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Monday, 1 December 2008
Page: 7740

Senator McGAURAN (7:31 PM) —Before dinner I was about to outline the significant difference in relation to tax deductions between the MISs—management investment schemes—and the carbon sink forest tax incentive scheme, and that is simply permanency. That has an enormous effect on the rural sector. The food-producing land under the permanency factor of carbon sinks cannot make a comeback in many respects if returns should ever improve for food producers over and above the distortion that the tax incentive has created. In my own state of Victoria, land has made a comeback where managed investment schemes have vacated the land and, in some cases, farming food producers have actually made a comeback over and above the plantations. Under the MIS, there is a chance of that occurring within the market fluctuation; but, when a forest is permanent, food producers and farmers cannot ever come back to that land—not in 100 years under this foolish legislation, such is the danger of permanency.

The tax incentive scheme is a clear case of distorting the market and creating an unfair advantage that will inevitably lead to a misallocation and an inefficient use of resources. Often the supporters of the scheme will say that farmers can plant windrows and boundaries to take advantage of the tax incentive scheme. They cannot. It is worthy to note that farmers carrying on the business of food production cannot join this scheme or take advantage of the tax break. The so-called dual effect of planting windrows and a carbon sequester forest at the same time is not likely to be permissible as a tax deduction because a farmer’s intent of planting is related to the primary business, not to emissions offset as defined in the legislation. That could become a lawyer’s delight.

What exactly is the legislation saying? Many of the previous speakers have asked that. There is so much about the legislation that is open for interpretation. But we know for a fact that the National Farmers Federation, when they appeared before the Senate Standing Committee on Rural and Regional Affairs,  and Transport made the point that farmers cannot enjoy the tax incentive in regard to windrows. The Senate committee inquiry report, in referring to the NFF submission, states:

Concerns were also raised that the proposed arrangements would not allow a landholder to make a claim on the capital expenditure on non-contiguous plantings.

The NFF argued that this condition places a limitation on primary producers claiming the tax provisions for on-farm forestry practices that deliver carbon sink benefits. The NFF stated that on-farm forestry practices by agricultural producers will often involve multiple patches of small lots of trees in order to optimise the broader environmental and productivity benefits of such practices.

The NFF also argued that this same condition may instead lead to the perverse outcome of providing an incentive to farmers to plant trees in areas which deliver a poor environmental outcome, purely in order to maximise the potential claim.

This is a scheme for the big players—the big energy companies and traders that will buy large tracts of land to offset carbon emissions. It really is like giving Goliath the first punch in a fight against David. Further, the buy-up will be compounded by the fact that Labor’s proposed ETS is looking certain to be only a domestic scheme, in no way linked with international schemes; therefore, the carbon sink forest scheme will become even more attractive as a means to offset emissions and trade within the ETS. Obviously, you cannot plant trees on poorly productive land, as has been said by previous speakers, so the highly productive land will be the target of this new scheme. The forest-planting scheme will become a lazy way for the energy companies to offset rather than undertake the more expensive and long-term route of research and development, plant maintenance and upgrades or investment in alternative energies.

It is worth noting—and I note that Senator Boswell touched on this subject too—that Treasury has modelled the estimates on the number of new forest plantations that would occur under this scheme at different prices per tonne under the ETS. The Treasury modelling sets out certain scenarios according to different assumed stabilisation rates and prices per tonne of carbon, as will be traded under an emissions trading scheme. At the lower end of the assumptions, starting around the mid to high $20 per tonne in 2010, it is estimated that some eight million hectares of additional land will be given to new plantations by 2030. At the higher end of the assumptions, starting around the mid to high $40 per tonne, it is that some 40,000 hectares will be taken up in new plantations. It will become a case of forests before food.

