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Address to the Australian Food And Grocery Council (AFGC) Industry Leaders Forum, Canberra



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SPEECH

THE HON BRUCE BILLSON MP Minister for Small Business Federal Member for Dunkley

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Media Contact: Kane Silom 0458 550 506

Address to the Australian Food And Grocery Council (AFGC) Industry Leaders Forum

Parliament House, Canberra ACT

Wednesday, 30 October 2013

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Terry talked about a nation that is open for business and that is very much the ethos the Abbott Government brings. But just hoping for that isn’t enough. There is actually a need to sort of nurture and enable an environment that is encouraging and welcoming of enterprise, so that people who are prepared to mortgage their house to have a go at creating wealth and opportunity see that there is a prospect for success.

It is that kind of outlook that we bring to the task of Government. Respecting and recognising the risk takers and those that nurture the opportunity for millions of Australians to have livelihoods in this great country.

We have talked about the need to diversify and create a more robust economy. Yes we have been blessed by the benefits of the mining boom but that alone is inadequate for our future. When we think about the over the horizon economy, we need to look to other sectors of the economy to ensure of prosperity as a nation.

Five pillar economy

We have talked about a five pillar economy one that unleashes our real economic potential and takes advantage of our strengths and builds on those to create prosperity and livelihoods we hope for the future.

We have talked about Manufacturing Innovation, Agriculture Exports, Advanced Services, world- class Education and Research, as well as boosting our Mining Exports, to make the most of our comparative advantages in international markets

We have already established the Prime Minister’s Business Advisory Council to advise the Executive Government on developing the economy. The Business Advisory Council is chaired by leading Australian business leader Mr Maurice Newman AC and meets three times a year.

Our goal is to restore more certainty, predictability through shore footedness, effective and meaningful collaboration and consultation that sees us getting those policy settings right to boost confidence, promote investment, to encourage employment and above all give all enterprise big and small the sense it is worth having ago in our economy. We have a plan. You have heard Prime Minister Abbott talk about our plan. It is about nurturing a rencacinse in enterprise. It is not only being about open for business but supporting an enterprising eco-system that encourages people to be in business and to invest and to take risks.

That plan includes repealing the world’s biggest carbon tax which makes Australian businesses, particularly manufacturing, less competitive in domestic and international markets

It includes cutting red tape costs by $1 billion a year which take people away from building their businesses and creating opportunities for others.

Media Contact: Kane Silom 0458 550 506

We will act to deliver a level playing field for Australia’s manufacturing businesses with more effective anti-dumping measures. We will crack down on overseas producers who don’t cooperate with anti-dumping investigations. We will strengthen enforcement of the provisions of the World Trade Organisation Agreement on subsidies and countervailing measures. We will transfer anti-dumping responsibilities from Customs to the Department of Industry

We want to build on our comparative strength in food production and better manage our precious water resources to help our agriculture sector become the ‘Food Bowl of Asia’ and achieve ‘food security’ in a world demanding more of our food resources;

We want to support our fishing industry and review the declaration of new Marine Protected Areas. We will establish genuine consultation with the fishing industry on research and strengthen the connection between science and fishing policy; and

We will provide policy stability and certainty to our live exports trade - avoiding damaging backflips like Labor’s overnight decision to suspend live cattle trade with Indonesia.

The need for industry to be ‘world class’ and cost pressures facing the industry

Australia’s food industry is substantial and the numbers are staggering: $42.6 billion in primary production; $91.2 billion in manufacturing; and $135.8 billion in retailing. As a net exporter, the industry exported $30.5 billion worth of food in 2011-12. Compare that to $11.3 billion worth of food imports in the same year and we get a sense of the contrast between the two.

As you know, the industry encompasses a complex series of supply chains, their evolution being driven by changes in the lifestyles, demographics and food habits of Australian and overseas consumers, as well as by the pursuit of cost savings and greater scale by large food retailers.

