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Tuesday, 18 September 1990
Page: 2079

Mr LLOYD(5.50) —The previous speaker, the Minister for Finance (Mr Willis), claimed that there would be no deep recession anywhere in Australia in the next year. I differ from this view most vehemently because if one looks at the bush-at rural and regional Australia-one can see that there is a social and economic tragedy enveloping that area now. Rural and regional Australia is sliding quickly, relentlessly and so far remarkably quietly into the most difficult economic period since World War II. It is more severe than any approaching economic difficulties facing metropolitan Australia because rural and regional Australia is more susceptible to the vagaries and corruptions of world trade. It is export or import competition oriented. It is more susceptible to high interest rates, to the high dollar value and to a high inflation rate. It is not internationally competitive at the present time.

In June the Australian Bureau of Agricultural and Resource Economics (ABARE) forecast a 48 per cent reduction in the net value of farm production for this financial year. That figure is on top of a 20 per cent reduction in the previous financial year. So in two years we have had a 68 per cent reduction in the net value of farm production. That reduced purchasing power on our farms, whether it is for consumer goods or for investment back on the farms, quickly flows through to regional business and affects its level of employment very dramatically. The unemployment rate in non-metropolitan Australia is significantly higher than in metropolitan Australia, and that gap will widen. I am thinking not only of retailing and service industries but also of food processing industries, which are a major sector of employment in regional Australia. Processed food costs are increasing by 20 per cent a year-and will reach almost $2 billion. That is happening, firstly, because of the high cost structure in this country and, secondly, because of inappropriate anti-dumping and countervailing duties and the developing country preferences of this Government.

The Bureau made those projections several months ago. Since then the fall in rural income has accelerated, and the portent of that fall has now become even greater. For example, not only has Russia stopped buying wool from Australia but also it still owes $130m on previous purchases. Eastern European purchases of wool and other agricultural products are also down. The Minister for Primary Industries and Energy (Mr Kerin) has indicated that there is a need for a further reduction in woolgrowers' income, while still maintaining the 700c per kilogram floor price. The industry is now looking at ways of doing that, such as slowing down the selling system or the payment process. This comes on top of the 35 per cent reduction that resulted from the lowering in the floor price and the increased levy in May.

That dramatic reduction in woolgrowers' projected income of a few months ago is no longer adequate as a price signal to woolgrowers to diversify. Wheat-the obvious industry for diversification-is suffering to an even greater degree, particularly because of the crisis in the Middle East. Iraq was our best wheat customer. We were hoping to sell that country up to two million tonnes of wheat in the coming year-and that would have been in addition to the $600m in payments from Iraq which are frozen at the present time. This is resulting in the wheat pool payments of the two previous years being stalled also. That $600m is not flowing through to our wheat growers.

The European Community and the United States have now increased their export subsidies. The Australian Wheat Board has already indicated that the gross return, in the sense of money coming back to the wheat growers, will be down $45 per tonne. That is a more than a 40 per cent reduction in wheat growers' returns since last year, and if one wants to take inflation into account as well-that is, the increase in wheat growers' costs-we are looking at a net reduction in wheat growers' incomes of close to 50 per cent in this financial year.

Mr Anderson —Shame! Mr Ferguson wouldn't wear it.

Mr LLOYD —That is one of the tragedies of this country; in that respect it is so non-competitive in international terms. It is the same with other grains, such as barley and rice. Due to increased European Community export subsidies, the manufacturing sector of the dairy industry is now writing down its budgets by 20 per cent to 25 per cent. Once again the Gulf crisis and events in Kuwait have meant a dramatic reduction in live sheep exports. Events in the Middle East and Russia have, once again, affected mutton exports. So we have had massive reductions in sales in the sheep meat sector. But that is only half the story-reduced income. The other half of the story concerns the extra costs. Since those ABARE projections of a few months ago, higher fuel costs-and fuel is particularly important to the farming sector and regional Australia-have resulted from the Gulf crisis. Many State and local government charges for farmers and for country townspeople have risen above the consumer price index level. Interest rates, the biggest variable farm cost, have doubled from 10 per cent 10 years ago to about 21 per cent for farmers today.

