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Tuesday, 7 December 1976


Mr KEATING (Blaxland) -The States Grants (Rural Adjustment) Bill 1976 is a significant piece of legislation, in fact too significant to be brought down in the dying stages of the session. Both the public and the rural industry, which is becoming disenchanted with the coalition Government, should have been given a greater opportunity to study and debate this Bill. The Opposition welcomes the Government's belated action on the Industries Assistance Commission's rural reconstruction report of January 1976, a report which was originally commissioned by the Labor Government in April 1974.

The Opposition supports in principle the attempts which have been made in this Bill to rationalise this particular form of assistance to the rural sector. We consider the amalgamation of previous industry orientated reconstruction schemes into one rural adjustment scheme covering all farmers in the rural sector as desirable and we support the expansion of the provisions of the scheme to include farm improvement carry-on finance and household support, and an increase in the amount being made available to individual applicants for rehabilitation purposes. However, it is not what the Government has achieved in this Bill, but what it has omitted to do, which causes concern to the Opposition. The Government appears to have passed up a unique opportunity to construct a viable and consistent adjustment assistance policy tailored to the long term adjustment needs of the rural sector, and to provide the necessary administrative machinery to ensure that this form of assistance is effective, and can itself adapt to the changing needs of the rural community.

The questions raised by this Bill in its present form relate directly to how the Government views the whole issue of assistance to the rural sector and its sincerity in constructing policies which will have a lasting and beneficial impact on the long term viability of agriculture in Australia. For the Opposition it is not so much a question of whether you assist, but how you assist the rural section. We are concerned that the advances which have been made in adopting several recommendations of the IAC rural reconstruction report could be diminished because the Government has only gone half way, only done the bare minimum, in establishing adjustment assistance as a preferred means of assistance to the rural sector.

It is on the question of assistance philosophy that the Opposition differs from the Government and differs markedly. The issue of rural adjustment assistance and the role it is to play in future agricultural policy in Australia must be viewed against the significant changes which have occurred in its structure of the rural sector since the war, and the sector's ability in a social and economic sense to respond autonomously to changes in its economic environment. There has been a sharp decline in the number of male farmers plus unpaid male family labour, from 240 000in 1952-53 to an estimated 183 000 in 1975-76. Those figures are provided by the Bureau of Agricultural Economics. There has been considerable product diversification in agriculture with increases in the average size of farms and the level of output, while a decline in the number of farms. Productivity growth has largely been due to the inflow of capital into agriculture and the substitution of capital and purchased inputs for labour. Population living in rural areas has declined in an overall sense. As costs for the farmer have risen dramatically and the price obtained for his or her output has not grown proportionately, the importance of off-farm employment as a source of income has increased.

The factors which have contributed to this structural change in the rural sector need to be understood adequately if Government is to respond to them with well considered and relevant assistance measures. Changing patterns of domestic and international demand for the output of the rural sector, and prices obtained for that output, can exert quite severe pressures on the structure of the rural sector; the rate of domestic and international inflation also is a factor. The increasing availability of new farm technology; the general level of economic activity at home and abroad; the ravages of drought and storm, the exchange rate fluctuations- we have seen plenty of that in the last few days- and the actions of Government in various fields, all constitute pressures on the internal structure of the rural sector. Industry structures do not grow overnight. They develop over periods in response to various pressures and policies of government.

It has been the ill conceived 'subsidy and concession' mentality, if one likes or assistance measures pursued over a long period by successive Liberal-National Country Party Governments, which have encouraged the formation of an industry structure in agriculture today with the capacity to produce far in excess of the capacity of the domestic and international market to consume.

The recent devaluation of the Australian dollar is another example of how this Government has attempted to dress up long term losses in the guise of short term gain to the rural community. The questions the Opposition poses are these: Has the Country Party so called, explained to the rural community why the income effects of the devaluation will only benefit some farmers and not others, or how the increase in freight rates will erode the devaluation gain to some industries in the rural sector? Will the Liberal Party explain and justify to the rural producer why he will be called upon to pay higher prices for many of his manufactured and imported inputs because of the massive levels of effective protection now protecting manufacturing projects, or why the farmer must once again face the prospect of a long term squeeze through costs, which will inevitably flow from this devaluation? As late as this evening on the question of costs, the Government introduced a statement on tariffs which failed to do anything effectively with the reduction in the overall protection which has now been accorded by way of tariffs flowing from the effects of devaluation.

It has been estimated that on the importation of tractors alone this could lead to an extra cost of at least $30m a year, in addition to the cost of importing harvesters, balers, other farm equipment and chemicals consumed by the rural sector. Fuel prices also are expected to rise by 3c to 4c a gallon because of devaluation. Has the mouthpiece of various sectors explained to the rural community that if the expected large export earnings of the small number of predominantly overseas owned mining companies materialises, and the need to revalue arises because the balance of payments moves into a surplus situation, that many of the short term gains to the rural sector of devaluation will be eroded and eroded seriously? The present coalition Government promised rural producers domestic economic stability and responsible economic management. All it has delivered is the long term prospect of economic instability, a continued squeeze on income through rising domestic costs, and increasing pressures for structural adjustment in the long term. It is these factors which have made the development of an efficiently administered and effective structural adjustment policy, tailored to the special long term adjustment needs of the rural community, a matter of urgency.

