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Friday, 5 December 1986
Page: 3538

Senator WATSON(4.41) —While the Liberal-National Party coalition supports the Banking Legislation Amendment Bill 1986, the Opposition urges the Government to reconsider its position concerning the continuation of funding for rural research and establish more positive guidelines for the provision of finance in that area. Recognising that over half of the profits from the Rural Credits Department of the Commonwealth Bank of Australia are directed to rural research, the Opposition moves the following amendment to the motion:

At the end of the motion, add:

``, but the Senate expresses its concern that the Government has not made alternative arrangements for replacing the funds normally generated for rural research from the activities, now to be phased out, of the Rural Credits Department of the Reserve Bank''.

The legislation before us this afternoon effectively winds down the operations of the Rural Credits Department of the Reserve Bank of Australia, a department that has been in operation for over 61 years. It was established to meet the seasonal funding requirements of primary produce authorities and co-operatives. I stress the words to finance `primary produce authorities and co-operatives', because I think it is significant that anybody listening to this debate is not under the misapprehension that this Bill is taking away a source of finance to farmers in conducting their ordinary primary producing occupations.

The Bill essentially sought, in its early days, to provide short term seasonal finance to the rural produce marketing organisations. It was directed at facilitating the orderly marketing of primary products. However, following the deregulation of financial markets, this has enabled the bulk of the seasonal funding requirements to be fulfilled in recent times through commercial sources. As Rural Credits Department funds are available at market-related prices, the Department has had a much reduced role in recent years, but in the early days the interest rates at which finance was provided were lower than the market rates, in effect creating an element of subsidy in the operation of the Department. Traditionally the largest borrower from the Rural Credits Department has been the Australian Wheat Board, which has typically accounted for up to 75 per cent of the loans advanced. However, since 1982 the Australian Wheat Board has ceased to rely on the Rural Credits Department for funds and now fully meets its seasonal finance requirements from commercial sources.

This legislation is initiated as a rationalisation measure on the advice of two significant committees-the Campbell Committee of Inquiry into the Australian Financial System and the Martin Review of the Australian Financial System-which recommended the winding down of the Rural Credits Department as they believed that changes in the financial markets had left the Department somewhat obsolete and maintained that the assistance currently given to the rural sector could be provided just as effectively by alternative means which would cause less disturbance to the efficient operation of the financial system. The Rural Credits Department has, in the past, played a significant role in the provision of credit for Australia's rural sector. However, as I mentioned earlier, the Department has been superseded and really no longer fulfils any necessary function. The Opposition, therefore, supports this legislation and recognises the need for the rationalisation of government operations of this nature.

A major problem facing the farming community-namely, the attainment of financial provisioning at affordable interest rates-is highlighted by this legislation. The need for loan finance at reasonable interest rates is especially vital to the rural sector, although naturally other non-farm areas of the economy are adversely affected by high interest rates. So the present economic climate will, by no means, encourage farmers and businessmen alike to invest in the future.

I wish to point out that these Australian farmers are, at the same time, battling against low world commodity prices, high fuel costs and incentive-crushing taxes, not to mention the drought conditions that have plagued much of the country. So record high interest rates are a burden which the farmers have to bear, given the present economic conditions. The artificial component of the current interest rate levels has been estimated to be between five and six percentage points. We, on our side, have to acknowledge that the Hawke Government's macroeconomic policies are placing huge strains on our primary producers when the cost burdens on all industries are inflated in this manner. At the same time, despite all the huff and puff about tax relief, I remind listeners that even after stage 2 of the promised income tax cuts Australians will be no better off than they were when the Labor Government came to power. Our tax burden over the last four years has lifted by over 60 per cent.

The aspect of the Banking Legislation Amendment Bill which is most troubling to the Opposition is the lack of commitment indicated by the Government in relation to future levels of funding for rural research. The Rural Credits Department traditionally provided an avenue for the supply of funds for on-farm research, in that half the profits made by the Department were actually ploughed back into the industry. For example, in 1986-87 this sum is estimated to be of the order of $3m. What we are talking about here is not an inconsequential amount. The Minister for Immigration and Ethnic Affairs and Minister Assisting the Treasurer (Mr Hurford) stated in his second reading speech that the Government would `give consideration to supplementing funds available for rural research in future years' as the Rural Credits Department's operations are abolished'.

We believe that is a fairly woolly commitment. The coalition is concerned by the Government's failure to indicate in what manner finance for research will be supplied and how such a sum will be determined. Therefore, whilst we do not decline to give this Bill a second reading, we in the Opposition are concerned that the Government has not openly made alternative arrangements for replacing the funds normally generated for rural research from the activities, now to be phased out, of the Rural Credits Department of the Reserve Bank.

Research relevant to Australia's agricultural sector is vital to improving the efficiency and international competitiveness of the country's rural sector. One of the principal ways in which living standards can be raised is through growth in productivity, which in turn can be greatly attributed to scientific research. The cost benefits which such developments can produce are considerable and vital to the welfare of Australia as a nation whose livelihood is inextricably linked to the state of its primary industry.

According to the Standing Committee on National Resources, the rural industries feel frustrated at the lack of clear Commonwealth policy on and commitment to rural research. It expressed alarm that, although funds for research are necessary for the agricultural sector to continue to contribute to the national economy, support by the Commonwealth for development in this area has been declining in real terms. The present lack of commitment by the Government in respect of future funding, in light of the demise of the Rural Credits Department of the Reserve Bank, can be seen as a step backwards for rural research, given that there is no future commitment on alternatives. This failure to give an adequate undertaking about the gap in funding, which is left by the abolition of the Rural Credits Department, should not be tolerated. The Commonwealth is a major provider of financial support in the area of much agricultural research. Of course, much of this agricultural research is unattractive to the private sector because of its high risk and its likely low return to the investor. However, it is maintained that rural research produces substantial benefits to the community at large-far above that which it produces for the agricultural sector. Many smaller industries have been especially reliant on the Rural Credits Department for research finance. It is particularly important that the Government maintain a minimum amount of funding for agricultural development.

In conclusion, it is interesting to note that the Senate Standing Committee determined that, due to the importance of Australia's farming industries, and to the high return that research produces, `attempting to save relatively small amounts of money from the research budget is a false economy'. I call upon the Government to make clear how it will finance this continuing commitment of the order of $3m to rural research, given the winding down of the Rural Credits Department of the Reserve Bank. Vague references to supplementing funds or expecting more funds for research in the future are not good enough for the Senate. That is the reason for the amendment that I have moved on behalf of the Opposition.