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Wednesday, 14 May 2014
Page: 3644


Mr FITZGIBBON (Hunter) (10:04): It is a pleasure to follow the member for Pearce, who largely made a very thoughtful contribution on agriculture. It is obviously an area in which he has a great degree of knowledge and a strong interest, as you would expect from someone representing a Western Australian seat. It is true that, despite drought challenges, WA did enjoy a bumper wheat harvest. That has done wonderful things for the majority of farmers, at least in his state.

I have often said that if I can do one thing in this portfolio, it will be to nurture and encourage a bipartisan approach to agriculture. Agriculture is a sector that is all-important to the Australian economy and our export opportunities. That is something that the Minister for Trade and Investment will agree with. Really, in ideological terms, there should not be all that much between the major political parties in this place as we strive together, I hope, to make the most of the opportunities presented to us by global food demand and, in particular, the food demand out of Asia.

There will be limits to my bipartisan spirit, because the member the Pearce then wandered more widely onto the budget more generally, as did the member for Fraser, I understand. While I will return to specific agricultural matters in the budget—which in many ways was a business-as-usual budget for agriculture, but I will qualify that later—the broader budget will affect farming communities in the same way as it will affect communities right around this country. I think it was my 19th budget in this place and I must say it was the harshest budget I have seen. It was a double whammy for Australian families and elderly Australians because it hit them both on the income side of the equation and on the cost-of-living side of the equation. In other words, it hit the purchasing power of pensions and family budgets, while at the same time driving up the cost of living through things like the increase in the fuel tax and the affordability of health care.

Those things tend to fall disproportionately on people living in rural and regional communities. For example, fuel taxes are embedded in the transport of goods, including food. In regional and rural Australia, we have greater challenges in attracting GPs, although we have made some improvements in that area in recent years. The co-payment for GPs will hit disproportionately in rural Australia, where people are already challenged in securing bulk-billing services because of the shortage of doctors.

This is a bad budget for rural and regional Australia. In terms of agriculture, as I said, it is largely a business-as-usual case for agriculture, although the four per cent reduction in departmental staff will have impacts in policy development, in service delivery and, most importantly, in areas like quarantine which safeguard our clean, green, safe image as a food exporter to the rest of the world. There will be consequences from those cuts—make no mistake about that. On the other side of the ledger, I note the government has fulfilled its commitment to increase R&D expenditure by $100 million, although I think few in the agriculture sector expected that to be over a four-year period at $25 million a year. It is not smoothly spread over the four years; and it is a very modest increase, particularly when it is aggregated with those cuts made to other areas of agricultural R&D, including cuts to RIDC—one of the more important research and development corporations in the sector. It was a bit of a double whammy.

I should say very quickly that this bill broadly does two things: it tidies up some GST arrangements—I will let the member for Fraser articulate those matters—and it amends the farm management deposit scheme, as the member for Pearce said. The member for Pearce is right in saying that these changes were initiated by the former Labor government—good and welcome charges. For the uninitiated, the farm deposit scheme is probably the most effective drought preparation initiative we have seen in this parliament. It allows farmers to put money away in good times to spend in bad times, particularly those driven by the effects of dry weather conditions. We use the tax system to give them incentives to do so: for example, they do not pay tax on income until that income is drawn; it is put away in good years, when the tax rate tends to be higher, and withdrawn in tougher years, when the tax rate for the farmer tends to be lower. These are tidying up of those arrangements, allowing farmers to consolidate accounts, for example. These are good things, and I am very pleased to see we have a bipartisan approach to the measures before the House today.

This leads us to drought, one of the biggest challenges facing the farming sector. I am disappointed that the government pins so much of its promise to agriculture on its coming agricultural white paper. There is nothing on climate change or, indeed, natural resources sustainability in the terms of reference for the white paper. I do not say that to make a political point; I just say that to express disappointment, because I do not understand how you can ignore the greatest challenge facing agriculture and hope to have a strong and credible policy document at the end of that process. Going back to the budget last night, there are further cuts to Landcare, which is a retrograde step that will not help us meet the challenges of soil fertility, land degradation, salinity, et cetera. Drought is a huge challenge for us and FMDs are an important part of that approach to drought.

