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STANDING COMMITTEE ON REGIONAL AUSTRALIA
18/01/2010
Impact of the Murray-Darling Basin Plan on regional Australia

CHAIR —I now welcome Professor Chris Miller from the School of Social and Policy Studies at Flinders University to today’s hearing. Although the committee does not require you to give evidence under oath—I think you have heard this from previous hearings—are you comfortable with having been warned?

Prof. Miller —Yes, very comfortable.

CHAIR —Thank you. We have received a submission from you. Would you like to make a further submission or an opening statement or remarks in relation to your submission?

Prof. Miller —Both. To add to your reading, I would like to leave committee members with a very brief paper that provides an example of community transition in the United States, which I think you might find interesting, and I would like to make an opening statement. First of all, I thank the committee for the opportunity to meet with you and to speak to the inquiry. I have no doubt that over the coming weeks you will hear many stories of hardship faced by farming and irrigation communities and of the efficiency, resilience and adaptability of farmers and communities in response to such hardship. The stories will, I am sure, refer to the precarious nature of farming and to the importance of it to the Australian economy and to food security and, of course, to feeding others living elsewhere. Such stories will, I am sure, no doubt reflect the lived experience of many farmers, communities and growers in the basin. However, I suspect that the primary purpose in telling such stories will be to argue from a business as usual perspective. In other words they will be put to you in order to try to prevent or minimise water reform.

While the focus on the Basin Plan in terms of socioeconomic impact on water reform has been important any thorough assessment must, I think, take account of the structural fault lines that exist within regional economies, structural fault lines that have actually got nothing at all to do with water reform. Such structural problems were highlighted more than a decade ago, in fact, by Neil Barr from the Victorian Department of Natural Resources and Environment, and drew upon data that was produced from 1986 to 1996. It highlighted a number of key factors and these include: the ongoing declining numbers of farm establishments, farm families and farmers; the loss of young people to agriculture and to basic communities; the ageing profile of farmers; the insufficient productivity gains for the majority of farms to compensate for the compression in terms of trade; the low incomes generated for most farmers—50 per cent of Australian farms have an estimated agricultural operations value of less than $70,000; the increasing dependence of farmers on off-farm income; the loss of so-called entrepreneurial farmers with mid-sized farms through increased investment driven debt; and the high costs and high risks associated with entry into agriculture.

These trends, very evident well before the recent drought, have not receded and may have indeed got worse. So today we are struggling with an abundance of water, but even I—and I am not a scientific expert as such—know that droughts will return. Droughts will continue to be a future of our landscape. The recent drought, in a sense, simply intensified the realities of farming and reminded us that, for many, agricultural work as we currently know it should not automatically be defended as a ‘no change’ scenario. The realities of farming are reflected in the higher than average suicide rates amongst farmers. They are reflected in mental health referrals, domestic violence levels and increasing crippling household debt. They are also reflected in basin communities, with declines or stress in agricultural related industries, in the retail and service sector and in the housing market. There is also recent evidence of growing antisocial behaviour amongst young people who are still left behind in those communities. They are also reflected in the continuing failure to attract and retain essential professionals, such as medical and healthcare staff, teachers and public servants. There is also evidence of an outward migration of those who are highly skilled and who have expertise. Without that group of key workers, the future of basin communities in the long term will only be very limited and restricted.

These trends are already the reality for many basin communities. Once they take hold it is very difficult to reverse that kind of process and can easily lead to a spiral of decline for those particular communities, often resulting in a very slow and painful death for the people who live and work there. So it is important to keep in mind timescales in our consideration of social and economic impacts. In the guide to the draft plan, one suggestion—a so-called transitional strategy—is to extend the period by which we introduce the water reform policy. We heard earlier this morning from an advocate for extending the time period for change. But actually extending the time can often have the reverse effect to what people think it will have. People seem to assume that, by giving us more time for change, there is a greater opportunity for adaptation whereas, in reality, all we are doing is posting a future date on which communities are likely to come to an end. So keeping that timescale in mind, what happens is that the best, the most resilient and the most adaptable pack up and go. They look for a future elsewhere. They do not stay and wait for the final date on which change will happen. They start to assess what the options are elsewhere. What you then see is communities go through this period of decline which, as I said before, is really difficult to reverse once it has begun. Now we have an opportunity—having secured a healthy river system for the benefit of all and for future generations—for the Commonwealth, in partnership with state governments, working together with basin communities, to invest in the future of basin communities, particularly in an economic future.

