arrangements. While the Coalition's stated preference is to maintain the "single desk", multiple insiders say a Machiavellian Prime Minister will deregulate next year but I wouldn't bet on it. I spoke with Opposition agriculture spokesman Kerry O'Brien on Sunday about Labor's plan. While it's not complete deregulation, it's a huge leap forward. The Coalition, mired in internal ructions, can't even tip-toe forward. Labor will establish an accreditation system. Anyone may apply to export wheat. A new authority, Wheat Exports Australia, will evaluate applications against criteria, including financial standing, probity and reputation. While anyone can apply for a permit under the current system, AWB vetoed all applications until the Government, under pressure following the Cole Inquiry's damning findings on the AWB oil-for-food scandal, transferred veto power to Agriculture Minister Peter McGauran in December. Apart from several token approvals, McGauran has vetoed or simply sat on all applications. A National and avowed single-desker, McGauran is fundamentally conflicted. He claims to act in the "public interest", but his refusal to define it helps him get away with this appalling behaviour.

In contrast, accreditation under Labor will be based on a specific definition of public interest, with no ministerial veto power. The current system is cumbersome and costly, as the rarely issued permits are country, time and tonnage specific. Labor will renew accreditation annually, provided performance is satisfactory. Accredited exporters may ship unlimited volumes to any markets.

The discredited AWB still gets special treatment. It doesn't have to apply for permits. Despite his past savaging of AWB, a remarkably magnanimous O'Brien says he shouldn't pre-empt the WEA's decision on its accreditation. However, given it's atrocious record, AWB couldn't possibly satisfy Labor's reputation and probity criteria.

Prime Minister John Howard gave the Wheat Export Marketing Alliance until March to make the case for designating its proposed company, Auswheat, as the new single desk operator. WEMA is a grab-bag of six state-based farm lobbies whose members account for less than 15 per cent of Australia's wheat production.

While a Labor win would dash WEMA's single desk ambitions, O'Brien says it can apply for accreditation. I'd be astounded if it satisfies Labor's criteria.

WEMA's business plan is so pitiful that last month one of its own members, the South Australian Farmers Federation Grains Council, unanimously passed a vote of no confidence in it and the council's chairman lauded Labor's policy. Despite this, McGauran publicly backed it, slipping WEMA $250,000 of taxpayers' money, and teamed with Vaile to push for $4 million more. WEMA displays the worst attributes of farm lobbies. It thinks it's entitled to special treatment and handouts from political mates. WEMA chairman Graham Blight described his $4 million demand as "chicken feed". Coalition reform advocate Wilson Tuckey recently asked Blight: "Why should your private $2 company have more rights to taxpayers' money than the struggling health system?" Blight hasn't replied.

Incredibly, WEMA thinks it needs only $4 million of external capital to run a $3 billion export business and McGauran and Vaile believe it. Forcing growers to put $3 billion of export wheat through a company with only $4 million of capital would be irresponsible.

WEMA's fundraising effects have been disastrous. Nobbling McGauran for $250,000 was a pushover. Having sought $2 million from 20,000 growers three months ago, it got only $210,000. It hasn't raised a cent from commercial sources. McGauran unsuccessfully pressured Howard to approve the $4 million handout days before the election was called.

The Coalition destroyed the previous regulator's integrity by pandering to farm lobby demands. It legislated the Grains Council's right to nominate two of five directors and restricted the regulator's role. McGauran recently appointed five members of the new Export Wheat Commission, which replaces the old regulator. Four, including a former National Farmers Federation deputy president and three growers, came from the old regulator's board. McGauran added another former NFF deputy president as chairman. O'Brien says appointments will be based solely on "skills and experience", adding "we won't take nominations from any industry body". While not ruling out appointees from industry bodies, he stresses "no director will be appointed as a representative of any body". Directors' decisions must be made solely on "public interest, eschewing the interests of any one party". O'Brien says the chairman must be "as independent as possible" and "can't be involved in wheat marketing or growing".

Speedy reform is imperative. O'Brien will present legislation to parliament "early next year" and wants it implemented as soon as possible", well before the 2008-09 harvest. What will happen in the meantime? The 2007-08 harvest is already under way, with a third of WA's crop already in. The former regulator had recommended for approval at least 10 of the many permit applications McGauran has sat on for months. Until new arrangements are legislated, a new minister will inherit McGauran's veto power.

However, O'Brien says decisions will be made "as quickly as possible" but "as I haven't seen the applications, I can't preempt decisions". He also wants to vigorously pursue Cole's recommendation to investigate potential criminal charges against 12 individuals. Saturday marks a year since the Government received Cole's report. Three weeks ago this paper reported that the 12 hadn't even been interviewed. O'Brien says he's "heard that investigators were told that these pursuits were not priorities".

If the Coalition wins, the Nationals will push to hand WEMA $4 million immediately and for Auswheat's designation. But multiple sources claim Howard won't designate Auswheat. They say he decided last year to deregulate, but agreed to the WEMA charade to keep the Nationals quiet until after the election. WEMA was set up to fail. Come March, its failure will give Howard an excuse to (partially) deregulate.

At least one Coalition parliamentarian vows to report any further WEMA handouts to the Auditor-General. Howard won't relish another lambasting like last week's Auditor- General's report on the Coalition's mishandling of its rural partnerships slush fund.

An article in the latest issue of the American Journal of Agricultural Economics the most prestigious in the field found that current wheat marketing management  cost Australia $US 224.7 million ($252 million) annually. The article is by Melbourne University's Donald McLaren and an English economist, not by anti-single desk Americans.

On November 1, Melbourne University's Joshua Vans – whose past work AWB cited as "evidence" that the single desk earned a huge price premium – wrote ( that  “the ALP’s policy appears to be moving towards a better outcome”, describing its plan to provide “more competition” as “a solid policy option”.

I’m sick to death of the Coalition’s ineptitude on wheat. Meaningful reform is only sure to occur if the Coalition loses this Saturday. Should that happen they only have themselves to blame.