Research and Development

WoolPoll review avoids wool levy ‘split’ issue, but offers options

Terry Sim, April 28, 2020

The last WoolPoll was held in 2018, now growers have a chance to improve its structure.

AUSTRALIA’S wool growers will be able to give feedback on changing the frequency of WoolPoll, its role, voting mechanism and levy options in a review launched today.

But the contentious issue of the levy expenditure split between marketing versus research and development projects by the industry’s levy-funded body Australian Wool Innovation will not be considered by the review.

However, in the discussion paper released at the review launch today, the Department of Agriculture, Water and Environment has offered options if wool levy payers want to decide on the level of investment into R&D and marketing separately.

WoolPoll is the three-yearly vote of all wool levy payers, conducted by Australian Wool Innovation (AWI), through which the industry decides on its levy rate for investment by AWI in research, development and marketing. Australia’s 60,000 wool producers contribute $4.3 billion in Australian wool exports a year and the wool levy raises around $60 million to be spent on wool industry research and development, marketing and other services each year.

The department launched the WoolPoll Review today and invited growers to have their say in response to a discussion paper that poses 11 questions in the key areas of frequency and flexibility; roles and responsibilities, and; voting documents and procedures.

An AWI spokesman said the body welcomed the announcement by the Department of Agriculture, Water and the Environment to review WoolPoll.

“This is an opportunity for woolgrowers to have their say in response to the department’s discussion paper and provide their ideas to improve how WoolPoll is conducted.”

The submissions period will be open until 29 May 2020 and will be followed by targeted virtual consultation conducted by the department in May and June 2020. The department expects to release the final report of the review later this year.

The 2018 review of AWI’s performance and governance by Ernst & Young identified opportunities to improve the way WoolPoll operates, and recommended an independent assessment of the WoolPoll mechanism. The Department of Agriculture, Water and the Environment said it is delivering on the EY recommendation, “to ensure WoolPoll remains an appropriate and contemporary process that provides robust assurance about what wool levy payers want their levy rate to be.”

The EY review report stated that a shift in the WoolPoll mechanism could be contemplated to reduce the frequency from three to five years.

“This would give longer term funding certainty to AWI, encourage long term investments in research, and reduce the costs of the WoolPoll,” the review report said.

Australian Wool Growers Association director Martin Oppenheimer said the main issue with WoolPoll was its frequency – currently every three years – and the need to move this to a five-year cycle to align with the funding and strategic planning cycles of AWI and other research and development corporations such as Meat & Livestock Australia.

“It is pretty significant that MLA is involved with sheep research and you would think that it would be important to have alignment between AWI and MLA.

“It was only once in every 15 years that there was alignment.

“If we go to a five years with WoolPoll, it will be aligned with MLA’s five-year cycle.”

AWI has also been operating on three-year funding and operational cycles, but is now developing a 10-year strategic planning process. Mr Oppenheimer said a five-year WoolPoll and AWI-funding cycle would give more stability and security for the body’s programs.

“Currently the situation is that AWI has to hold a lot of reserves to cover funding because the three-year cycle is such a short timeframe.”

Levy spending split not up for discussion in review

In the WoolPoll Review discussion paper, the department noted that wool industry stakeholders have raised the ‘funding split’ between R&D and marketing as a key issue requiring further exploration in the WoolPoll review.

“Common feedback has been that wool levy payers want to have a greater say over how much levy is invested for each purpose.

“The department notes that matters relating to the AWI board and its decisions, including how it chooses to invest the wool levy once received, are not within the scope of this review,” the department said.

“However, the government’s levies policy, and the structure of the wool levy itself, are key factors to consider in determining how WoolPoll could best be optimised.”

The department said the levy on wool is a ‘general services levy’ that can be invested into R&D, marketing and other activities.

“AWI must make investments for the benefit of the wool industry in accordance with its strategic and annual operating plan, in consultation with stakeholders, and in compliance with its funding agreement and its enabling legislation.

“Within this framework, it is a decision for the AWI Board as to how it ‘splits’ the levy funds. AWI has committed to a defined split of the levy between marketing (60%) and R&D (40%).”

Growers could separate R&D and marketing into distinct levies

The department said the wool industry’s general services model is uncommon and most other commodities have a separate levy for each different purpose. It cited the avocado industry which collects separate levies for R&D (2.9c/kg), marketing (4.5c/kg), biosecurity preparedness (0.1c/kg) kilogram) and emergency biosecurity response (currently nil).

“These separate levies can only be spent for the purposes for which they were collected, and changing one or more levy rates generally requires a formal levy proposal, industry vote and legislative amendment – even for an adjustment within an unchanged total levy rate.”

The department said the major advantage of wool’s general services levy model is that it provides certainty for levy payers about the amount of overall levy they will be liable to pay, while also allowing levy revenue to flow to areas of greatest priority across both R&D and marketing, as determined by the AWI board.

The department said the suggestion that wool growers could be asked about the split between R&D and marketing at WoolPoll, delivering a result that would bind the AWI board, is not consistent with the core design of the general services levy model, which hinges on allowing the levy recipient body to manage levy revenue flexibly, in response to changing priorities.

“A further consideration would be how a binding vote on the split could align with the obligations of the AWI board, which is ultimately responsible for the company’s financial decisions.”

The department said the government’s long standing levies policy is that the rate and structure of any levy is a matter for those paying the levy to determine, in consultation with their RDC. However it said there are avenues that could provide levy payers with the opportunity to express views about how the levy is split between R&D and marketing.

“For example, within the framework of the current general services levy and as part of existing strategic planning processes, it would be possible for AWI to develop a process to canvas levy payer preferences and inform decision making on the split.

“However, if wool levy payers wished to decide on the level of investment into R&D and marketing separately, it would be equally possible to move beyond the current ‘general services’ model and separate the R&D and marketing components into distinct levies.”

Mr Oppenheimer said the issue of levy expenditure split between marketing versus research and development will come up in the industry. The bigger issue for strategic planning is the frequency of WoolPoll to have some alignment with the other RDCs, he said. He believed there will also be bigger issues than the split, such as the Australian industry’s dependence on China.

Have your say on the WoolPoll Review discussion paper here: haveyoursay.agriculture.gov.au/woolpoll-review.

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