The collapse of the Australian wool reserve price scheme

Abstract

In January 1991 the Australian Government announced the suspension (and later the abandonment) of the Wool Reserve Price Scheme. The price of wool fell overnight from 700 cents per kilo (c/kg) to 430 c/kg). The wool industry is no longer as important to the Australian economy as it once was, but the collapse of the wool market was still a disaster of national significance. This paper examines the background to the collapse of price stabilization under the scheme in 1991/2, and draws out implications for the feasibility of government backed price stabilization schemes.