In my submission to the committee I provide the detail on how this can be done and highlight the fact that it has been done elsewhere and is being done as we speak. I am happy for you to ask me questions on any aspect of that kind of process. But the important message here in this introduction is that I believe Australia has the capacity to solve this kind of problem. In Australia we have the expertise, we have the resources to bring about those transitions that would enable communities hardest hit by water reform to have a sustainable future—a future that, in terms of its economics, will be different from what it is now. But it will still be a viable alternative.

There are many examples, Canadian ones in particular, in addition to the ones I quoted in my submission. There are many examples of how this process of investment and transition can be achieved and what the key elements are that are required for it to be a success. The example I will offer you today is from Wilmington, Ohio, where they talk about re-energising Clinton County. There are also many examples of local economic development and the rejuvenation of rural and regional communities from which we can learn and draw inspiration. Indeed, I would encourage members of the inquiry to argue for the opportunity to visit some of those communities both in Australia and overseas to actually see firsthand how regional communities who have faced many of the same problems that we have here have gone through a process of transition and successfully re-emerged with a different kind of economic base.

To give some examples of those kinds of transitions—and I am not suggesting that they are necessarily what we would look for here, but nevertheless they do highlight some things that are being done successfully elsewhere—in Europe there is a movement called the ‘care farming movement’. It is already well established in Holland and spreading to other parts of Europe. It provides supervised programs of activities in animal husbandry, crop and a vegetable production and woodland and natural resource management to a broad range of people including those with physical and learning disabilities, mental health problems, and in particular young people in danger of social exclusion. In Holland there are well over 1,000 farms involved in this work, up from 75 when it began in 1998. This work generates an average of the equivalent of $32,000 per year per farm for the work that is undertaken. It is paid work charged at an average of $25 a day per person. To get that initiative started, the Dutch bank Triodos lent over €40 million to around 50 care farms. The role of social investment banks is quite a crucial and critical factor in how you will help to transform local communities. That is one example.

Other examples would include support for niche market farming, or the design and the development of sustainable energy products geared to a low-carbon, clean energy economy, or implementing payments for ecosystem services. For example, New York City pays farmers in the Catskills to protect the municipal water supply, offering tax breaks and ecological fiscal transfers as incentives to conserve rather than to consume land and nature. Another example—again from the Netherlands—is the notion of the landscape auction held for citizens and businesses to adopt a landscaping element for its creation or its maintenance. It is a way of making open space, clean water and intact wildlife habitat pay for itself. There are also examples much, much closer to home, in Victoria—Coleraine and Castlemaine, the Wombat State Forest near Daylesford, and the City of Hamilton—of rural communities currently coming together to struggle with that question of how they re-energise and restructure the local economy. They are simply examples by way of illustration.

The crucial point about those initiatives is that they are driven by the energy, skill, creativity and the sheer ingenuity of local communities supported by governments as well as those in the private sector who appreciate the importance of sustainable environment and the role of regional communities in generating that. Crucially, such initiatives are built on the basis of confidence in the future, a future that is better than the present. My submission argues that this confidence is created through having in place sound structure, good leadership, and appropriate tools to enable communities to move forward. It is no good just saying to people: what is the economy going to look like in 10 years time with less water, or asking anyone in this room today what they would do if they were not doing what they are doing now. Most people who work in a particular field all their lives would find that a really difficult question to answer. We are dealing with a high level of uncertainty and that is, in part, what generates community anxiety in response. But we can actually get through that uncertainty and begin to plan for a better future as long as we have the key structural elements in place and as long as there is clear leadership from government demonstrating that government has belief in the capacity of communities to come up with viable options for the future.

CHAIR —Thank you, Chris. In your submission you talk about a basin investment fund and you mention that it is not a request for new money, rather a reassignment of part of the $5.8 billion that is within the system at the moment—some of it committed to the states—in terms of infrastructure spending, and I think you make a comment that a buyback is a cheaper way of achieving a reduction in water in the system.

Given that background, my question is really related to the consideration given to the socioeconomic impacts on individuals in making the decision between buyback and micromanaged infrastructure in a theoretical community where there is extreme demand on the consumption of water within the system—if in fact the guide recommendations were to proceed through the process. If we have a community where individual water entitlement holders are going to be socioeconomically impacted by any change, infrastructure spending, in a sense, may well be a way of fixing their particular problem.

Prof. Miller —Absolutely.

CHAIR —Would you opt for buyback in that situation or would you use a ‘horses for courses’ approach to try and ameliorate the socioeconomic impact?

