Mr BRUCE SCOTT (Veterans' Affairs) (10:53 AM) —in reply—It is a pleasure to follow the honourable member for Parkes (Mr Cobb), my parliamentary colleague and electorate neighbour. I am sorry that we are not going to see you at our border town of Hungerford, on the border of New South Wales and Queensland, and almost on the South Australian border, tomorrow for the field day. I will be there, and I will be singing your praises.

It is a pleasure to sum up for the Minister for Primary Industries and Energy (Mr Anderson) on the Taxation Laws Amendment (Farm Management Deposits) Bill 1998 , because this is really a great initiative of this government. I acknowledge the hard work that went into this by our minister who really has gained a tremendous tool for the farm sector to use. Had it been in place under the previous administration many primary producers in Australia today would be in a much better position, having been able to conserve their own cash reserves in better times, but, unfortunately, under Labor the scheme was totally gutted and was not tax effective. It certainly was not attractive, and that is borne out by the levels of deposits in the existing schemes.

The member for Kalgoorlie (Mr Campbell) raised an issue in relation to contractors who may use their own farm equipment for, say, harvesting or hay making. I will not give an answer to the member for Kalgoorlie, but I will ensure that the minister does respond to this particular query relating to contractors.

The contribution of the honourable member for Burke (Mr O'Keefe), since he has become the shadow minister responsible for this great industry of agriculture in Australia, shows little understanding of the situation in rural Australia, so that often we have seen in the parliament amendments moved by the opposition which really show a total lack of understanding of what the bill is trying to achieve.

Mr Sawford —This isn't a self-description, is it?

Mr BRUCE SCOTT —No. He has embarrassed himself. He has embarrassed the Labor Party by moving such amendments, because they are quite contrary to the intent of what the government is trying to achieve. This just demonstrates that the Labor Party has no-one on the other side of the House who understands agriculture, nor the needs of a modern agriculture sector in Australia.

The Taxation Laws Amendment (Farm Management Deposits) Bill 1998 establishes the farm management deposit scheme, which is one of the most important elements of the government's integrated strategy to build a competitive, sustainable and profitable farm and rural sector. The rural sector is a vital part of our Australian economy. It accounts for a major share of Australia's exports and provides the basis for this nation's value adding food and fibre processing industries. However, the rural sector has faced unprecedented change in recent years, bringing new challenges and opportunities through globalisation of markets and international trade reform.

The sector also has had to face devastating climatic conditions in some parts of the country and declining terms of trade. This has pushed many farm businesses in the rural sector to a very low point. Mr Deputy Speaker Forrest, I know that, in your electorate, you are well aware of the plight of many farmers and the people in your own community. Many, tragically, in my own electorate and in many parts of rural Australia have not survived.

Much has already been done by the government to position rural Australia to succeed in the years ahead. Of particular importance have been our efforts to return the federal budget to surplus, and the ongoing reforms, which have helped create the solid economic foundation supporting the maintenance of low inflation, and, very importantly for all Australians, continuing low interest rates. Lower interest rates have helped produce a situation which has put Australian farmers in a very competitive position. The Australian dollar is making our exports more attractive and also encouraging growth in our vital export industries.

Mr Sawford —Show us your stuff: tell us about the current account.

Mr BRUCE SCOTT —It is just economic illiteracy that we can hear from the other side of the House. I remind the other side of the House that when the Labor Party was in government business indicator rates were 20.5 per cent. To service their debts and to meet the general business of living costs, lower interest rates have been a major benefit to our farm sector and all Australians.

Mr Cobb —People were leaving the banks under them.

Mr BRUCE SCOTT —Absolutely. The benefits of managing the economy have also put this nation in a very sound position to deal with the fallout from the Asian economic crisis. However, more is needed to take Australian agriculture into the future.

