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Address by the Hon. Ralph J. Hunt, M.P., Deputy Leader of the National Party of Australia to the Federal Council Meeting



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ADDRESS BY THE HON. RALPH J. HUNT, M.P., . DEPUTY LEADER OF THE NATIONAL PARTY OF AUSTRALIA TO THE FEDERAL COUNCIL MEETING . CANBERRA, 26 OCTOBER 1985

Mrs. McKerrow, distinguished guests, ladigs and gentlemen.

It is my pleasure to thank those who have participated in today's primary industry forum.

The commodity papers forwarded in advance, and today's presentations by leaders of the m e a t , wheat, dairy and sugar industries, are a valuable contribution to our primary industry policy review.

The standard of the submissions is excellent.

They demonstrate the sophisticated approach of primary industry organisations in response to the difficulties facing the farm industries.

The main theme emerging frCm the submissions is a call for Governments to adopt the right macro-economic policies to maximise our opportunities on export and domestic markets.

AGRICULTURE TODAY

It is important that all Australians understand the problems besetting the farm industries today. " '

It is widely understood that the prolonged drought badly undermined farm incomes and contributed to the recession in 1982 and 1983. '

What may not be understood is the accelerating decline of the terms of trade of agriculture and the reasons for this phenomenon and increasing indebtedness of farmers. .

From 1980 to 1982, the height of the d r o u g h t , institutional debt rose

$953 million to $4.7 billion; but in the next two years to the end of 1984 rose $1,200 million - despite the breaking of the drought and the

international recovery. .

Today, institutional farm debt is more than $6 billion, or $35,000 per farm. Worse still, a BAE study of 75 per cent of Australian farms has revealed a total farm business debt of $53,000 per farm.

The rise of interest rates to the highest real levels for 50 years has gravely worsened the problem. Seme rates are now at all-time record heights. It is now feared that with the deteriorating balance-of-payments deficit and the concern to prevent the dollar depreciating further, rates could reach 25 per cent within six to eight months.

The devaluation has not assisted farmers to reverse this balance-of-payments trend. The 20 per cent devaluation is expected to Increase the value of rural exports by only 2 per cent this y e a r , but the real net value of rural

production is forecast to drop 22 per cent.

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Against this background, it should be remembered that effective assistance to agriculture has fallen dramatically over the past decade.

Effective assistance to agriculture has fallen from 28 to 9 per cent, while assistance for manufacturing has dropped from 36 to 25 per cent.

So there are two points to be made: One, the agricultural industries have one-third the rate of manufacturing protection and, two, the fall in

agricultural assistance has been twice the pace of manufacturing. This statistical fact is not advanced as an argument to increase protection - guite the reverse - in fact, we argue for a lowering of industry protection.

Farmers' terms of trade will drop further this year. We have yet to see the full impact of the devaluation on the cost of imported farm inputs such as fuel, farm machinery and eguipment.

The average farmer income since 1982-83 has ranged between $9,200 and minus $115 per annum.

Productivity gains have resulted in agricultural output growing at a long-term rate of about 2.8 per cent per annum, but with a steadily declining number of producers.

Capital investment in farms has been relatively unattractive, with returns to capital on a long-term trend of about 2 per cent. Yet we are about to have introduced a capital gains tax, quarantining farm losses and a ragbag of other tax nasties.

On top of this, the Hawke Labor Government will have ripped off at least $442 million frcrn Australia's 170,000 farms by the end of this financial year.

The assets test clearly discriminates against family farms by exempting only up to two hectares with the farm house.

But once wasn't good enough. Twelve months later they're at it again, this time with the capital gains tax exempting a still undefined curtilage.

No wonder there is a growing rage in rural Australia.

Let's place the problems of agriculture in the context of our national economic performance.

How do we compare with the United States, Canada, the U.K., West Germany, Belgium, Holland, France, Italy, Switzerland, Sweden and Japan, with whom we trade and compete for markets?

- Our inflation is almost double the average.

- . Our interest rates are the highest.

- Our exchange rate has suffered the fastest trade-weighted decline.

- Our money growth is the fastest.

- Our balance on current account has the second-fastest decline.

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Indeed, the Hawke Government is deliberately holding up interest rates to attract foreign capital, much of it speculative, to stop the Australian dollar collapsing further in its dizzy tumble since March.

Mr. Keating boasts that we have the fastest real growth in GDP and, of course, Bob Hawke's, Simon Crean's and Bill Kelty's Accord with fully indexed wages, employer-funded superannuation, and other goodies such as employer-paid taxes on their fringe benefits.

We also have four weeks' holidays and 17-1/2 per cent loading - paying people more for a month's holiday than for four weeks' work.

