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Wednesday, 25 March 1987
Page: 1304

Senator CRICHTON-BROWNE(3.09) —I move:

That, in the opinion of the Senate, the following is a matter of urgency:

The need for the Government to bring down the crippling interest rates, record levels of taxation and the other costs which are devastating Australian farmers and small businesses in country towns.

When it comes to rural policy, this Government has a one-track mind. It sees the beginning and the end of the farm problem as export prices, and exclusively export prices. Its entire program for rectifying the malaise of the Australian rural economy is to close its eyes, cross its fingers and hope for a recovery in the export prices that our farmers receive. The truth of the matter is that this Government cynically recognises that for it there are no votes in the country. It is more concerned about outer suburban Sydney and Melbourne. It has total disregard for the economic plight of country people.

Only recently the Prime Minister (Mr Hawke) said on radio in Sydney that there was nothing further that the Government could do to help the Australian farmer because there was nothing he could do to change export prices. The Prime Minister even went so far as to say that his heart bled because there was nothing that he could do for the farmers. Surely this is the most abject nonsense that we have ever heard, even from this cynical Prime Minister. A child of 10 knows that the profit is the money left after the costs have been paid. Despite this, time and again this Government has either done nothing to mitigate the rises in farm costs or, worse still, it has played an active part in increasing them. No one could be so blind as not to recognise the effect high prices and high costs are having on our farmers. In this case ignorance is the result of the Government deliberately shutting its eyes.

In the coming year the average return on capital on Australian farms will be minus 6.9 per cent. The returns for one in four Australian farmers are minus 19 per cent or worse. Only 15 per cent of farmers will actually earn a positive rate of return on their investment. One in every three family farms will make a loss this coming financial year. Land values have fallen at such a rate that even those farms which will show a positive cash flow at the end of this year will show a negative return on their capital when the fall in the value of their land is included in the equation. In the wheat and sheep zone land prices have fallen by between 8 per cent and an incredible 47 per cent in the two years from June 1985 to June 1987, the worst affected State being my own State of Western Australia. Senator Walsh tells us that there is some virtue in land prices falling, as that means that people coming into the industry can buy land. What about the vast majority of farmers who are presently seeking to raise loans through their equity in their farms and who are finding that their equity is dramatically falling as the value of their land falls? So much for the concern that Senator Walsh has for the farmers.

Rural debt is presently in excess of $8,000m, and it is tipped by the National Farmers Federation-and in my view it is a modest assessment-to rise this financial year to $10,000m. The farmers are being forced to leave the land in droves as they find it quite impossible to service their debts. Such is the state of the Australian rural economy at the moment. Yet our Prime Minister tells us that there is nothing he can do. Despite what the Government claims about prices, interestingly enough not all the prices received by farmers have been falling as dramatically as perhaps the price of wheat has been. The prices for wool and beef have actually risen over the last 12 months, although in Western Australia over the last few months there has been some modest deterioration in the increases in the prices for cattle. But the prices certainly have not risen to a level to accommodate interest rates. For instance, the price of wool has risen by about 10 per cent on average over the last 12 months. So it is not good enough for the Prime Minister to tell us that the farmers' problems are to do with their prices for their commodities.

Despite the Government's attempts at a snow job, of trying to use the well publicised media reports of the falls in wheat prices as if they are indicative of all areas of agriculture, it is important to note that rural export earnings in 1985-86, interestingly, in gross figures, were at record highs. Even this year Australian rural export earnings are expected to be just 4 per cent lower than the record of 1985-86. How can it be accepted that the average income for family members working, for example, on a cattle station last year was slightly in excess of $10,000? Yet cattle prices are up. Why is it that one in four beef producers will make a loss this year? Of course it is because of costs, and not primarily because of prices. The reason is the same for cattle producers as it is for dairy producers, for graziers and, in some respects, for wheat producers. It is costs, not prices, that are causing this problem. The answer is that the Australian farmer has had to contend with massive increases in input costs, with which his overseas competitors do not have to contend.

The rates of increases in prices, or, to put it another way, the increases in inflation in the major overseas countries, are the lowest they have been for 20 years. However, the present inflation rate in Australia is at the highest level relative to overseas countries that it has been for 30 years. Our overseas competitors have the lowest rate and Australia has the highest rate it has had for 30 years.

