HILL, Mr Alan, Director of Policy, Western Australian Farmers Federation Inc.

NORTON, Mr Michael, President, Western Australian Farmers Federation Inc.

PARK, Mr Dale, Senior Vice-President, Western Australian Farmers Federation Inc.

Evidence from Mr Hill, Mr Norton and Mr Par k was taken via teleconference—

[15:23]

CHAIR: I welcome the representatives of the Western Australian Farmers Federation. While the committee does not require you to give evidence on oath, I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the Senate or House of Representatives. Do you have an opening statement for us today?

Mr Norton : Yes. Our submission is very short and sweet. WA Farmers Federation does not support the carbon tax proposal. Our reasons are pretty straightforward. From the evidence that has been given to us, we believe that financially we will be worse off under a carbon tax. Some of the detail, of course, is pretty limited in relation to proving that. I know the government's research does not indicate that, but we have been through these processes before. Farmers are very much at the end of the line and we believe a lot of the costs from processing, from retailing and from transport will gravitate back as increased costs and charges to growers.

CHAIR: Thank you for that. That was short and sweet, and we do appreciate that.

Senator URQUHART: You said in your submission that you had not reviewed the full package in detail. That was dated 22 September. Are you aware that agriculture has been permanently excluded from the scheme?

Mr Norton : We are aware of that, but we are also aware that the heavy machinery and diesel exemption will be lifted from 2014, and we believe that that will have a direct effect, certainly on the grains industry in Western Australia and heavy transport costs in general. So, whilst the statement is correct, we believe that the flow-on will have an ulterior effect.

Senator URQUHART: I am talking about the current bill. Are you are aware that under the package as it stands farmers will not have to fill in any additional paperwork, they will not have to account for their emissions and they will continue to receive the same fuel tax credit as they currently do?

Mr Norton : We are certainly aware of all that, but farmers work on the bottom line. We believe that we will be financially disenfranchised under this particular piece of legislation.

Senator URQUHART: In what way? Can you explain that?

Mr Park : One of the things that happen in primary industry is that we put our product up and people bid for it at an auction, basically, whether that auction is open cry or otherwise. In other words, we get the price after everybody else has taken their bit out. What normally happens in just about every other instance where costs are imposed on industry—and we are talking about the processing industry now—is that the costs get passed back to the grower. The only time that that does not happen is when there are shortages, and unfortunately that has not happened a great deal of the time in the agricultural industry.

Senator URQUHART: Are you aware that the agriculture sector stands to benefit from a carbon price? I will take you to the Treasury modelling, which outlines this. According to that modelling, your sector will grow two per cent more with a carbon price than without a carbon price.

Mr Park : We have reservations about that statement.

Mr Hill : I think it is fair to say, if you go back to the original statement, that whilst it is true we said we have not read the entire package of bills, we as an organisation are not new to this debate. In fact, we have been involved at both the state and federal level in a range of committees going back to the early discussions on the Carbon Pollution Reduction Scheme. The Treasury modelling, as I recall—and, Dale, I might get you to support this—makes an assumption about the flow of costs within the supply chain which has been challenged. I do not have at my fingertips an alternative figure as to what the impact is likely to be, but if we go back and look at some of those assumptions we would contest them.

Mr Park : To back that up, this gets back to what I was saying before. The Treasury model assumed that all the carbon costs are going to go back to the consumer. What we contend is that, if we take history as being any sort of guide, unless there are shortages the costs always come back the other way because the processors are intent on keeping their costs down, and the way they do that is paying us less money for our products.

Senator URQUHART: I will finish on one final question. What do you know about the $429 million Carbon Farming Futures package that is included in the proposed legislation? That package is designed to assist farmers and landholders to benefit from the Carbon Farming Initiative.

Mr Norton : We are well aware of the package. We have been working very closely with NFF along with other state farming organisations and we certainly intend to work with NFF to look at ways and means as to how farmers in Western Australia can lock into some of those packages so that we can try and develop some way of ameliorating any potential costs that do flow back to us. Do you have any other comments, Dale?