My colleague the honourable member for Gwydir (Mr Anderson), in an excellent address today during the matter of public importance discussion concerning the problems confronting the rural sector, indicated that since 1985 interest charges, as a proportion of farm costs, have increased from 9 per cent to 13 per cent. If one wants to go back even further to 10 years ago, one can see that they have also doubled from 6 per cent to 13 per cent. We should remember that a one per cent rise in interest rates means a $150m difference in farm costs or, if you like, farm income. To add to the problems of farmers at this time, the banks have chosen to increase the margins on those costs to farmers. According to the Bureau, the result of this is that last year the average farm income per farm worker-that is, for family workers because they do not receive the award wages which were referred to earlier-was $18,500. That is well below average weekly earnings, and it does not allow for any return on capital. The average capital invested per farm in Australia in June 1989 was $1m. That meant a rate of return, including capital appreciation, of just over one per cent. If we use that calculation, including capital appreciation, to get a positive figure, obviously we will have a negative figure from now on.

With these disasters compounding in rural Australia, and to a lesser degree in Australia generally, one would expect that the Budget would recognise these difficulties and assist where possible. Unfortunately, the opposite is the case. The impact of the Budget will be to exacerbate this downward spiral in net incomes in rural and regional Australia because the Budget is not putting any downward pressure on interest rates. Government expenditure will increase by 12 per cent-that is, 5 per cent ahead of the inflation rate. In spite of what the Minister for Finance said a few minutes ago, if one really looks at the Budget surplus and corrects the fiddles, one can see that the Budget surplus this year will actually be less than last year. That is certainly not a fiscal policy that puts downward pressure on interest rates. The only reduction in interest rates that will occur in this country will come about as a result of the slowing of the economy generally. So farmers and others will certainly derive no joy from this Budget when it comes to this Government's imposed interest rates structure, nor will they derive any joy from the related high dollar value-a value that bears no relationship to its true trade related position.

A one cent difference in the exchange rate between the Australian dollar and the US dollar means once again about $150m difference in farm incomes. The third point is that the inflation rate in this country will continue to add to our costs in an uncompetitive way. Those are the three major components of farm viability: interest rates, dollar value and inflation rate.

If one wants to go even to a specific in the Budget, at a time when we need exports, the Government has imposed a 100 per cent cost recovery at an additional $60m impost on farmers. So we have established with figures produced by the Australian Bureau of Agricultural and Resource Economics that average rural incomes are lower than for Australia generally. We know that the average family in rural and regional Australia is larger and that educational opportunities are more limited and expensive. For example, only one-third of rural and regional students receive post-secondary education compared to those in metropolitan areas. There is increasing poverty and there are greater family costs.

What has the Government done in relation to this in the Budget? It has imposed new and more restrictive assets tests for the family allowance, the family allowance supplement and Austudy. It means that farmers and small business people are virtually excluded from welfare assistance available to all other Australian families in similar need. Furthermore, there is no equity, consistency or logic in the application of those assets tests. I point out that an average farm capital of $1m may produce an income below average weekly earnings.

However, with an assets test limit of $300,000 introduced in respect of the family allowance compared to an income test limit of $57,000, there is no way a farm valued at $300,000 can generate $57,000 of income. The assets test also makes no allowance for a family with additional children. There is no consistency because the test for the family allowance supplement is now $200,000-it was $300,000-while the test for Austudy is $400,000 for farmers and business people but with no real recognition of the additional cost that country students must incur in being forced to live away from home.

The Government is aware of what it is doing with these double standards to country students and country families. I refer to allegations given to me and reported in the Bendigo Advertiser that the Government has tried to suppress a report called Austudy: Rural Inequities prepared by Dr Doug Lloyd, who, I assure you, Mr Deputy Speaker, is no relative of mine. He is Dean of Education at the Bendigo College of Advanced Education. That report was ready in March but was only allowed to be released after the Budget. That details the unfairness of the present Austudy system.

We are speaking to time limits, so I will conclude my remarks but give notice that in the committee stage I shall be continuing with more specific comments about the primary industry sector of the Budget.