Incredibly and foolishly, this massive loss of food-producing land runs parallel with two other flawed government policies that target reducing farm land—firstly, the $3.5 billion water buyback program for environmental flows along the Murray River. This policy has focused on buying productive rural properties, such as the historic Toorale Station in New South Wales, and turning them into reserves—unmanaged reserves, I would predict. At the same time, the Rudd government has ground to a halt the coalition’s $6 billion commitment to improving irrigation infrastructure—and that is the real solution to saving the Murray. Secondly, Labor’s Minister for the Environment, Heritage and the Arts, Peter Garrett, has his own land grab going on. He is about to hit the market in pursuit of 31 million hectares of new reserves.

It was only recently, in this parliamentary sitting, that the Minister for Agriculture, Fisheries and Forestry, Tony Burke, presented to the House a ministerial statement regarding world food security. Full of piety and anxiety, the minister delivered this statement—with hand wringing and pleas that Australia must do and can do better and, ‘We will lead the world in food security.’ I recommend anyone who wishes to read the minister’s speech to pick it up. He made the speech on 12 November. How hollow is that statement sounding tonight. It amounts to nought. It was as hollow as all the Rudd government’s statements that we hear—full of piety and no action at all. Let us read some of the statements that the minister made. He said:

The bottom line is that, wherever you are in the world, it is becoming harder for families to feed themselves. The world needs to act and we need to act now. Our actions need to be targeted, they need to be coordinated and they need to focus on the short, medium and long term.

Well, you cannot eat trees, Minister. He continued:

Australian agriculture is resilient and adaptable. We need to publicly acknowledge the critical role our farmers play as food producers. If we get in front of the game and act decisively—

in front of the game? This puts us right behind the game. He goes on:

… I am certain that Australia’s primary industries will adapt to these challenges and thrive. And the world will continue to look to Australian agriculture as world leaders.

This is the only scheme of its kind in the world. It is the only type in the world. Indeed, we will be leading the world in replacing food-producing land with forests. That is the hollowness of that presentation.

In a time of great concern regarding world food shortages, the long-term effect of a major food-producing country such as Australia reducing its productive land will simply exacerbate the situation. In fact, Australia will lose valuable export income. And then, of course, there is the effect on the rural communities. Given that the majority of the farming sector is made up of family farms, this efficient social and economic unit will be undermined by the distortions that will be produced by the tax incentive scheme. Farming families are the foundation stone of the economic and social life of small towns and regional cities. The small businesses, schools, hospitals et cetera of small towns and regional cities are primarily reliant on a viable farming sector for their own economic viability. These economic regions will be detrimentally affected by the loss of productive farming land because of this scheme—singularly because of this scheme.

Senator Jacinta Collins —So how are you voting?

Senator McGAURAN —’How do I know?’ says the interjection. You have no care. You have wandered in here and just decided to interject willy-nilly. You are from the city. That is the whole idea—you are from the city. You do not have a clue.

Senator Conroy —How are you voting?

Senator McGAURAN —Don’t you join in, Senator Conroy. You are the last person who would seek to represent the rural sector. The Environment Association, Senator Conroy, noted the undesirable impacts in rural Tasmania, stating their concerns before the Senate inquiry. They said:

Australia’s attempts to sequester carbon to mitigate global climate warming are likely to promote a mass expansion of artificial plantings in Tasmania. A great social concern for Tasmania is that farming activity is being replaced by artificial plantations which employ very few. The reduction in farming activity, the local production of food and associated employment is a long-term loss that may well have severe impacts for the viability of our community.

And the VFF, the Victorian Farmers Federation, gave similar evidence, backing up the Environment Association from Tasmania.

It is worthy to note that this debate has been very much centred on the theory of the scheme, though some people have properly touched on the practicalities of the scheme. As they have all said: ‘Who is following up on all of this in five, 10 or 15 years? When they get the deduction in the first year, who is going to follow up on that?’ I should inform the Labor Party that this is still a country of fires and floods and droughts. If you ever try to plant a mass lot of trees—and the two senators across there would never have tried to plant a tree, except in perhaps the backyard of their suburban home—it will be a case of get the tax deduction in the first year and run, because no-one will be checking to see what the results of that plantation are. (Time expired)