Opinion Number. 1673


wheat acquisition Wheat industry stabilisation plan: implementation of plan: acquisition on just terms: guaranteed price: state co-operation: use of excise to repay commonwealth: licensing of wheat growers

Key Legislation

National Security (Wheat Acquisition) Regulations: CONSTITUTION s 51(xxxi)

The Secretary, Department of Commerce

The Secretary, Department of Commerce, has forwarded a draft submission concerning the wheat industry which the Minister for Commerce proposes to place before Cabinet and has requested my advice as to the constitutional validity of certain aspects of the scheme proposed in the draft submission.

So far as is material for this Opinion the proposed plan is adequately summarised in paragraph 23 of the submission, which is as follows:

The proposed plan of stabilization is as follows:

  1. Guaranteed price 3/6d. per bushel f.o.r. ports, bagged wheat. The deductions from this to bring it to a siding basis would be—
    1. Receiving and handling costs      214d. to 212d. per bushel
    2. Railage average        412d. per bushel

    Total            634d. to 7d. per bushel.

    Note: Storage costs would, on this basis, not be a charge against the farmer.

    The deduction of, say 7d. per bushel would bring the siding return to 2/11d. but it is better to talk of 3/6d. f.o.r. ports, bagged basis.

  2. The plan to be authorized under National Security Regulations for the term of the war; the Commonwealth Government to indicate that, if the States are prepared to come into the scheme and carry out their part of it after the war, the Commonwealth Government is prepared at this stage to make the guarantee operative for ten years.
  3. The guarantee in respect of individuals to be limited to 3,000 bushels, or 4,000 bushels—preferably the latter.
  4. The guarantee to operate in respect of a total marketed crop of 140 million bushels; the Commonwealth Government to reserve the right to reduce this total quantity after the war, if market conditions are bad.
  5. When the market price f.o.r. ports (as defined above) exceeds 3/6d. per bushel bagged basis, the first 1d. to go to the fund for repayment; the fund to take half of any further excess in the price.
  6. The plan to be administered by the Commerce Department, with the assistance of the Australian Wheat Board, the membership of which is now under review.
  7. Wheatgrowers to make application for registration of their properties and licences for themselves; the application for licence to contain undertaking to adhere to conditions, of which the following would be the principal:
    1. to sow only the acreage authorized from year to year by the Government;
    2. to market, through the Australian Wheat Board, all wheat harvested as grain (during the war, this is compulsory);
    3. to cut for hay in any year such acreage as might be directed by the Government;
    4. as required, to furnish returns to enable the Government to investigate production costs;
    5. the form of application for licence to have an explanatory heading, indicating clearly that the Government guarantee is for 3/6d. per bushel in respect of a total marketed crop in Australia of not more than 140 million bushels. Another note clearly to explain the circumstances under which an export tax will operate.
  8. The scheme to provide for the refusal of registration to properties not now growing wheat. The transfer of licences in respect of registered properties to be provided for.
  9. When the scheme is in its final form, the Commonwealth to announce it, advise the States, and invite them to come in. If the States refuses to come in, then it will be clearly indicated publicly that, in those circumstances, the scheme must cease after the National Security Act ceases to operate.

In my opinion it would be possible to devise legislation to give effect to the proposed plan.

It is apparent, however, that the plan submitted to me contains only the basic features and I consider that in drafting legislation concerning the details of the plan care will be necessary to see that in certain respects the constitutional powers of the Commonwealth and the States are not exceeded.

This opinion, therefore, takes the form of indicating certain legal difficulties which will need to be borne in mind in settling the details of the plan.

In the first place, it should be noted that the problem during the operation of the Wheat Acquisition Regulations necessarily differs from the problem which will present itself after those Regulations expire. At the present time, producers do not sell their wheat—it is compulsorily acquired from them by the Commonwealth and their previous rights in the wheat are converted into claims for compensation.