The bill is about positively helping farmers towards financial self-reliance. The farm management deposit scheme is a key plank of the Agriculture—Advancing Australia package and delivers on a major commitment given by the government prior to the last federal election. The scheme is a tax linked risk management tool that builds on the previous IED scheme and farm management bond scheme. However, the farm management deposits are an important risk management tool to help farmers deal with the uneven income streams so common in agriculture.

Although they are not a panacea for the management of the many risks faced by farmers, farm management deposits will enable them to hold over pre-tax income from years of good cash flow and also be able to be drawn down in the years when additional cash flow is needed. They are a tax enhanced savings tool and can be used as a complement to other risk management strategies such as developing fodder and water reserves, financial planning, diversification, insurance, forward selling and also futures contracts.

The previous schemes were amended after extensive consultation with rural industries and the financial sector, including the Australian Bankers Association. The initiatives have been receiving widespread endorsement from key farming bodies such as the National Farmers Federation. The new scheme will also be much simpler from a taxation perspective, and that is important.

All deposits will now be treated the same way and will have a 100 per cent investment component on deposits totalling up to $300,000. Producers will no longer have to determine at the time of the deposit whether they wish to make an IED or an FMB deposit. The scheme is more appropriately delivered by the private sector where banks will compete for the deposits. That is also particularly important because it will, in many cases, encourage the banks to stay out there in rural Australia enabling them to attract these deposits. So it will be an incentive for our banks to stay in rural Australia.

Any participating financial institution must be prudentially controlled or have a government guarantee so that eligible participants will include banks, credit unions and also building societies. This will ensure the security of the deposits held by financial institutions, including the taxation component of the deposits. In addition, the bill and regulations will specify a range of reporting requirements to the Department of Primary Industries and Energy to ensure the accountability of the scheme.

In the commercial arena, there will be a range of financial institutions offering farm management deposits. Each institution will have specific products so depositors will have much more flexibility in the types of FMDs they can choose. For example, farmers may have a range of deposits with different terms and conditions or they can change to another institution for different products. This means that farm management deposits should appeal to a larger number of primary producers as they better tailor the investment decisions to their particular circumstances. Currently, there are only two standardised products. They are the IED scheme or a farm management bond scheme.

The availability and accessibility of the farm management deposits will improve as they will be offered through financial institutions which have substantial networks including in rural areas instead of being administered by a unit in the Department of Primary Industries and Energy here in Canberra. What this means is that producers will have closer contact with the managers of their funds and should find it simpler to make withdrawals and deposits with more personal explanations to clarify the terms and conditions.

If farmers are in financial hardship, they may also apply to the Department of Primary Industries and Energy for a deduction exemption certificate. If the department agrees that the farmer is in serious financial difficulty, the financial institution will not have to deduct—and this is important—20 per cent of the deposit on withdrawal. Financial difficulties will be assessed by the department against criteria similar to those which currently apply to the farm management bonds. Mr Deputy Speaker and to those on the other side of the House, I commend this bill to you because it is a tool that the farm sector will be able to use to great advantage.

Mr Campbell —We're going to vote for you, Bruce. You're wrong, but we're going to vote for you.

Mr BRUCE SCOTT —They always say that empty vessels make the most sound. This has been adequately demonstrated by the other side of the House.

Opposition members interjecting—

Mr DEPUTY SPEAKER (Mr Forrest) —Order! The two members on the other side who are making a lot of noise are on the list to speak shortly. They will get their opportunity. I call the minister. Standing order 55 requires him to be heard in silence.

Mr BRUCE SCOTT —I thank you for your protection, Mr Deputy Speaker.

Mr DEPUTY SPEAKER —It might be helpful if you tried not to provoke the other members.

Mr BRUCE SCOTT —This bill presents an ideal opportunity to take rural Australia forward. I commend the bill to the House. We seek the support of the opposition.

Question resolved in the affirmative.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

Mr DEPUTY SPEAKER —If no member wishes to consider the bill in detail, I put the question forthwith. The question is that the bill be reported to the House without amendment.

Question resolved in the affirmative.