Prof. Miller —I imagine the answer to that is that it would vary across the basin. If one talks to farmers, growers and irrigators in the basin around the issue of infrastructure improvements, a lot of irrigators have said they are not really interested in further improvements to infrastructure, because they are already highly efficient and they have spent a large amount of their own capital and resources in making themselves as efficient as possible. There is actually a concern within those communities that a large amount of money is being put aside that will not benefit the most efficient farmers and growers; rather, it will go to the laggards in the industry—so-called, as defined by them. A lot of people in that sector would argue not only that that is an inefficient use of funds but that in fact many of those laggards should be invited to leave the industry and leave the efficient farmers and growers to get on with the business of growing.

I think one has to be very careful. Large infrastructure projects look good. They sound good. People think that they are going to solve problems. But actually, as we know and as the Treasury advised the incoming government, their efficiency is dubious and would not necessarily be welcomed by all parts of all communities across the basin. In some parts of the basin that may well be the solution.

In a sense, it is not for me to talk about the basin. It is difficult in all aspects, isn’t it? We are talking about large numbers of communities. They are all very specific and quite diverse and they all have different issues to struggle with and ways of responding to this kind of issue.

Ms LEY —Professor Miller, I was interested when you mentioned the European experience. Europe is now a huge net importer of food, and European farmers are some of the most unhappy in the world because they are being paid transfers from their governments—in other words, public funding—to produce amenity, which is a landscape, a picture, an environment that people can be happy driving through and experiencing but not one that readily grows very much food. Given that, I am interested in what you think the responsibility is for us in the social plans for the future that you may have studied and considered for this part of the world, mindful of course of a sustainable environment—and certainly I do not accept that it is one or the other—to look at food security for our nation and, most importantly, for our region and in a wider sense for the world.

Prof. Miller —By giving you the two examples from Holland, I was not necessarily saying that European-wide agricultural policy is something to be emulated. To some extent, what you would be looking at now across Europe would be attempts to rethink broad agricultural policy. There certainly has been for many years a lot of disquiet in Europe about food mountains and so on. I am not arguing that a European-wide strategy as we have seen it is something that we should necessarily mirror here. But that does not mean we cannot learn from particular examples and initiatives in Europe, either.

Food security is one of those very emotional issues, I think. Everybody believes that every country in the world ought to be able to produce enough food to feed itself, and this has been a standard policy viewpoint for many years. But, actually, in a globalised world that is becoming less and less of a reality. The food that is on most people’s tables today is not necessarily grown here.

Ms LEY —Oh no, I accept that. And most of the large food crops in the basin are substantially exported, so I do not see it as being just about feeding ourselves. But what about the wider responsibility of the global food task?

Prof. Miller —That is a critical issue and I think it is a really important issue. The question then is: how are we going to make decisions in the basin that see agriculture and food security as part of a global process? How do we connect with those mechanisms, at a global level or at a regional level, that would generate the right kinds of regional food policy and regional food strategy? It does not seem to me that that is currently in place or that anyone is even talking actively about the bringing together of global food strategies. Now, if we were in that sort of ball game we would be faced with a different set of questions. So, you still get away with the question: what is it appropriate for the basin to be growing? I think if we could answer that question we might make a useful contribution to the global question. It does not seem to me that Australia even has an agricultural policy that defines quite clearly what the food growing priorities within its own boundaries should be, let alone thinking about the global food strategy. We are a long way from that.

Ms LEY —I think it would be a disaster if governments planned what should be grown and where it should be grown. Obviously, there are restrictions with regard to growing certain crops in certain types of soil, and they are quite appropriate. But I would say that Australian farmers, and their innovative capacity—which is quite different from the rather grim picture you have painted of rural communities and Australian farmers—are equal to that, and our ability is above and beyond that.

Prof. Miller —Yes. Just going back to the grim picture, I think it is really important to keep in mind the kinds of fault lines I have identified. Because if we are going to come up with a policy for the future and we do not take account of those fault lines, any policy is going to be short lived. Here is an opportunity to actually plan for the future of regional Australia and, in particular, the basin. It is not just a matter of how we deal with the water reform question. It actually gives us the space and the time to say: what is the future of the basin regional economy? That is a much bigger question. It is not just about looking at the social and economic impacts of water reform; it is actually about looking at where our regional economies are going. If you pose that question, you have to ask what the trends to date have been. Whilst there are some good trends, there are also some very negative trends that one would not want to replicate. Why would you want to replicate a trend where you have a much higher suicide rate amongst farmers? That is not something that we would want to build into a future policy. All I am saying is that you need to take those things into account if you are going to get a decent policy out of this.