So far, therefore, as a guaranteed price to farmers is concerned it is clear that, during the war, the problem is what compensation the Commonwealth will pay in respect of the acquisition (and in this connexion reference is made to placitum xxxi of section 51 of the Constitution which requires the acquisition to be on just terms), while after the war a guaranteed price would have to be achieved either by the payment of a bounty on production by the Commonwealth or by a grant to the States for distribution to sellers.

Sub-paragraph II of paragraph 23 of the submission indicates that the plan is to be authorized during the war by National Security Regulations. In this connexion reference should be made to my comments on sub-paragraph VI. Sub-paragraph II also indicates that the States are to signify their willingness to carry out their part of the plan after the war. Some difficulty may, however, be experienced in forcing future State Governments to adhere to any undertaking which a present Government might give.

Sub-paragraphs III and IV indicate that the guaranteed price will be restricted to either 3,000 or 4,000 bushels, in the case of an individual, and restricted to a total crop of 140,000,000 bushels. The plan does not, however, deal with the problem which would arise if, notwithstanding that no individual produced more than 4,000 bushels, the total crop exceeded 140,000,000 bushels. Some provision for a proportionate reduction in such case will apparently need to be made.

According to sub-paragraph V, if the market price exceeds the guaranteed price the first 1d. of the excess and one half of any additional excess is to go into a fund for repaying the Commonwealth. This suggestion has figured prominently in several pre-war plans when it was proposed to collect this money by means of an excise. After the war ceases there can be no doubt that the money will need to be collected by means of an excise, either on production or export. The submission does not indicate which, but in sub-paragraph VII (e) reference is made to ‘the export tax’. If I am to assume that the excise is to be on export, a problem immediately presents itself as to how the excise on export is to be imposed during the war when, owing to the acquisition of all wheat, the Commonwealth is the only exporter. Prima facie it would appear that during the war the objective could be achieved by the Commonwealth retaining the necessary moneys from any amount of compensation which it would otherwise pay in respect of the acquisition. Closer examination indicates, however, that placitum xxxi of section 51 of the Constitution may prevent this. Just what are ‘just terms’ within the meaning of that placitum may be difficult to ascertain but if any considerable amount less than the market price were being paid to the farmer, I am inclined to think that the courts would hold that the farmer was not receiving just terms. Consequently, it appears to me that while the Wheat Acquisition Regulations are in force the collection of any excess above the guaranteed price must be collected by means of an excise on production, i.e. at a point prior to the acquisition of the wheat by the Commonwealth.

If paragraph VI, by indicating that the plan is to be administered by the Department of Commerce, with the assistance of the Australian Wheat Board, infers that the State Governments are to be excluded from the administration, I fear that the licensing system contemplated by sub-paragraph VII could not be used. It may possibly be that the licensing of wheat growers by the Commonwealth could be justified as a defence measure during the war, but the view is open to some doubt. It is clear, however, that this could not be done by the Commonwealth after the war.

I am, therefore, of the opinion that any scheme for licensing wheat growers must be carried out by and under State legislation.

So far as sub-paragraph VII is concerned, for the reasons already mentioned, I consider that any licensing scheme must be administered by the State Governments and, for the purposes of this opinion, I assume that this will be done. The sub-paragraph does not state just what it is that is to be licensed but I assume it is the actual sowing. If these two assumptions are correct I see no legal difficulty in giving effect to the proposals set forth in the sub-paragraph so long as the States do not endeavour to impose a licence fee measured by acreage. Were this to be done the licence fee would be held to be an excise and therefore invalid (see the Chicory Case, 60 C.L.R. 263).

No mention is made as to whether the present flour tax scheme is to be retained and administered in conjunction with the proposed plan or whether the proposed plan will supersede the flour tax scheme. In this connexion I would point out that if and when the price per bushel of wheat exceeds 5/2d. f.o.r. Williamstown the existing scheme would break down by reason of the fact that as no sales of wheat now take place and the Commonwealth is the only exporter of wheat it would not be possible to collect either the tax on sales of wheat or the export tax.

[Vol. 33, p. 356]