Mr Park : Yes, we are very enthusiastic supporters of the Carbon Farming Initiative. My understanding was that it was not dependent on a price on carbon, a tax on carbon, but I might be mistaken. Am I?

CHAIR: No, the bills have already passed, but it is part of the overall package.

Mr Park : That is right. My understanding was that it had already passed. We are viewing that as a separate issue to the carbon tax.

Senator URQUHART: Okay. But certainly you agree that it will assist farmers and landholders?

Mr Park : There is no doubt about that.

Senator URQUHART: Thank you.

Mr CHRISTENSEN: Thank you very much, gentlemen. Firstly, can I get an overview of the different farming sectors that WAFF represent?

Mr Norton : Primarily the bulk of our members are grain producers, followed by wool and sheepmeat producers, dairy farmers and then we have the bee industry and the egg industry.

Mr CHRISTENSEN: In your opinion will all those sectors be impacted by increased input costs as a result of this carbon tax legislative package that we are talking about today?

Mr Norton : I would imagine so to varying degrees. Certainly the grain sector we believe will be by far the worst affected. Also the dairy sector, because some of our dairy farmers have very high power usages growing green feed during very long summer periods. Some of those dairy farmers will be well and truly affected by increased power costs.

Mr CHRISTENSEN: Out of those sectors that you mentioned, which ones are mainly export oriented?

Mr Norton : Certainly our grains industry. I think 93 per cent of our grain produced in Western Australia, and we are the largest grain-producing state in Australia, is exported. So grains by a country mile.

Mr CHRISTENSEN: Have you done any work at all on grain producers in other nations, what carbon pricing policies your competitors have and how that is affecting them in terms of their input costs?

Mr Norton : Dale, do you want to have a crack at that one.

Mr Park : Thanks! I was just running through my mind who our major competitors are. The US would be the biggest one as far as grain goes. They do not have a tax input. I am just trying to think of others. Russia has exported grain at various stages. We do compete in wool and sheepmeat against Uruguay and New Zealand mainly. Beef is Brazil and those people. We virtually export nothing into Europe and we do not compete against Europe in any of our markets. That is a quick rundown.

Mr CHRISTENSEN: On these extra input costs, basically what you are saying is that there is no known additional carbon pricing in other nations that are competing with wheat and other sectors that will have this extra cost put on them that our farmers and farmers in WA are having put on them?

Mr Norton : Certainly it is new ground. The Americans started off with a carbon price, bearing in mind that a lot of their grains and meat exports are fairly heavily underwritten by the US government in various ways. I am not exactly sure about Canada, but certainly Canada is a fairly big grain exporter. I guess this particular legislation is a new frontier for Australian agriculture. It is really going to have an effect on our bottom line. The Australian Farm Institute has done some work showing that at the recommended price of carbon a grain farmer will be $24,000 a year worse off. Whether that happens in practice will remain to be seen.

Mr CHRISTENSEN: As the peak body over there do you believe this is going to put WA farmers at competitive risk against their trading competitors.

Mr Park : Probably not. It will just be another cost that farmers will have to bear. Productivity in agriculture has been rising at the rate of 2.8 per cent per annum. I guess we are just going to have to work a bit harder to try to offset it. But it certainly makes younger farmers become disillusioned when they see these extra costs and charges being attached to the bottom line. It just makes agriculture a little bit less attractive compared to the mining industry and a whole lot of other occupations. Ultimately it starts to become a food security issue for Australia.

Mr CHRISTENSEN: Can you supply to the committee the Grain Institute research you spoke of before.

Mr Norton : We can do.

Mr Park : Yes. The Australian Grain Institute have done a lot of work on various commodities for the National Farmers' Federation and all that information is available for dairy, sheep meat, beef and grain.

Mr WINDSOR: You mentioned that grain production is pretty important over there, and obviously it is. Are you aware of some of the funding arrangements on the plus side for agriculture? One that readily comes to mind is the tax offset or subsidy, in terms of no-till or conservation-tillage equipment and sod-seeding equipment in pasture. Are you guys aware of that?