The bright outlook for prices in the cattle and wool sectors was immediately undermined by an average increase in costs of 7.6 per cent for this past year. What is even worse is that most of the increase occurred in the latter part of this year, indicating that things might actually be getting worse during the balance of this year. So it is expected that costs will go up. These increased costs are far above the levels which are being experienced by our overseas competitors, and they are negating the best efforts of the wool and cattle industries to get themselves back on their feet. They are unmercifully compounding the problems of Australian wheat farmers. Where these rises are government induced, then the Government must take exclusive and absolute responsibility for the flight and the plight of our farmers. Foremost amongst the price increases has been the amount farmers have had to pay on interest rates. The Primary Industry Bank of Australia is charging an 18 per cent interest rate on loans. Commercial banks are charging about the same, with variations depending upon the bank and the capacity of the customer to pay and the equity he still has in his farm. As I have said on other occasions, the crushing effect of interest rates being charged by banks pales into insignificance for those farmers who no longer have adequate equity in their properties and who have to go to finance companies. The rates they charge vary but go up to 24 per cent. If the farmer is forced, as many are these days, to purchase second-hand equipment, he finds that finance companies are charging even higher than 24 per cent. What return does a farmer have to get to accommodate interest rates of 24 and 25 per cent? I put it to honourable senators that there is not a business in this country that can make a substantial profit on return on investment at interest rates at those levels.

Since the present Australian Labor Party Government won office in 1984, Australia's interest rates have increased dramatically. The prime interest rate has risen from 13.5 per cent to over 18 per cent-by one third in the short time this Government has been in office. In stark contrast with Australia, interest rates in countries such as Canada, the United States of America, France and Japan have all fallen over the same period. As we all know, the Australian Government has deliberately followed a policy of holding Australian interest rates high. In fact, they are at their highest level since the Great Depression. The Government is doing this when farmers are carrying record levels of debt; for example, one in four wheat farmers has a debt in excess of $185,000. If the farmers are blessed by God, and few are, with, for instance, an interest rate of 16 1/2 per cent, that means that they are paying annually $30,000 in interest, or $600 a week, before they even start to contemplate and worry about the cost of wages, fuel and machinery. A fall in interest rates of but 5 per cent would save those farmers $9,000 a year in interest.

In a time of high levels of debt, much of which was brought about by the disastrous and unpredictable drought of 1982, the Government has callously and wilfully jacked up interest rates without any care, compassion or consideration as to what this will do to the Australian rural producers, who contribute 40 per cent of our export earnings. It is false for the Minister for Primary Industry, Mr Kerin, to suggest that the Government cannot reduce interest rates for farmers. As we all know-anybody who has done elementary economics knows-substantial reductions in government spending will immediately relieve pressure on interest rates. But the Government has shown that reducing its spending is something that it will not do-in my view, probably for ideological reasons.

If this Government does not change emphasis from monetary policy to fiscal policy the plight of farmers will deteriorate even more. The Government has introduced the most iniquitous tax so far seen in Australia. That of course is the notorious fringe benefits tax. Each time a farmer provides a house or home for his employees, or perhaps even lets them have a side of beef, or allows them to use the farm electricity, he is liable to pay fringe benefits tax. This will be irrespective of whether that farmer is able to make a profit; irrespective of whether there is a requirement to provide accommodation as a result of an award under which an employee works. The tax is grossly inequitable because it taxes an employer on a benefit received by an employee. It has a disproportionate effect on the rural industry for the same reason as it has a disproportionate effect on the mining industry-the isolation of the industry and, therefore, the need to provide an incentive to have employees travel to the country to accept a job.

Farmers do not enjoy the luxury of being able to pass this cost on as do producers of domestically consumed items and goods. About 70 per cent of primary production is sold on overseas markets. Competitors in these markets are not saddled with this Hawke-Keating fringe benefits tax. If farmers tried to pass the tax on through their selling prices it would immediately have the effect of cutting their own throats-they could not compete with their overseas competitors. So they cannot pass the costs on. They must absorb the costs of the Hawke-Keating fringe benefits tax. The Prime Minister tells them that there is nothing the Government can do to alleviate the plight of the farmers.

