Australia Slaughter Down Under

By JAMES WALSH.

Across the rolling countryside, the normal peace of rural life is shattered by volleys of gunfire. Under the hot summer sun of the Southern Hemisphere, sheep farmers are carrying out one of the largest animal slaughters in history. Some families drive off in tears after delivering their gentle charges to the killing pens where, next to mass burial pits, firing squads will dispose of 20 million sheep over the next year.

The death sentence was decreed as an emergency measure to rescue a vital export industry by curtailing wool production. During the past 18 months, Australia's prime overseas customers have cut back on purchases, leaving a glut of fleeces. Moreover, wheat farmers expect to see their incomes halved this year, and home-grown citrus sales have also soured. At a time when much of Australia is taking to beaches and playgrounds, the dreaming high summer of the Lucky Country's interior has turned into a nightmare.

For an economy that relies on products of the land for export earnings, the rural crisis is especially painful. Former Prime Minister Malcolm Fraser, now retired to his sheep and cattle ranch in the state of Victoria, warns that the slump could be the worst since the Great Depression 60 years ago. According to the New South Wales Farmers Association, its members are selling out and leaving the land at the rate of one every two hours. Says Daryl Reading of Gowrie: "It makes you mad. We're good at what we do, but we still can't make a living."

Such protests came to a head last week, when 60,000 farmers wearing broad- brimmed bush hats converged on Melbourne to dramatize their hardships. Coming from specks on the map like Yackandandah and Koo-wee-rup, they marched along leading sheepdogs or, in two cases, mounted on camels. AUSTRALIA FOR SHEEP, NOT POLITICAL GOATS proclaimed one placard. Rally leader Danny Johnson from Warracknabeal drew cheers when he shouted, "The heart has been ripped out of country Australia by high interest rates and excessive government taxes."

But more neutral observers wonder whether Prime Minister Bob Hawke's Labor Party government in Canberra is the villain or the scapegoat. Agriculture is a notoriously boom-and-bust business. If any single factor is to blame, it is probably Australia's dodgy trading position in a rapidly industrializing part of the world.

Economically, a nation that once prided itself on a way of life superior to its neighbors' now stands in relation to Asia, particularly Japan, as a colony to a mother country. It imports money and equipment and sends back minerals and farm products. Welfare-state labor costs also stifle competition with hard-driving Asian exporters in manufactured goods.

Australian salesmanship in Asia has brought in healthy profits, but commodity prices remain subject to mercurial swings. Two years ago, when wool was fetching a high world price of $4.81 per lb., sheep men delighted in their earnings bonanza and stepped up production. They could not have foreseen that China, a big customer, would drop out of the market in the wake of Beijing's Tiananmen Square upheaval, when Western credits were cut off. Nor could they have predicted that the financially strapped Soviets would cancel orders and stop paying bills.

For years the wool growers have been sheltered by a cartel-like mechanism that only helped skew the market. The Australian Wool Corporation, a quasi- official body, bought all unsold stocks at a guaranteed price. When natural fibers became the fashion rage of the late 1980s, the AWC lifted the price by 71%, to $3.35 per lb., which encouraged farmers to swell their flocks. So dominant was Australia in the fine-wool market that its minimum price kept the stuff expensive amid overproduction and shrinking demand. One result has been a turn by Japan to improved synthetic fibers, which are smoother and more lightweight than their forerunners.

The slaughter campaign aims to reduce flocks to a more commercially manageable 150 million, though for Australians it has the dimensions of tragedy. Historically, the country rode to prosperity on the back of this biblical creature that typically can produce enough wool for four men's suits in a year.

But the sheep men's miseries are not the countryside's only plight. Thanks to bumper harvests around the world, wheat farmers face their lowest returns in more than half a century, and the international embargo on exports to Iraq has also eliminated Australia's second-biggest customer. Aggravating the crisis is cutthroat grain dumping by the U.S. and the European Community; both unload surplus wheat overseas at subsidized prices.

As for citrus, the bruiser has been import liberalization. In 1988 Canberra relaxed tariffs on a variety of products, enabling Brazilian oranges to capture 20% of the domestic market. Australia's 167,000 farmers protested that such imports were heavily subsidized by foreign governments. But Canberra remains committed to free trade in an effort to make the country more competitive. Whether market-oriented policies will rescue the countryside is the big gamble: a question, as the doomed sheep might attest, of killing some agriculture in order to save it.

With reporting by John Dunn/Melbourne