Mr Norton : I think we have lead the Australian grains industry in that technology. The technology has been around in Western Australia for 10 years now. The subsidies—

Mr WINDSOR: I know it is around, but if you are purchasing a $300,000 no-till planter, for instance, you will get a 15 per cent deduction off the cost of that. Are you aware that that is in the legislation? So it is $45,000 on one of those machines.

Mr Norton : These were recently announced. Am I correct in saying that?

Mr WINDSOR: Yes, it is in the legislation.

Mr Norton : Yes, we were aware that there were components of that package.

Mr Park : We just have to make sure that this gets handed back to the grower and does not get gobbled up by increased margins for manufacturers, retailers and salesmen.

Mr WINDSOR: The way it is designed is that it will be done at taxation time rather than at the point of sale. I quite agree that some of the pass-through effects of the investment allowance in the past have been to just ratchet the price of the machine up rather than give great encouragement to the farm sector. We believe we have hopefully dealt with that at the point of sale. Also, the receipt of the 15 per cent offset, irrespective of whether or not they have made a loss, will be at income tax time.

You are member of the National Farmers' Federation. I was a member of the Multi-Party Climate Change Committee and I had a number of meetings with the board of the National Farmers' Federation—Mike, you may well have been there—and on a number of occasions asked the president and others, during that committee process, would they provide input into the process. I have to say, and I do this as a practising farmer, that I am extremely disappointed with the reaction from the National Farmers' Federation. They have decided to sit on the fence through the whole process. I made one suggestion at one stage that if agriculture had a billion dollars a year coming into research and development or into the coffers of agriculture by way of the revenue stream from the carbon pricing arrangements, what would they do with it? What I suggested was that they could write some of the policy.

Mr CHRISTENSEN: Is there a question?

Mr WINDSOR: I am extremely disappointed that they have not bothered to do that. Now we see people complaining about some of the bits and pieces that are within the legislation. I just suggest that the National Farmers Federation in particular had every opportunity to be a part of this process, and one member of the National Farmers Federation board gave me a piece of paper with a couple of handwritten comments on it.

Mr CHRISTENSEN: Madam Chair, thanks for Mr Windsor's submission, but he is supposed to be asking questions.

CHAIR: Mr Christensen, I would—

Mr WINDSOR: My question is: being a member of the National Farmers Federation, why wasn't the organisation a bit more proactive during this period when there were offers—from me in particular, and others—to be part of the process?

Mr Norton : It is my understanding—and it has certainly always been the direction from the member organisations—that the NFF got involved as closely as they possibly could in developing the legislation to get the best possible deal for agriculture. But obviously this issue has been highly political, and we have been very careful not to try and get branded from one side or other of the political divide on this issue. From my position, I always thought NFF got involved as much as they possibly could. I certainly do not sit on the board. I sit on the policy council, and numerous politicians have addressed the policy council on this issue. But politically it is very sensitive. We are there to get the best possible result for agriculture, and the fact that we have been excluded, we thought, was a real plus for ag. Until the legislation had been made available, it was very difficult to have much more input other than we already had, bearing in mind that we were also pretty closely involved with the CPRS legislation. I am a little bit surprised at your comments. Alan, have you got anything else to say?

Mr Hill : I just wanted to say that it is awfully difficult in this forum to speculate on why or why not particular actions have not occurred. I certainly can speak from a WA Farmers point of view and say that we are obviously engaged in this process to the depth that we can be. We were certainly very active during the CPRS debate and subsequent discussions. Dale, I do not know whether you want to talk about some of your national involvement, but we have certainly tried, where we could, to both promote a balanced argument to the membership and also speak publicly on the issue as best we could advise members. I do apologise. It is a bit difficult to talk about why NFF did or did not do this or that, but we are in daily discussion with them on a range of issues, and it is something that we can take up with them at some stage. But, from a fairly large distance, it was our understanding they were fairly active on the issue, perhaps not in direct response to you but in ongoing engagement with the agencies and various political figures.

Mr Norton : Dale has been more directly involved in the NFF committee. Dale?