Considering this Bill in detail the Opposition supports the various additional provisions such as farm improvement carry-on finance and household support, contained in the legislation. The Opposition considers farm improvement is an important area where Government participation in providing assistance can improve the productivity and mobility of on-farm resources, especially where the commercial credit market is unwilling or unable to supply credit for adjustment purposes.

An important factor which has contributed to productivity growth in the rural sector has been the inflow of capital, and the gradual substitution of capital inputs for labour. Developments in farm technology and escalating labour costs will increase the importance of capital to future farm production.

It was the Labor Party in government which first recognised the value and the need for this type of assistance when it allocated moneys under its Dairy Adjustment Program to assist viable dairy farmers finance technological improvements such as conversion to bulk milk vats.


Mr Lloyd - And brought about the skim milk powder surplus?


Mr KEATING - The skim milk powder surplus is a world surplus- caused by the same kind of useless, senseless ideology as the National Country Party supports.


Mr Lloyd - And you encouraged it.


Mr KEATING - The internal policies of the European Economic Community countries fostered an over-supply in skim milk powder as the honourable member well knows. The EEC released that on the market and destroyed the international industry. On a smaller scale, the National Country Party does the same thing.


Mr Lloyd - If you knew all of this, why did you encourage that situation to develop?

Mr DEPUTY SPEAKER (Mr Lucock)Order!I suggest that the honourable member for Murray restrains himself from interjecting. He will be speaking on this Bill at a later stage and I suggest he keep his comments to himself until then. I call the honourable member for Blaxland.


Mr KEATING -The provision for carry-on finance in the new scheme is also a welcome addition. There are factors which, from time to time, lead to financial difficulties for a farmer, which are completely outside his control, such as the actions of foreign governments in operating restrictive quotas on beef as has occurred in Japan and the United States of America. In these critical periods the farmer often has difficulty in raising carry-on finance from existing commercial sources at interest rates which do not prejudice his long term viability. Carry-on finance may be desirable in these circumstances to avoid the long term economic costs of unnecessary resource movements out of the industry where the need exists to hold resources in that industry in the short term.

The welfare measures announced under the household support provision also receive the support of the Opposition. Having seen more than 2000 farmers on the dole in its time of tenure or office, the Government is duty bound to provide suitable welfare proposals to maintain the income of farmers who are judged to be nonviable, up to the level of unemployment benefit prevailing in the community at large. We do question however, whether the Minister for Primary Industry (Mr Sinclair) has given consideration to instructing that the recipients of household support be referred to the Department of Employment and Industrial Relations and the Department of Social Security, to alert such recipients to alternative opportunities available outside the rural sector. The Opposition supports also the increase in the rehabilitation loan from $3,000 to $5,000.

Our criticism of the Government's current approach to rural adjustment as contained in this Bill, as I said earlier, relates not to what has been done, but to what has not been achieved by the legislation in its present form. The Opposition concentrates its criticism in four main areas: The first is the lack of a concrete commitment to adequate review provisions in the Bill.

The Opposition intends to move an amendment to the motion for the second reading and to move amendments in the Committee stage. Those amendments, if carried, would overcome much of our objection to the deficiency of the legislation. Secondly, the Bill makes only fleeting reference to special assistance to selected industries, and total ignorance of the needs for area adjustment measures. Thirdly, no indication is given by the Government that it intends expanding the counselling services provided by State extension services. Fourthly the Opposition seeks clarification from the Government that the commercial emphasis of rural adjustment assistance has in fact been strengthened through the interest rate on which these funds will be made available to individual applicants.

I referred earlier to the second reading amendment which we proposed to move. It states:

.   . while not opposing the provisions of the Bill the House is concerned that the proposed agreement is restricted to land based primary industries.

In other words matters like fisheries are not mentioned in the legislation yet there are 16 000 fishermen in Australia with a combined income of about $100m. This is a significant part of primary industry which is not mentioned in the legislation. In the Committee stages we will be moving an amendment to the Schedule of the Bill, to add a new Part 8 headed 'National Rural Adjustment Board'. This amendment will provide for the establishment of a national rural adjustment board. The composition of the board will be an executive chairman, 2 part-time members drawn from rural industry, and 2 members drawn from the States' rural reconstruction authorities and selected on a rotational basis for a term of no more than 2 years. This, of course, is referred to in the Industries Assistance Commission report.

The IAC rural reconstruction report was quite specific in its comments on the need for some form of administrative machinery at the national level to co-ordinate, evaluate and plan rural adjustment assistance. In making such a proposal the Commission has left no doubt about the importance it feels this form of assistance should play in future agricultural policy. There is a need to provide a more effective monitor to evaluate the progress of reconstruction clients, to research the effects of the scheme so it can be adapted to changing adjustment needs, and to monitor the administration of the scheme at the State level in the interest of equitable and consistent treatment for all farmers. Frequent reviews are also necessary to assist the factors first mentioned. The IAC report states that without precluding special meetings between the Australian Government and the States, there be at least two official meetings a year in all State authorities. The Opposition regards regular reviews as essential to maintain reasonable flexibility and effectiveness of the scheme.

