Australia Yearbook - 2001

644 Year Book Australia 2001
The recent decline in the underlying demand for
wool reflects changes in lifestyle (such as the
trend to more informal, easy-care clothing), and
the increasing competition from other fibres,
particularly high quality synthetic fibres. On top
of this, economic upheaval in many countries
traditionally considered to be large purchasers of
wool (particularly the Asian economies) has
resulted in limited demand for wool. These
factors, together with a very large supply of wool
left over from the high production of the late
1980s and early 1990s, have resulted in a dramatic
fall in the price of wool in recent years. However,
this fall appears to have reached the bottom, with
wool prices generally improving in the first half of
2000. Reasons for this include a reduction in the
quality of stored wool and an increase in demand.
Demand for wool has traditionally been a cyclical
phenomenon, determined largely by economic
cycles and world wide trends in clothing fashion.
Attempts to minimise the damaging effect of
these short term cycles on the income of
woolgrowers have been in place for many years.
In 1970 a reserve price scheme was introduced,
the original intention of which was to protect
wool growers from severe short term price
reductions caused by fluctuations in the demand
for wool. A minimum reserve price was
introduced in 1974 to provide growers with a
guaranteed minimum price for their wool. The
scheme was funded by a proportion of the tax
paid by growers on the value of shorn wool, and
was administered by the Australian Wool
Corporation (AWC), which purchased all wool
not meeting the minimum reserve price at
auction. This wool was later sold during periods
of higher prices.
The reserve price scheme worked well for about
20 years. However a combination of a sharp fall in
demand and a high reserve price (set during a
period of high demand in the late 1980s), resulted
in the scheme being suspended in February 1991,
when the size of the AWC stockpile had reached
4.7 million bales. The Government, with the
agreement of the industry, decided that the
scheme could no longer be maintained.
The Australian Wool Realisation Commission
(AWRC) was initially responsible for the disposal
of the wool stockpile. In December 1993 the
disposal of the stockpile became the
responsibility of Wool International (WI), a
statutory corporation of the Commonwealth
Government. WI was required to sell the
stockpile in accordance with a statutory imposed
disposal schedule, the last bale of stockpile wool
to be disposed of by 31 December 2000. At
30 June 1998, under the management of WI, the
stockpile had been reduced to 1.2 million bales.
By October 1998, equity in the wool stockpile had
reached a level significantly higher than the wool
debt, and therefore ongoing government
involvement in stockpile management was no
longer justified. On 15 October 1998 the
Commonwealth Government announced a freeze
on sales of wool from the stockpile, and an
intention to privatise WI by 1 July 1999. On this
date WI became WoolStock Australia Limited, a
public company limited by shares allocated to
previous holders of units of equity in WI.
WoolStock Australia took over the assets and
liabilities from WI and is fully accountable to its
shareholders for the efficient management and
sale of the stockpile. The principal activities of
WoolStock are selling the stockpile, and making
distributions to unit/share holders. There is no
fixed schedule of stockpile disposal as such
decisions can now be taken on a purely
commercial basis and in the interests of
WoolStock’s shareholders. As of 31 January 2000,
the wool stockpile consisted of 927,000 bales of
unsold wool.
A second reform process is currently underway to
replace the Australian Wool Research and
Promotion Organisation (AWRAP) with private
sector arrangements with a target date of
1 January 2001. Following the continuing low
demand and prices for wool and a successful ‘no
confidence’ motion in the Board of AWRAP (in
November 1998), the wool industry Future
Directions Taskforce was established to
undertake a major inquiry into the future of the
Australian wool industry. The Taskforce
presented its findings in June 1999. While most of
the recommendations of the Taskforce report
were focused on individual farm businesses and
what they can do to improve their profitability,
there were recommendations for government to
consider, including the future of AWRAP and
wool tax arrangements. On 23 September 1999,
the Minister for Agriculture, Fisheries and
Forestry announced an Eight Point Plan for
progressing those recommendations of the
Taskforce report that related to industry services
and levy arrangements. A key element of the Plan
was to conduct a grower ballot (WoolPoll 2000)
to give woolgrowers the opportunity to vote on
their preferences for future industry services and
associated wool tax arrangements. The final result
of WoolPoll 2000, released on 6 April 2000,
showed 61% of votes, based on an optional
preferential voting system, supporting the 2%
service model.