Foreign newsAustralian wool freezedecision angers producers

AUSTRALIAN sheep farmers are up in arms over a decision by the government to put a moratorium on wool sales from the countrys stockpile for 12 months.

The decision is a reversal of previous commitment but the government claims the international wool market is in disarray with weak prices and faltering demand.

The wool stockpile, effectively a quota system, was set up in 1991 when the government was forced to abandon its wool reserve price scheme which guaranteed producers a minimum wool price.

The new system was intended to stabilise prices and clear the backlog of debt with quarterly sales of stockpiled wool. But poor prices has forced the government to freeze stockpile sales in order to reduce supply and increase prices.

Politics have also played a part in the decision. The government, a coalition of Liberal and National parties, sees it as a means of winning favour from wool producers.

But critics warn the decision could cause long-term harm to Australias wool industry by encouraging its substitution with synthetic fibres. It could also open the way for competitors in Australias traditional wool markets.

The legal difficulty for the decision has come about because the government found it could not enforce the decision without a special session of parliament to approve the changes. The imminence of an early election makes it unlikely that parliament will be reconvened in time.

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  Financial Times 26/08/98 page 24
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