We have penalty rates and generous, eagerly sought-after worker's

compensation.

How can we afford such comforting luxuries when the wealthiest nation in the world, the United States, ca'n’t afford such holiday entitlements, penalty rates, and so on? -

Does the Treasurer or the ACTU ever stop to ponder those guestions?

How is it that employers in Australia can afford such benefits?

Do Australians really think this honeymoon can go on?

The truth is it can't, and the day of reckoning is not far away.

The Governments, State and Federal - indeed, the community - are mortgaging our children's future.

We are mortgaging future generations.

We are financing our growth in wages and on-wage costs through the Accord and our gross domestic product growth through excessive borrowings both here and abroad.

With our $3,345 million current account deficit for the September quarter and a gross foreign debt which has doubled in two years to about $80 billion, we are borrowing heavily to sustain a false standard of living.

Remember that the foreign debt was $36 billion just two years ago - it has doubled in the past two years!

The managers of the national economy are not only propping up the dollar with the highest real interest rates in the Western world, they are leaving a legacy of debt to the young people of this country to satisfy the greedy wants of the ACTU today.

"Live for today and to hell with the future of our children" should be the motto of the ACTU and the Hawke Government's indulgent Accord.

The truth is we are heading on a course which will leave the Argentina record for dead.

How can you claim that our real growth in GDP is in excess of 5 per cent when our national and foreign debt is reaching record proportions?

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The major export industries - agriculture and mining - are not only facing crippling commodity prices on world markets, they are now labouring under increasing domestic production cost pressures, staggering interest rates and declining competitiveness. '

There is no indication that our current account deficit has any chance of improvement in' the near future. Metal prices are low and the world

agricultural trading prospects continue to be blighted by the gluts generated by the subsidy policies of the EEC and USA and the likelihood of a trade war.

I pose the question again: How can Australians afford the Accord, record spending by Commonwealth and State Governments, huge budget deficits?

The truth is we can't .

We are propping up the system with record borrowing against the background of declining terms of trade. -

And now we face Labor's capital gains tax, quarantining of farm losses and taxing employers on fringe benefits - indeed, a tax regime that strikes at the capital base of the productive sector of our economy.

The Hawke Government's tax package continues the relentless redistribution of resources away frcm the productive and wealth-producing sector of the economy.

The package will not ease the tax burden, but it is designed to redistribute what is left of the cake to satisfy the demands of the ACTU and the

maintenance of the Accord.

In these circumstances, there had to be losers and the axe has fallen with vengeance on the capital base of the export sector, the rural and the

small-business sector.

Ironically, fiscal creep will swallow up much of the benefit of the promised tax cuts two years down the track.

The package represents a continuation of the undisciplined, open-ended tax system enabling the government of the day to spend up at will and for the bureaucracy and government to grow.

By 1987/88, Australian taxpayers are likely to be $1,400 million worse off frcm this tax package and the export, wealth-producing sector will be even less capable of earning the foreign exchange required to repay the interest

on, let alone our foreign debt.

The combination of the capital gains tax and the quarantining of farm losses will accelerate the decline in land prices - the security against which farmers have borrowed a record $6,000 million, now at record real interest rates.

The average 1-1/2 to 2 per cent return to farm capital invested, the

discriminatory accumulated primary industry budgetary cuts since 1983, the depressed world markets, fast rising costs of production, record debt and interest rates, and the combined effect of the Hawke Government's tax package are undermining the capital base of farmers.

The National Party will fight the Hawke Governmentrs tax package which would destroy investment incentive in agriculture and small business.

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Our Party must not only commit itself to macro-econcmic policies to restore a competitive environment for primary industries in particular and export industries and small business generally, but to repealing those taxation impediments that attack the capital structures of our wealth-producing, small business, and employment-inducing industries.

We cannot and will not live with policies which are the product of socialist objectives.

If this Party - indeed, Australians - fail to face up to the problems of exporting industries and, indeed, import-competing industries, the future for all Australians is bleak. '

Government policies must now be redirected towards the export industries which are capable of pulling Australia out of its slide.

We fail to do so not so much at our peril but at the peril of our children.

To repay that external debt we must develop vigorous, competitive export industries which can compete on world markets, which all too often are influenced by the enormous subsidies of some competitors.

Mining and agriculture between them consistently earn three-quarters or. more of our $25 billion per annum from exports.

It is not good enough to dismiss these important industries, as some

Government members seem to do, because they are on the "slow growth end" of world trade. While it is necessary to improve the competitiveness of our manufacturing, high-tech and service industries, agriculture and mining remain our greatest hope.

