I am honoured to be asked to open this Conference and I congratulate Dr Pratley and the organising committee upon their very timely choice of topic. I suppose it has always been a good time to pause and to reflect about the impact of change and our need to adapt to it. But somehow this year of grace, 1989, seems to be an especially opportune time for those of us engaged in the rural industry in Australia to do just that.
In the lifetime of even the youngest person here today - let alone in the span of years that I have been around - we have witnessed many important changes in the political climate in which we have to operate, in social attitudes which affect our industry, in our markets, in the technology that is available to us on the farm or station, in financial and banking matters -and dare I say - changes even in the weather patterns.
Speaking of the changes that have occurred in my own lifetime, I am reminded that I spent my early boyhood in the Riverina not very far from here. My father was for a time the Manager of “Yamma” Station near Morundah - owned I think by a family named O’Keefe. “Yamma” was a 53,000 acre sheep station with the usual cycle of good times and bad, and with the ever-present threat of drought in a relatively low rainfall area - about 14 inches a year I think. We had no motor vehicles, no telephone, no radio, no refrigerator - a bullock team to move our wool and heavy stores, a horse and jinker to make the long journey into town. A Coolgardie safe was all we had for our perishable food including meat, which was therefore restricted to what was killed on the place.
Today that station is part of a thriving irrigation area, intensely cultivated -divided I think into about 100 individual blocks - with many different winter and summer crops and stock. It supports a population several hundred times greater than were able to live off the same land when I was a boy. So much for change!
As Sam Goldwyn is alleged to have said “Forecasting is very difficult -especially about the future!’ As well as looking at the impact of changes that are now occurring, I believe it is possible - at the very least - to prepare ourselves to cope sensibly with whatever changes may come along, by looking at some of the things which have happened to us in the past; to think about what our attitude was to those changes at the time; and how they have since affected our businesses and our lives.
There are two themes I would like to pursue today. First, to dispute our in built response that change is a bad thing and, second, to urge upon you the need to manage change actively.
Looking, firstly, at my remark that, all change is not a bad thing, I would like to draw a little on my own experience with the wool industry.
As you know, much of my working life has been concerned with that industry in one way or another. So I thought, as people living in one of the great wool growing areas of Australia, you might be interested in my views about how the wool industry - at both the producer and using ends - dealt with some of the quite dramatic changes which have occurred during the past quarter of a century. Much of what I have to say will be very familiar to many here today.
Almost without exception, the most important and fundamental changes proposed to the wool industry were initially strongly resisted - sometimes with considerable bitterness. And yet, it turned out that in each case, each change, when finally implemented, brought great benefits to almost everyone, including to those who had been its most bitter opponents.
I will speak briefly about three of these developments - namely, the launch of the Woolmark program, the introduction of Objective Measurement, and the early operations of the Australian Wool Commission which was, of course, the forerunner of the present day Australian Wool Corporation. With the first and third of these I was personally involved, and I also had some involvement with the introduction of Objective Measurement, though never in a technical sense.
First - the Woolmark programme, this remains, some 25 years later, the cornerstone of the IWS worldwide promotional support for fine wool products. When we first began to think about the future strategy for IWS in the early 1960s - at the tine that I became Managing Director - we concluded that whatever plan we adopted had not only to protect the interests of our wool growers and enhance their incomes, but had also to provide real benefits for those who used wool as a raw material in any forn. and, most importantly for the consuming public, the ultimate purchasers of wool products.
Any plan which failed to satisfy all of these requirements was unlikely to survive in the long tern.. We knew that in order to lift the impact of IWS promotion to a level of effectiveness in the market place, we would have to ask the Wool Boards of our partner countries to seek from their woolgrower constituents an increase in financial support of almost 500 per cent. We would, therefore, have only one chance to succeed - if we failed it was unlikely to be possible for any further atten.pt to be made to counter the strong competition from synthetics, which were at that tine threatening to destroy woolgrowing as a viable industry.
And so the Woolmark programme was developed which essentially had two purposes, both of which I an. sure are familiar to you. The first was to position wool products at the top end of the textile market, in which situation there was scope to command higher margins for the producer of the wool, for the processors at every level, and for the garment makers and retailers. The second purpose was to ensure that products bearing the Woolmark label were made front pure new wool and manufactured to the highest quality standards. This was, of course, primarily to make sure that consumers would not be disappointed with their purchases and would buy woolmarked wool goods again and again. Also, very importantly, to protect honest manufacturers against the dishonest few who would otherwise come into the programme with inferior goods and thus denigrate the mark.
When the programme was first presented to the International Wool Textile Organisation, representing wool users and the merchant trade of virtually all the western countries, at a mid-year meeting at Cologne in 1964, it was, I regret to say, rejected out of hand. It was considered by the IWTO delegates as being likely to inhibit freedom of choice of fibres by spinners and weavers, particularly in their use of blends. In any case very few of them believed it could succeed. Having been, so to speak, refused entry through the front door, we went around to the side door. We made a series of unilateral deals with key manufacturers at the highest quality level in each of a number of countries. They became our first licensees. When others saw that such prestigious firms had taken up the woolmark, they too became ready to sign agreements. The rest is history. There are now some 50,000 licensees in the world and the Woolmark ranks with such famous marks as Shell and Mercedes in terms of consumer recognition and understanding.
After 25 years, I think it is fair to say that everyone has benefited from that programme. Processors, manufacturers and retailers all have gained from what has now become quite a massive promotional support for their pure wool products, a secure market for them and, by and large, good profit margins.