Australia’s food processors and grocery wholesalers are a key part of our food supply chain — and almost 99 per cent of them are small and-medium size enterprises.

The Government recognises and wants to grow the potential of these enterprises to benefit from developments in Asian markets in particular. Competition in the supply chain, and ensuring fair relationships between different participants, is critical in ensuring that the food industry remains flexible and resilient in responding to changing market circumstances, and in building international competitiveness and a world-class export-orientated industry.

We are acutely aware that rising input costs place significant pressure on the international competitiveness of the sector.

To alleviate cost pressures, the Government intends, as its first item of parliamentary business, to introduce legislation to repeal the carbon tax. The Government has released a carbon tax repeal bill for public consideration — businesses have an opportunity to comment on the specific details of the repeal process until 4 November 2013.

And — to restore time, focus and resources back to small business — the Government intends to cut red and green tape by $1 billion a year annually. Small business interests will be placed at the heart of policy and program design, and wherever possible, we will ensure that red tape is minimal or reduced.

The Government has also announced several other measures aimed at alleviating cost pressures, encouraging growth, and driving employment and innovation for small businesses, including those in the food processing and manufacturing sector:

For instance, we are cutting the company tax rate by 1.5 per cent from July 2015, to encourage investment in Australian businesses and jobs.

Media Contact: Kane Silom 0458 550 506

We are also delaying, by two years, the increase in compulsory employer-funded superannuation contributions, which will give small business some respite from escalating cost pressures.

The Government is also planning to initiate an independent review by the Productivity Commission of the Fair Work laws, which will take into account the need for business to be able to grow, prosper and employ (and to ensure workers are protected).

We have also announced the transformation of the Australian Small Business Commissioner to a Small Business and Family Enterprise Ombudsman. The Ombudsman will advocate for smaller enterprises, be a single entry-point to access federal small business support, help to make Commonwealth laws and regulations friendlier to small business, and play a role in dispute resolution.

Root and branch review of competition laws

Many of the current issues relating to competition policy in the food industry involve market position of major players in the market. Some of the most contentious issues in the sector go to questions of buyer power and how big players use it when dealing with other businesses in the supply chain.

Grocery processors, food manufacturers and primary producers commonly express concerns about an imbalance of bargaining power between the majors and themselves.

While intensified competition between the two major chains has reduced grocery retail prices, there are concerns that those reductions come at the expense of suppliers and impact on the longer term durable benefit to consumers.

We have to ask ourselves: will these price and market pressures impact on the viability of the food and grocery industry over the long term, and will they stifle innovation and investment by suppliers. And will this result on higher grocery prices in the longer term.

These issues have been discussed in a number of spheres, including Parliamentary committees and industry reports. In addition, the ACCC is currently investigating complaints of anticompetitive and unconscionable conduct by the supermarkets towards their suppliers.

Some of the alleged behaviours by supermarkets may not necessarily be breaches of the competition laws. At the same time, this does not mean that the status quo is necessarily delivering the most efficient or optimal outcomes in the market. If unduly harsh bargaining practices are being used, they could, indeed, reduce incentives for suppliers to invest and innovate. it is these question marks over competition policy which we want to examine.

The Government’s ‘root and branch’ review of Australia’s competition laws and policy presents a great opportunity for identifying areas where reforms could deliver more competitive markets and drive productivity in a win for business of all sizes and for consumers.

The review will be an independent examination of how the competition framework is working, whether it is keeping up with emerging trends, and looking beyond the competition framework to identify impediments to competition with the goal of improving the living standards of all Australians.

In a nutshell, the review provides an opportunity to support the growth and prosperity of big and small businesses while ensuring consumers are getting value for money.

We want and aspire to have competition based on merit not on muscle.

Grocery Code and Horticulture Code

Industry, including the AFGC, continue to work together to solve supply chain issues.

Codes of Conduct can facilitate more effective enforcement of contracts, encourage supplier investment, identify appropriate risk-sharing and enable more effective dispute resolution.

