The scheme was set up to smooth out fluctuations in prices for wool, of which Australia continues to be a major producer.
Before long, the AWC had exhausted its billion dollar plus reserves and started borrowing.
[3] A key cause of the collapse of the scheme has been attributed to a change in the scheme's governance arrangements, whereby the Wool Council came to set the floor price, which led to increased political pressures to raise the guaranteed minimum floor price in 1974 to unsustainable levels.
[4] The responsible Labor Minister, John Kerin, initially refused to take direct action, but tried to get wool industry's leaders to see reason.
With the collapse of the reserve price scheme, farmers and wool related businesses all went broke.
Key processors in England, Germany, France, Italy and Eastern Europe went out of business.
China would invest heavily in new textile technology, factories and machinery, and by 2018 would be buying 80% of Australia's wool clip.