Marketing arrangements for wool have recently been under enormous strain. Both the supply of wool and the stocks held by the AustralianWool Corporation during the 1989-90 season amounted to just over one half of total output. This precipitated serious conflict between the federal government and the woolgrowers’ organizations; especially the Minister for Primary Industries and Energy, Mr John Kerin, used his powers to lower the reserve price.
In this Policy Monograph, Alistair Watson, a freelance agricultural economist and a long-standing authority on the wool industry, argues that the reserve price scheme, as well as suffering from a number of intrinsic flaws, has in recent years been transformed from a buffer stock scheme designed to stabilize price into a speculative reserve scheme implicitly pursuing a strategy of raising the long-term price of wool. The mismanagement of the scheme should prompt the wool industry to reconsider its entire institutional relationship with the government.