Mr Park : Just compare the CPRS set-up to what has happened under this one. We actually had something we could work with, and the NFF spent a fair bit of time with the department of climate change going through what was happening with CPRS and how we fitted into that. I think that agriculture was not included in this legislation because of a lot of the stuff that we went through at that time. One of the problems we had with this is that, as Mike said, it was very politicised and so therefore we had to be a little bit more careful. Whereas with the CPRS we seemed to know where we were going, with this one, because of the rhetoric and whatever floating around about it, there was a lot more uncertainty about where we were going and how we were going to go with it.

Mr WINDSOR: I will just make another comment in relation to the submission and comments that you made there a moment ago in terms of the impact of heavy vehicle fuel. I am looking at the National Farmers Federation submission now, to which you are a signatory, and the Farm Institute numbers are still being plugged into the National Farmers Federation figures, with the inclusion of heavy vehicles. I would have thought that an organisation with the skills that the National Farmers Federation is supposed to have would fully recognise by now that heavy vehicles are not in the legislation. They are not in the documents we are talking about. But we continually get these publications that base their numbers—and your $24,000 for a wheat farmer or grain farmer would be based on those numbers—on including heavy vehicles, which are not part of the discussion we are having at the moment. They may be part of some political party's processes in the future but they are not in the legislation at the moment. If the NFF keep including these numbers in their figures, the only take out of that I can get is that they are going to be supporting the Labor Party at the next election. Otherwise they are creating a fear for their membership that should not be there. We are talking about legislation that is before the parliament now, not legislation that could be there in 10 years time.

Mr Park : My understanding was that the exemption was to be taken off after two years.

Mr WINDSOR: No. If you can find reference to heavy vehicle fuel being included at some stage in the future in these bills, I will vote against it.

Mr CHRISTENSEN: It is not in the bills but it is government policy.

CHAIR: And therefore it is not legislation as we have it now but it is quite deliberately being put out—the government is being honest—that it is our intention to do that. But it is not in legislation as we currently have it before us, so it cannot be included in these figures. Depending on the political landscape and who is there, it is our intent as the Labor Party, but it is not in these bills.

Mr Park : That would mean there would have to be a change of legislation for that to come in.

CHAIR: Exactly right. There is no provision in these bills now, very much due to Mr Windsor's involvement in this issue, but it is our intent to put in new legislation or alter it in 2014. But that is future legislation the Labor Party would seek to introduce. As the bills currently stand it is not in, and it is not proposed to be in these bills.

Mr WINDSOR: And it is not proposed to be in this term of parliament.

Senator BIRMINGHAM: But you should not feel bad about funding modelling that includes it because of course even the Treasury's own modelling for the government happens to include because that is how committed the government is to including it.

CHAIR: We get accused of not being upfront. Now we are upfront we get accused. Senator Pratt.

Senator PRATT: I have got a couple of questions. It is my understanding that, whilst there was a commitment from the government to bring in heavy vehicles at some point in the future, heavy vehicles for on-farm use were exempt from that. Is that the WA Farmers Federation understanding as well?

Mr Norton : Yes, it is.

Senator PRATT: Okay. With respect to your support for the Carbon Farming Initiative, clearly much of the investment that underpins that initiative comes from the revenue raised and indeed from the offsets that you would expect to be given by putting a price on carbon. How is it that you can recognise the significance of the Carbon Farming Initiative without really having a mechanism to price carbon and put that forward?

Mr Norton : There has not been a terrible lot of research and development done in this area, so to really sit down and quantify numbers as far as agriculture is concerned is very difficult. We are very much of the opinion that agriculture can be part of the solution but there needs to be a terrible lot more research and development done to clearly identify what they are and what the value to agriculture is going to be. Is that a reasonable assessment, Dale?

Mr Park : Yes. You are right, Senator, that one does follow on from the other. As Mike said, there is a lot of research to put into where agriculture fits in to be part of the solution.

