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Wednesday, 23 June 2010
Page: 6314

Mr TUCKEY (1:15 PM) —The Farm Household Support Amendment (Additional Drought Assistance Measures) Bill 2008 is important legislation about which I will give credit where credit is due but take some part of my speech to identify a direction that I think would be more worthwhile. The Minister for Agriculture, Fisheries and Forestry, Mr Burke, is, nevertheless, to be congratulated. Through this pilot scheme, which I think is properly located in Western Australia, he has tried something different and something better, and recognised that the exceptional circumstances scheme has never been effective in giving appropriate support to the rural sector. One of its greatest failings, of course, is the fact that, if you are rather profligate and borrow a lot of money, you will get half your interest paid for you. If, on the other hand, you have been careful and even accumulated a few off-farm assets to protect yourself from seasonal and price cycles, you get nothing. The very nature of Western Australian farming is that today it generally covers very large farms and cropping programs of 10,000 or 15,000 hectares. The leading farmer puts in 100,000 hectares. Each of those people, I might add, are betting their farm virtually annually against the weather and against price movements, currency and everything else.

The fact of life was that we in government sent the ‘drought bus’ up to the northern sector of what was then my electorate. They had had three years of devastating drought when nothing grew. So in they went to the public servants to see what assistance they might give—and this program had been very successful in the dairying country—and one after another they were told, ‘You’re too rich.’ You had not grown a crop for three years but the asset valuation, which was often unsaleable, was such that you could get no money. The scheme failed through means-testing and it failed in other ways.

The minister, to his credit, has come up with an alternative. I am not going to criticise that alternative, because I am prepared, as I think most farmers in my electorate are, to give it a go. I recognise that NRAC as we know it, the National Rural Advisory Council, will be a participant. I have also got a note down here in speaking of the minister’s achievements that it was he with the cooperation of the Liberals—and it is interesting today when the Neanderthals were out there again complaining about the loss of the single desk—who had the courage, as did his predecessor John Kerin, to bite bullet on this. It is pretty handy if your opponents will take on the issues that are so hard for those with the constituency. But I wish the Labor Party took the same opportunity after we had fixed up the industrial relations sector for them. They should have just left it alone and said, ‘It seems to be working.’ Might I add that some credit there goes of course to Paul Keating and Bob Hawke. People forget that both Whitlam and Hawke attacked the industrial relations stupidity by lowering tariffs. Whitlam also revalued the dollar and both of these put pressure on people to stop doing silly deals and try and get more efficient.

Nevertheless, what has happened with the single desk deregulation is that farmers, particularly in my electorate, are now getting a separate account for their off-farm costs—their storage and the loading on ships and the freight. One of my constituents was horrified that that cost equalled his fertiliser account—and take it from me, that is a lot of money. The focus in my state now is not about crying tears of blood over the departure of the single desk, as it was known; in fact, 50 per cent of the crop is now handled in a single desk concept by the farmer cooperative CBH. That 50 per cent of farmers, as in other areas, has continued with the pooling system, but they have all got to understand that there is a huge cost burden being borne off the farm. It was all secret under the single desk—all bundled into the pooling. We knew that the corporate entity, AWB Ltd, was actually milking $40 million a year out of overseas freight contracts by contracting in their name for chartered shipping and then billing it at their chosen price per tonne to the pool. All those things are now exposed.

It is pretty interesting to note that, as farmers measured the cost of delivering their wheat to a storage, they started to buy silos and said, ‘I’ll pay for them in three years.’ Interestingly enough, the farmer co-op then lowered the price of storage. But they put a bit more on the price of loading a ship, where they have still got a monopoly at this stage. I have got farmers going out there now to protect their business, by their own right, by simply looking to alternative loading arrangements. They are talking to people with a woodchip belt and with an iron ore belt. They are looking to the development, which is being slowed down by the Barnett government—and I am after them about it—of the Buckeridge private port, where they will be able to get access to loading facilities sufficient to load a shipload of wheat. That is all great; that is getting on with it.

If you are growing 5,000 or 10,000 tonnes of wheat, which is typical, and you can save $5 a tonne, it is a lot of money and it is the difference between going broke and not. The other matter I want to talk about at length is to do with the farmers’ right to insure their return and to have a form of cash management, which is typical around the world. I would have preferred that to this legislation, but the minister has gone with a pilot scheme. But I will come back to that.

The reality is that the farming sector in my electorate now realises where its costs can be reduced. On-farm, they have gone from, in my living memory, 40 horsepower tractors and a three-pass approach to putting a crop in to 500 horsepower tractors and actually seeding dry on a certain date and waiting for the rain. That effectively adds about two inches of rainfall to their cropping period. They are doing all that. They have learned every form of no-till farming and all those things to make sure that they are as efficient on their property as they can be.

But now we have got to improve their local roads so they can use bigger trucks, if necessary, to go all the way to port. Again, I thank the minister because I convinced John Kerin to deregulate the transport of export wheat and Mr Burke, the now incumbent Minister for Agriculture, Fisheries and Forestry, reincluded that provision in the wheat marketing legislation, meaning that a farmer cannot be captured any more by a grossly inefficient rail system. When that came in under Mr Kerin, the then state government regulated rail authority of previous years thought it might be a good idea to put a loop down at Kwinana where the major exporter port is so they could actually bring a train back while a full one was going down. They did not care about that while there was a regulation.

CBH is a good organisation. Its executive know that they have got to get it cheaper. At the moment and at present rates, if they do not get eight million tonnes of wheat into their system each year, they cannot even break even. These are the issues that are being exposed by the government’s decision to deregulate the market and generate the transparency that is now allowing farmers to do it.