To these taxes can be added the increases the Government has thrust upon the entire community by the failure to allow a full flow-on of the falls in world oil prices. In February 1986, for instance, petroleum products excise for petrol and diesel was 10.43c per litre. Today it stands at more than 19c per litre. The Government levies on petrol and diesel have almost doubled in that time. I am aware, as we all are, that the Government provides a rebate for off-road diesel but that totally ignores the fact that 40 per cent of farm fuel costs do not relate to off-road diesel. Wheat farmers also face very substantial transport costs. I seek leave to incorporate in Hansard a table demonstrating the distances and costs for farmers.

Leave granted.

The table read as follows-

Transportation of Grain in Australia: Average distance by State














Farm to Silo...







Silo to exp. term....







Source BAE

Senator CRICHTON-BROWNE —Does the Government not realise that when overseas farmers are able to take advantage of fuel price falls our farmers again are disadvantaged? Freight costs in general are higher in Australia than in competing countries. For instance, while the cost of a 300-odd kilometre rail haul of wheat in Australia varies from around $16 a tonne to $24 a tonne, in Canada the price is less than $14 per tonne.

The Government has removed the immediate deductions for water conservation expenditure, converting them into a three-year write-off at a cost to industry in 1986-87 of $20m. It has doubled the tax on wine from 10 to 20 per cent, costing another $47m in 1986-87. Now it is about to introduce quarterly payments for personal provisional tax. This will require payment of an instalment of provisional tax earlier than would normally otherwise occur. It will also require farmers to make an estimation of their income for provisional tax purposes by August, which is far earlier than the present March. As a consequence, the estimations will be far less accurate and farmers and small businesses will be faced with paying more tax than they need to pay at a time when finance costs are high or running the risk that they may well underestimate their income by varying their assessment and hence incur penalties.

Amid the Government's patting itself on the back about income tax reductions, it is worth remembering that for many farmers the question of reduction in income tax, personal tax and otherwise is of no consequence. It is not an issue. People do not pay income tax when they are making a loss. That is the case with the vast majority of the Australian rural industry. Where was the Government when the Livestock and Grain Producers Association of New South Wales went before the Industrial Commission arguing about the conditions in the rural sector, arguing that they were so bad that the industry just did not have the capacity to pay the increase of 2.3 per cent in wages under the pastoral award? It was deafening in its silence, absent in its contribution, denying the farmers the moral and physical support of arguing against that diabolical increase which the community just could not afford.

We have seen that this Government has total disregard and lack of concern for the rural industry. The Government could have undertaken reforms in many other areas. It could have removed the ridiculous requirement that superphosphate be brought to Australia from the Christmas Islands in Australian flag ships at $30 a tonne, more than it costs to cart superphosphate from Florida to Australia. That would be a cost of $16 per tonne, a saving of $25m for the Australian farmers. At the same time, the Government has abolished the subsidy on imported fertilisers, aware that the Industries Assistance Commission has said that inevitably that will require an increase in the price of fertiliser. There are many other examples of the damage that this Government has done to farmers. For example, I could mention the fact that the level of protection maintained by this Government is costing the average farmer $9,000 per farm. Another result of Government policy is that the exchange rate is higher than it ought to be.

The rising farm costs and the guilt that the Government has on its hands for the present situation in rural Australia now ought to be obvious to all. It is utterly wrong for the Minister for Primary Industry to suggest, as he has in the past, that farmers are after a ride on the taxpayers' backs. Our farmers are not bludgers. As a group, they are perhaps the hardest working in Australia. It is not the case, as I said from the outset, that all farmers' problems are due to price falls, as was suggested by Senator Walsh recently in a letter to the Sydney Morning Herald. What these farmers, our farmers, Australian farmers, want is for the Government to get off their backs. It has to stop taxing and cut spending so that the disastrous rates of interest which are now prevailing can be reduced. In essence, the Government must realise that every time it implements a policy which raises Australian levels of costs, it kneecaps another farmer. It therefore stands condemned for the injury it does to our farmers, our community and our export earnings.

Neither the farmers of Australia nor those Australians who live in the cities should fall for a moment for this Prime Minister's and Government's ruse of trying to pass the blame for our rural problems exclusively on to export prices. The farmers are not the only ones suffering. As we all know, the effect that this Government's policy is having on rural industry is flooding into country towns and devastating country towns and businesses, driving people away from country towns, reducing populations and forcing people into the cities, on many occasions without jobs, opportunity or hope. That is the contribution this Government has made to the rural economy and to the country of Australia.