Even with the recent decline in prices which always follows the sort of surge we saw a year ago, woolgrowers have seen the price of their fibre improve front half the price of comparable synthetics in 1970 to four times or more the price of competitors today. Very importantly, they have been able to sell their wool at prices which, since the advent of the Wool Commission and later the Corporation, have largely kept pace with the inflation in our country. But the biggest winner by far has been the consumer, who has benefited by obtaining, year after year, pure wool products of consistent quality and value.
I turn now very briefly to the introduction of objective measurement. When I began my first job in the wool department of an Australian pastoral house in the early thirties, every important property of the wool fibre was subjectively assessed. By the time I joined the IWS thirty years later, the situation was little different. Since that time, as a result of excellent scientific work by CSIRO in particular, but also by others, plus the determined attitude of the Wool Boards to secure acceptance of objective test methods, there has been a complete change. Today, virtually all of the significant properties of wool are objectively measured. This has greatly improved the physical marketing of wool with benefits to processors, who know precisely what they are buying.
The wool producers, for their part, are now fairly paid for what they produce, and have information from which they can seek to bring about further improvements in yield, fibre quality and strength. So objective measurement has benefited everyone.
Thirdly, I refer to the most controversial of all of these developments -that is the introduction in Australia by the Wool Commission of a reserve price scheme in 1970. This led, some eighteen months later, to the formation in 1972 of the Australian Wool Corporation by a merger of the Wool Board and the Commission, with a floor price programme which has operated with complete success ever since.
In 1970 the most devastating recession in the textile industry in the northern hemisphere - the worst since the great depression of the thirties -produced a national crisis in Australia, and persuaded the Australian Government to legislate to establish a Wool Commission to operate a reserve price scheme in the auction market. This occurred notwithstanding the result of a referendum of growers held in 1965 which supported objections by some producers as well as by woolbrokers, buyers and others with self-interest engaged in the wool trade. Operations began in November 1970 and immediately met with strong resistance from the merchants and buying trade.
There is not time today - nor is it necessary - to go into any detail about the dramatic and nerve-testing events of the subsequent fifteen months. Suffice to say that the Commission quickly demonstrated that the operation of a Reserve Price Scheme, under which it was allowed to test the market, but not defy it, was quite useless under weak market conditions. By successfully operating what amounted to an illegal floor price, it also proved beyond all doubt that a well managed and well financed floor price scheme could bring great benefits to users and producers alike. Users benefited by the elimination of previous price uncertainties, and from the diminution - almost the elimination - of the downside risk on stocks which they produced in advance of their selling seasons. Growers benefited from having each year, predictable minimum prices on which they could budget and rely and from the achievement of prices for wool which the success in the market place of the IWS woolmark programme had fully justified. With many refinements and improvements, the floor price operated by the Commission in 1971 is the programme which the Australian Wool Corporation has conducted with great success ever since.
Each of the three great developments I have mentioned took much longer than they should have done to produce the considerable benefits which they ultimately did, for both users and producers, because the introduction in every case was resisted on narrow sectional interest grounds.
This resistance and unwillingness to accept change certainly did not come only from the users. Some producer organisations in Australia were equally short-sighted - one in its opposition to a reserve price, much less a floor price programme in any shape or form. Other producer organisations were similarly wrong to oppose any increase in funds for promotion before the setting up of a reserve or floor price programme. But IWTO, that is the processors of wool and the merchant trade - must accept responsibility for resistance to all three changes, each of which has since proved to have been beneficial to themselves as well as to everyone else concerned.
Looking for the moment at the Australian economy, it is clear that change will continue. Australia’s foreign trade and debt positions are simply not sustainable - in the language of the seamstress ‘something has to give Year after year, Australia’s export receipts have fallen well short of its import bill, with the difference being met by overseas borrowing. We have got to the point now where one-fifth of our export receipts are needed just to cover the interest payments of this debt, up from one-twentieth a decade ago.
Hopefully the Australian politicians as well as the people will realise the seriousness of the situation and take remedial steps. If this active management of change does not occur, change will be imposed upon us by the rest of the world in an abrupt and brutal fashion (witness the LDC countries and the conditions imposed upon them in return for bail out by the International Monetary Fund).
These remedial steps mainly revolve around making Australia a more efficient and productive place. Since the rural section is one of Australia’s most efficient, it has relatively little to fear, although there will be ‘knock-on’ effects from change in other sectors.
These include the painful matter of current high interest rates. These are being imposed by Government to slow Australian spending to a rate which can be satisfied from our own somewhat inefficient productive facilities. I hope this is just a ‘holding action’ before an all-out assault on Australia’s low productivity which includes clean up of the waterfront, transport system, coastal shipping(among many others) and further cuts in all public expenditure to restrain demand.
However, that does not alter the fact that interest rates are currently at very high levels and likely to remain for some time. Monetary policy is a blunt instrument which is hurting a lot of people it was supposed to protect.
The messages I would like to leave with you are, first, have a good think when confronted with change before saying “not bloody likely” - in other words try not to oppose change out of hand. Surely the lessons of the past quarter century in the wool industry, which I have taken as an example, must suggest that in that industry, at least, everybody should approach change in a more positive way, putting aside prejudice and sectional interests. The same, I am sure, is true for every other industry and for every other walk of life.
And the second message is - don’t make change more painful than it need be.
We have to remember that business relationships are a mutual affair.
There are many new products and services, and lots of advice available.
Be sure to make use of them in helping to adapt to the changing business
environment.
I have pleasure in opening this Conference and in wishing everyone here a useful and profitable as well as an enjoyable participation.