I was a most unpopular boy in my electorate at the last election. Funnily enough, the two parties that supported deregulation were the Labor Party and the Liberal Party, and we still got 66 per cent of the vote. Fortunately, I got nearly 50 per cent. But the fact of life is that, in these circumstances, people did not thank us. As I said, we still have the Neanderthals parading outside the parliament when farmers in my electorate are already making more money because it is deregulated, because they can negotiate a price or they can choose the old-fashioned pooling system. They are better represented now because their co-op owns shares in flour mills overseas, which will not guarantee the price but will certainly guarantee a sale, and in the present environment we have a very significant oversupply of wheat and grain around the world, driven I might add by one year’s spike in prices.

Farmers, who typically and in recent years would have looked at a tonne of wheat per hectare as the break-even point, last year had to harvest two tonnes per hectare because of price and other influences. For much of the so-called better part of the area, there was a very bad finish and they did not get it. In that region it is estimated by a constituent of mine, whose estimates I trust, that they lost $1 billion. Individual farms lost half a million dollars. If they do not get a good crop this year, then things could be very dangerous.

Consequently, the response of governments around the world is to give support to what is generally referred to as multiperil crop insurance. That can be delivered in many ways. Typically, around the world it is underwritten. In other words, if the losses of the private insurers exceed a certain point, then governments come in and pay. I will make further comment about that. Multiperil crop insurance is compulsory in South Africa. You cannot put a crop in without giving evidence that you have insured it. So you literally bet with the insurer against your crop being less than one tonne per hectare, two tonne per hectare or whatever.

I believe that, consistent with our policy on private health insurance, government funding would be best delivered upfront as a subsidy on that premium to make it attractive because, as we know with any form of insurance, the higher the rate of participation the lower the premium cost. Let us say the premium cost was—and this is purely a subjective figure—10 per cent. That would probably be beyond its worth. But at the moment farmers are deemed by the banking sector to be high-risk lending and they charge them accordingly—typically four or five per cent over what a home owner would pay for a home mortgage rate. Of course, if they have a bad crop, the friendly banker says, ‘You are an even worse risk now and you are struggling to pay me back, so I will charge you more.’ It is a policy I have never been able to understand, but the reality is that, if a farmer went into his lender and said, ‘Here is my insurance policy, backed in a fashion by the government, which says I will recover the full amount of your loan even if I get no crop at all,’ how can the bank then say, ‘You are a bad risk’? One might say in that example that five or six per cent of that 10 per cent would be offset by interest rates.

In my mind, this is a much better response. And, having congratulated the government on trying something new, might I say that there is a substantial accent in this pilot program relating to assisting people off their properties. Of course I do not think that should be the purpose of legislation, but I understand the reasoning. The words ‘to depart with dignity’ are used, and for some people the circumstances are beyond retrieval. But I am saying that if this House were to legislate a progressive and transitional arrangement, even in legislation of this nature, to give farmers the option of a subsidised or underwritten insurance scheme by which they could cover their input costs or such greater amount for which they were prepared to pay a premium, then in fact their security would be guaranteed. This occurs in Canada, it occurs in the United States, it occurs in many parts of the world. It is a common practice.

It is interesting. There have been numerous inquiries into this particular system, all designed to fail. In fact, one in Western Australia used as an excuse the fact that they sent out something like 1,300 or 1,500 survey forms to farmers to see if they would participate and they then said, ‘No, farmers aren’t interested; they only sent 230 forms back.’ I am surprised it was 230. You know what farmers do with survey forms; they chuck them in the bin. To use that as a judgment when they had figures in there that said that the premium rates could fall to two per cent if there were high levels of participation—now I am not recommending the South African system of compulsory participation but, if it happened, that would be extremely cheap. The thing has to be risk rated; you just cannot have a flat premium structure, because some properties represent a higher risk than others. Funnily enough, in the last couple of years in my electorate the so-called marginal country to the north has been doing pretty good after some very dry years, but the safe country has got another problem. It is called frost. One day they have a magnificent crop standing in their fields just maturing to head, and the frost comes along overnight and wipes it out.

Unfortunately, and I think unwisely, in better times for cropping and with all the efficiencies achieved, many farmers walked away from their livestock component, their mixed farming component. At the moment they are all rushing to get back into sheep—not to sell the wool, but to sell the meat, for which there is an ever-increasing international demand, particularly in the United States where the Latino population prefers mutton to beef. That is changing the buying habits of the United States, and of course they are such a huge consumer. We are talking now over $100 per lamb, and that in itself would make the difference.

All of this comes into the management process, but more particularly, considering the huge costs involved in putting a crop in and the past variations, farmers need a system that initially must be supported by government. My view is that all the EC outlays could be transferred to that, but there would be a double whammy period for government because you cannot say to those, particularly in the Eastern States, who are still on EC, ‘You get off it and go and insure yourself.’ No, you have to phase those sorts of people out. Maybe this is a step in that direction because it talks about self-reliance. I think we should be moving in that direction and, in the first instance, having a cost-neutral arrangement progressively so that the ongoing EC funding is committed to either a premium subsidy or an underwriting.

It is funny. When I talk about all of these concerns, the insurance industry in Australia have typically said, ‘It’s all too hard, we don’t want to be part of it.’ Yet I am pretty sure I read the other day that QBE have bought a company in the United States or Canada that specialises in crop insurance. I think they paid $700 million for it or something. So obviously they think those companies over there are profitable, but that is probably because of government underwriting.

I congratulate the government on trying to do it better because exceptional circumstances is a dog and it does not work and it was very unfair, but I would say to the government and I would say to my colleagues, as I do frequently, that we need to take another step and give people proper self-sufficiency through being able to insure, as everybody else does, and protect their actual asset through insuring their crop production. And if that requires some government assistance in the first instance, I think it would be worthwhile. (Time expired)