There is no justification in discrimination against the agricultural export industries. Quite the opposite. If anything, we should be discriminating in favour of our major export industries.

It is true that no sector is under more pressure from the unfair trading practices of seme competing nations than agriculture.

At the same time, our competitiveness is being progressively eroded b y . the accelerating decline in farm terms of trade.

Thursday's announcement of the September Quarter CPI result has given the farm sector and rural canmunities little joy.

The September Quarter figures indicate that the inflation rate has increased to 7.-6 per cent - about double the average of our major trade competing nations. ยท

Government charges, fuel costs and the effect of the devaluation on imports were the main ccmponents of the increase.

Relatively low increases in food prices mean that, while farmers are being hit by rising input costs, their real income will continue to fall.

The National Party is not prepared to bide time until the next election in the hope that Labor will fail and we will win.

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With the help of the rural, mining, industrial, small business, and other interested sectors, we are reviewing our policies with a view to having implemented policies, tough though they may be, to improve our competitiveness as a nation.

Apart from reducing government expenditure and budget deficits, we must:

- adopt a more flexible, less centralised, wage fixation system more attuned to the capacity to pay and the needs of youth unemployment;

- strengthen legal provisions to enable employers to recover more guickly compensation for damages occasioned by irresponsible industrial actions;

- guarantee freedom of choice as to whether employees join a union;

- reduce tariff protection on a steady, predictable and programmed basis;

- selectively replace tariffs with bounties where these provide significant benefits to export industries such as agricultural chemicals, farm machinery and parts;

- reduce the cost of fuel to remote areas by freight equalisation and

deregulation of the industry;

- retain a full diesel excise rebate for off-farm and fishery use;

- . progressively reduce the tax impost of fuel;

- maintain major research and promotion programs for rural industries;

- maintain national soil and water conservation programs; .

- restore the tax advantages of the Income Equalisation Deposit Scheme;

- pursue genuine reform of the tax system to restore incentive and a will to work and produce.

The success of our next term in government will depend on our capacity to generate an economic climate which provides an incentive for individuals, investment and work. In this regard the National Party is seriously examining a single-rate income tax system with rebate safeguards for the lower-income people. '

I am pleased to acknowledge that on the trade front the Government is now taking a much more active stand against the dumping of subsidised European beef exports into our key Asian/Pacific and Middle East markets.

It is supporting a renegotiation of the International S,ugar Agreement, and pressing for the inclusion of agriculture in a new round of GATT talks. We strongly support the Government in this approach.

At the same time, I have placed on notice a series of questions to establish what actions the Hawke Government has taken to counter the proposed

writing-off of- the NZ$700 million debt that the New Zealand Meat Board has accumulated enabling its sheepmeat producers to corrmand more than half the global trade. Such an action would represent retrospective subsidisation.

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In regard to the agricultural trade problems being caused by the senseless European subsidy policies, I give the Bureau of Agricultural Economics full credit for the excellent report it produced for wide public distribution both here and in Europe.

The report proves that the Common Agricultural Policies are costing Australian farmers $1,000 million per annum. ,

Recently I strongly supported the Minister for Primary Industry, Mr. Kerin, expressing our bipartisan concern of the EEC policies, in discussions with the Vice-President of the European Commission, Mr. Andriessen.

I will be following up these discussions with members of the Ccnmission in Brussels in January next year.

I give the Hawke Government no credit whatsoever for its abortive bid to dismantle the export sector of the Australian dairy industry in May following an early unanimous industry and States agreement. _

We blocked Labor's legislation in the Senate to enable the dairy industry and the State Governments to reach agreement on a more satisfactory,

market-responsive, less disruptive plan. I regret that there now appear to be seme internal problems in this divided industry.

On the sugar industry front, the National Party has been closely monitoring the "gun at the head" approach by the Hawke Government.

It is no credit to the Government to run away from the Commonwealth's

traditional, policy of providing the industry with the required financial support - especially an export industry.

It is outrageous for the Hawke Government to discriminate against Queensland, demanding the Queensland Government's direct contribution when it has only recently helped the motor and steel industries without State Government

financial contributions in South Australia, Victoria and New South Wales to the tune of $500 million over the next five years.

Finally, I thank all those who contributed so much to discussion on

agricultural policies here today.

Australians still have a golden opportunity to build on the foundations our forefathers established.

We must not throw away that opportunity by seeking the easy and soft options.

Our Party must get its policies right so that it can play a constructive and positive role in the next coalition government.

Our policies must aim at generating human incentive and drive.

Our task will be to reverse the downward slide of our export industries and give Australians the prospect of real rises in living standards as we move into the next- century.