Mr SECKER —Thank you, Professor Miller. I am actually a Flinders University economics graduate myself—but it was so long ago that it was probably way before your time! In your submission you quote quite a few references, and that is good to see. But you made a statement that I do not believe was in your original submission. I think it was probably the grim picture—

Prof. Miller —The work of Neil Barr.

Mr SECKER —Yes. To paraphrase, you said that farmers have a higher suicide rate, higher household debt and higher domestic violence rates. Do you have any references or evidence for that statement, which is not in the original submission?

Prof. Miller —Yes, I do. There is a reference in the original submission—the Grafton et al reference—which refers to domestic violence levels and mental health issues. In fact, that data on suicide, mental health and domestic violence is actually very recent. The Neil Barr data refers to 1986 to 1996, but the impacts essentially arising out of the drought were evidenced in the research that we undertook for the Murray-Darling Basin Authority in six different communities across the basin. That evidence emerged early last year.

What you had there were local providers such as the counselling services for mental health in the Shepparton area booked out within the first three months of the year. In other words, they could not take any new referrals for the rest of the year because they were literally booked out after those initial three months. Similarly, in the Riverland we heard lots of stories, such as SACOSS were referring to earlier, of increasing poverty levels within families. In terms of growing household debt, the average debt of dairy farmers is over $600,000 per household. Those are ABS figures. That is all up-to-date evidence.

Ms LEY —Do those counselling statistics relate to producers and farmers only, or do they relate to everybody in the town?

Prof. Miller —That is a good question. I could not really say—

Ms LEY —In Shepparton, for example, there are large communities of recently arrived migrants, many of whom have suffered trauma in their previous lives, and I would suggest that many of them would be accessing counselling services.

Prof. Miller —I would say with some confidence that that was not the case. The figures that they are referring to do not refer to new migrants. I would say that because agencies are very sharply aware of the impact of new migrants and the issues that they face and have, in a sense, particular responses to that. If they were actually receiving large numbers of migrants coming to their services, they would be flagging that up very loudly and clearly. They were actually talking about the farming and growing communities and the wider Shepparton community. These meetings were held to look at the impact of water reform on communities. People were talking about the farming and growing communities.

Mr ZAPPIA —Professor Miller, those trends that you were referring to in farming communities: whilst you suggest that the trends were made worse during the drought period, can you be certain that there were not additional factors that were simultaneously occurring during the drought period that were contributing to the trends?

Prof. Miller —You cannot rule out anything. Did you have anything particular in mind?

Mr ZAPPIA —Yes, I do, and I am aware that there have been other global forces that have affected the market for agricultural products produced in Australia over recent years, and those trends were—irrespective of the drought—being made worse as each year progressed. Therefore, some of the impacts that we have seen on farming communities in recent years are not necessarily associated with the drought.

Prof. Miller —That is true. Again, talking to lots of farmers and growers up and down the basin, you get a strong sense of the adaptive capacity of farmers in response to drought. So year in, year out, season after season, farmers make the adaptations that are necessary as the drought continues. They do that in the hope and expectation that the drought will eventually turn and they will be able to get back to normal. After 10 years of doing that, two things happen. One, your capacity for continuing to make those adaptations is markedly reduced, both your emotional capacity and the resources that you can bring to bear on making those adaptations.

The other thing that happens is that you end up in a position that you would not have wanted to be in if, 10 years ago, you had started planning. So if you had said, ‘Where do we want to be in 10 years time?’ then you would probably be very different from where you are after making those year in, year out adaptations in the anticipation that things would turn around and you would be able to revert back to where you were. So you end up with this cumulative effect and that is a very draining and stressful period for farmers.

Farmers were aware of the impacts of global price shifts but essentially what they were saying, not surprisingly, was that they were fairly exhausted, in terms of their capacity for adaptation and their resilience, by their local circumstances. In a sense their argument would be, I am sure, that if you were to take away the drought they would be able to compete on global markets. They were not so much interested in and were not so much worried by those as they were with their own capacity to survive.

Mr SECKER —Thank you for that.

CHAIR —Thank you, Chris, for taking the opportunity to come along this morning. As you are aware, the proceedings will be recorded in Hansard and you will receive a copy of that transcript. If there are any issues please let us know.

[11.31 am]