I support the industry’s continuing development of the Food and Grocery Industry Code of Conduct in the supermarket/supplier space, and appreciate the work that’s already been undertaken.

Media Contact: Kane Silom 0458 550 506

I also understand that negotiating the final aspects of arrangements like these can be challenging, and am really pleased to hear that work is progressing. I look forward to engaging with you and the rest of the industry on the draft Groceries Code over the coming months.

It might be worthwhile looking at experiences with another code that was developed by an industry working together to improve supply chain relationships.

The Horticulture Code came into force to address tensions in the industry concerning commercial transparency within Australia’s fruit and vegetable wholesale markets. The primary purpose of this Code was therefore to improve the clarity and transparency of transactions between growers and wholesalers of fresh fruit and vegetables.

Since the Horticulture Code’s introduction in 2007, it appears tensions around commercial transparency have reduced and the industry is operating with fewer disputes, or has, at least, been able to resolve them without the need for escalation.

Our understanding is though that there are strong and differing views within the industry on how the recommendations of the ACCC’s 2008 review of the Code should be dealt with, the former Government failing to resolve a position.

Issues of clarity around the roles of parties, obligations that accompany each party to a transaction, the grandfathering of pre-2007 arrangements and tactics to ‘game’ the Code remain key areas of debate about how to ensure the Code and all respondents are ‘fair dinkum’.

The Government would be willing to consider proposals from industry to improve the code, provided it would not result in a return to industry tensions between growers and wholesalers.

Extension of unfair contract terms provisions in ACL to small businesses

The Government’s policy for small business also includes measures that may address issues with supply chain relationships in the food processing and manufacturing sector.

One of these measures relates to the protections that consumers currently get under the Australian Consumer Law from terms in standard form contracts, such as your mobile phone contract, that are unfair. We are proposing to extend these protections to cover the small business sector.

Small businesses often receive standard form contracts from business on a ‘take it or leave it’ basis, and encounter the same disadvantage as individual consumers when it comes to negotiating contracts.

For example, we understand that primary producers are increasingly contracting directly with the large supermarkets, and that in many instances, supermarkets insist on standard form contracts.

We agree that many benefits flow from using standard form contracts — they save time and keep costs down. But they can also be used to shield a business from risk unfairly.

That is why the Government has committed to extending the unfair contract protections to protect small business.

In extending these protections, we recognise though that there may be several issues to work through. A thorough consultation process is going to be essential if we all want to get this reform right.

Food labelling

Australia’s laws require that all imported and domestically produced food is labeled with the country of origin, and they preclude making false or misleading country of origin representations.

Many consumers report being confused about the true meaning of claims such as ‘made in Australia’ ‘product of Australia’ and ‘made in Australia using local and imported ingredients’, and how these terms relate to the source of ingredients, where processing may have occurred and the extent of local economic and employment benefit arising from particular products a consumer may be considering for purchase.

For consumer confidence to be maintained, it is important that consumers understand the meanings of various country-of-origin statements. While not part of our immediate policy agenda the Coalition will consider the Blewett Review and other approaches that can improve food labelling in cost-effective and practical ways in parallel with improved country of origin labelling.

Media Contact: Kane Silom 0458 550 506

It is my belief we should be able to build upon the existing Country of Origin labelling representation framework guided by the key principles of greater clarity for claims about ingredient source-country; recognition of local transformation value and economic contribution; and claims as they relate to a product’s substantial characteristic.

Summary

We know the state of your industry is in a fragile state but we also recognise the potential for greatness given not only our geographical location but also our ability to produce world class products and produce.

It is why we want to partner with industry, big and small, to get our economy back on track and to provide opportunity and wealth for others.

It is why we have laid out a clear plan to get our economy back on track and to provide the right environment for business to prosper.

I hope you will join us in this journey as we make our country an even greater place than it already is.

Thank you for a few minutes of your time today.