Senator PRATT: There are low cost abatement opportunities within the agricultural sector. The research I have seen certainly demonstrates that that is the case. That is one of the important reasons for actually auspicing things like the carbon farming initiative within the Clean Energy Future plan.

Mr Norton : About the only one that exists in Western Australia is the Oil Mallee, and there is some debate as to how successful that is. It is pretty attractive for investors to invest in buying farms to do that, but just what the knock-on effect to agriculture is still an unknown quantity.

Senator PRATT: Are you aware of any of the drivers in terms of fossil fuel or coal companies looking towards the agricultural sector for soil carbon abatement and the kind of work that is being done in that regard?

Mr Norton : Yes, but, once again, companies like Carbon Conscious have signed contracts with the power companies but they tend to come in and buy the farm. At this point in time there is very little co-operational work being done. Farmers, for example, will plant 20 per cent of their farm for Oil Mallee and enter into those kinds of contracts—bearing in mind that you have to sign tenements up to 100 years or covenants on the property, which is a real disincentive as far as practising farmers coexisting with these types of schemes. Dale is a bit closer to this issue than I am.

Mr Park : Senator Pratt, you mentioned soil carbon, did you?

Senator PRATT: Yes.

Mr Park : My line is not terribly good here. That is a very good case in point. We need a lot more research into soil carbon because it is going to be a viable alternative. It depends who you talk to—whether you talk to soil scientists or cultural scientists—but the whole fact that soil carbon can be quite transitive in the soil is one of the problems that we really need to get to. That is where we need to put a lot of research money into to firm up some of these mechanisms.

Senator PRATT: Would you expect that pricing carbon can be a potential driver to get that research and investment unlocked?

Mr Norton : Yes, I would. If there is a price on carbon there is certainly a bigger incentive for people to do it—put it that way.

Senator MILNE: On the last point you made, clearly by creating a price on carbon and setting up the Carbon Farming Initiative in conjunction with the pricing mechanism and a biodiversity fund, there is now going to be money specifically for doing the research on soil carbon. I would agree with you that this is an area where it is not proven, and any claim that you could meet 60 per cent of a five per cent reduction in emissions on soil carbon is just a claim at the moment because the methodology does not exist. But I do want to reassure you that in the package money has been set aside specifically for this purpose, to actually ratchet that up.

I could not quite follow what you were saying before in terms of the prices. Clearly at the moment the voluntary market has very low prices when it comes to offsets. But now by creating a compliance market you actually start to get much better returns. So we have now got a scenario where the Carbon Farming Initiative will provide a lot of opportunities for stewardship projects, ranging from things like different savannah burning regimes and feral animal projects—getting rid of camels and the like—as well as creating opportunities to be paid for biodiverse plantings. Given that the farmer organisations have a leadership role here, are you now going to engage with these issues, because there is a big opportunity here for growers around the country to really make way?

Mr Norton : We certainly are. Even though we are opposing the tax, we realise that the numbers are there to bring this legislation into place and, we will certainly be doing whatever we can to line up and put propositions to government to try to get as much of the R&D dollars as we possibly can to look at ways and means that agriculture can be more productive and financially viable out of this current proposed carbon tax legislation. And if you have got something there that can fix wild dogs, we will certainly be looking at that. There are plenty of them over here, apart from camels.

CHAIR: Thank you for your attendance here today, via phone. Some of the greatest environmentalists that we have actually got in this country are farmers and we do not recognise that. So we do appreciate you taking part in this process today. If you have been asked for any additional material, could you forward that to the secretariat. You will be sent a copy of the transcript of evidence, to which you may make corrections of grammar and fact. We did have some difficulty picking up who was talking on the phone, so if we have attributed a comment to you and it was not you, you can all decide amongst yourselves. We do apologise. Thank you for your detailed input today. It has been appreciated.

Mr Norton : Thank you.

CHAIR: Can I thank everybody for their attendance over three exhausting days. I think we have covered just about everything we possibly can. We are hoping we will have a draft early next week and then we can make a decision about signing off on that. I hope we can do that by phone hook-up, so we do not have to get everyone back together.

Committee adjourned at 15:57