The second area where the Opposition considers the Bill is deficient is its ignorance of the proper need for area oriented adjustment measures. A severe market downturn may occur in a rural industry on which the economic prosperity of a particular region may depend, thus creating problems of adjustment which go far beyond the farm gate. This occurs especially where long term prospects in that industry are not encouraging.

The existence of an administrative machinery at the national level could prove useful in identifying the need for specific adjustment measures, and in formulating special areas assistance policy in close consultation with the State authorities concerned. No indication has been given by the Minister on how the Government proposes to approach this important aspect of adjustment policy.

The IAC report stated the need for adequate counselling services for both viable and nonviable producers- but it is not mentioned in the Bill. The Commission also considered that existing State extension services and appropriate Commonwealth departments be expanded to cater for the counselling needs of farm families. There appears to be no provision made by the Government to advise rural producers of the new provisions of the scheme, to extend the facilities of State extension services to assist and advise applicants in filing applications, or to provide follow-up advice on management to farmers remaining in the industry.

For those assessed as non-viable a need exists to ensure that those people are adequately counselled on alternatives outside of farm production to give them some future other than in agriculture. The Bureau of Agricultural Economics found that inadequate counselling was a major factor in the scant use of the rehabilitation provisions under the old rural reconstruction scheme. What is the point of having these schemes if people are not adequately counselled about them. The Labor Party in government placed particular emphasis on this aspect of adjustment assistance, with special purpose allocations to broaden the scope of State extension services to include farm management advice.

With regard to the rates of interest on which loans are made available to rural producers under Part A provisions of the scheme, the Opposition is still concerned that concessions are being built into the notion of farm viability through the present scheme. The Labor Party acknowledges that in setting target percentages for the various Part A provisions the Government has moved to ensure that a more consistent approach will be taken by the States in allocating moneys, thereby reducing inequities and inconsistencies in the treatment of farmers between States. However, the IAC was most explicit in recommendation5 of its report when it stated that 'the long term bond rate be the basic rate of interest for loans made for rural adjustment'. For the sceptics, the reference for this is page 79 of the report.

The Opposition notes that the Government has made loans to the States under the relevant provisions of the scheme at 7 per cent, considerably below the long term bond rate at the moment and, of course, nothing like what it will be below the bond rate when interest rates blow their brains out following the Government's devaluation decision. We seek clarification from the Minister as to the rate of interest likely to be charged reconstruction applicants by the State authorities for adjustment finance, and whether this rate is likely to be substantially below the long term bond rate.

The Opposition is also concerned that too much flexibility in the administration of the scheme at the State level may lead to inequitable treatment of farmers between the States. It should be noted that considerable discretion is given each State authority in fixing the rate of loan repayment and in administering particular loans so that flexibility should permit the relevant authority to suspend repayments or reduce them in the first years of the applicant's adjustment.

In summary, the Opposition's attitude to the issue of structural adjustment assistance is clear. The Labor Party acknowledges the capacity of the rural sector to adjust autonomously to changes in its economic environment. However, it is apparent that there are factors which have inhibited the adjustment process, resulting in considerable economic and social cost to the individuals affected and to the community as a whole. These factors, of course, include the mobility of some rural capital, the limited availability of jobs in rural areas off the farm, and a natural reluctance and, in some cases, inability to relocate. The Labor Party takes the view that where the costs associated with structural adjustment are excessive, the Government has the responsibility to use its resources to facilitate the process of structural change. We prefer this type of assistance to the myriad of ad hoc subsidies and concessions which have typified the policy of our opponents. I particularly mention the good old National Country Party which, over a period of time, has encouraged people to move into various sectors of agricultural activity and has fostered over-production. With a change in the world market and the domestic market such people have found themselves on uneconomic farms- farms which were not viable. Finally we found that they had a welfare problem on their hands. This is what comes of a shabby approach to farm policy simply in support of electoral aims and endeavours or, to put it in its crudest form, policies for votes.

Rural industry is confronting Government policy makers with difficult choices. However, the alternatives available are clear. At the national level we can continue to pursue protectionist policies which only aggravate the problems we intend to solve in the sectors or we can adopt the constructive approach of the Labor party which is to formulate long term restructuring policies which will eventually reduce this sector's dependence on protective forms of assistance. The Labor Party's goal is to pursue policies which will improve the productivity and mobility of rural resources, and to secure long term growth and efficiency in the rural sector.

In our opinion, the Government has given inadequate consideration to developing adjustment assistance as an important tool of agricultural policy. It continues to pursue policies which are not in the long term interest of the sector, and for its neglect in this important area of policy it stands well and truly condemned. Mr Deputy Speaker, I move:

That all words after 'that' be omitted with a view to substituting the following words: while not opposing the provisions of the Bill the House is concerned that the proposed agreement is restricted to land-based primary industries. '

As I indicated earlier, we will move a substantial amendment in the Committee stage.







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