What do we do about drought more generally? We saw the Prime Minister and the agricultural minister announce a new drought policy in February in great fanfare and some of it was around income support for farmers in need. Of course, we support that with its more relaxed assets test. There are other initiatives, but the centrepiece was really the extension of Labor's farm financing package to drought affected farmers. The government said it would spend $280 million over a four-year period, yet here we are three months on and not one cent of that assistance has been delivered to struggling farm families, I understand. That is disappointment to the opposition and it is why we felt compelled to move the second reading amendment today. I would prefer not to use the word 'condemn', although that it is the usual form of words used in this place for such an amendment. We are very concerned that three months after the Prime Minister's well-covered drought tour and his significant press conference—where he announced that he had learnt so much from the tour and, as a result, would allocate all that money—we have not seen that money flow to farmers, which says something about the government's capacity to administer this scheme.

Perhaps of greater importance, we are on track to having a bipartisan view of drought policy in this parliament. It is obvious that we all agree on the need for some form of social safety net—or a welfare payment, for want of a more appropriate word—to farmers in real need; a welfare payment that is temporary, is appropriately means tested and has a component of restructuring incentives for people to broaden their skills in drought. We agree on all of that. At the moment we are focused on a bipartisan view of farm financing—a Labor initiative—which I expect everyone would see as a temporary measure to deal with the temporary crisis at hand. What do we do beyond that? Is there more we should do as a parliament for farmers facing drought? Let us make no mistake about it: these dry events will, sadly, become more regular and more protracted. I think we do need to do more because our farmers are subjected to Mother Nature more than any of the sector in the economy. It is not possible for farmers in every instance to sufficiently ready themselves for drought. When you get one-in-50 or one-in-100 events, it is just not possible to do so. These are the people who give us our food security, put our food on the table and earn very significant export income. I think they are a special case and there are more things that we need to do. The challenge is avoiding the mistakes of past policies, which in effect—to put it not too subtly—rewarded farmers who were not doing enough on the drought preparation front at the expense of those who were doing significant work on that front. We have to be careful not to have perverse incentives in the public policy approach. I think it is fair to say that things like interest rate subsidies of yesteryear contributed some of those perverse outcomes. On a bipartisan basis we need to think harder about where we go beyond what we are doing for drought.

We are spending a lot less money now than we were before under the exceptional circumstances arrangements, so I think there is scope for both of the major political parties and, indeed, the crossbenchers in this place to think about reinvesting some of that money at some point in more long-term and well-considered drought responses. I said in something I recently wrote for one of the Fairfax blogs that I am a little surprised that the market has not responded to drought as it has to so many other areas where there are going to be challenges in not just the local economy but the global economy. I have suggested that, in the medium term to long term, farmland prices are only going to head in one direction, and that is north, given the coming supply-and-demand equation for food in the global market. So I think there is some scope for more innovative and broader thinking about drought policy.

I have written about the idea of some form of reverse mortgage where investors would take a stake in struggling farms, with an opportunity to take some of the upside of increasing farm values while providing some much needed cash relief for farmers during difficult times. Are these sort of schemes without risk? No, they are not. No economic investment is. But I do believe there is an opportunity for the private sector to do things in the drought policy space that governments have not been able to do over many years, with initiatives that do not pass some of the tests I spoke about earlier and certainly do not pass the Commonwealth budget test in terms of the great expense some of those have cost the budget bottom line. These would not be investments in individual farms, necessarily. These would be investments in bundled securities and an aggregate of farms in the farm sector. Given the supply-and-demand situation of the global market, I think there are very significant opportunities for the private sector and markets generally.

Why hasn't this happened? I think there has been a lack of attention to and understanding of the farm sector in the boardrooms and the equity houses of those around the world who invest. But I think if we start having this conversation we just might alert people to some of the opportunities in the agricultural sector. We have seen these things play out with Warrnambool Cheese & Butter and the very heavily contested play for a stake in that company. We are now seeing it slowly but surely happen in other parts of the agricultural sector. I am hopeful that in the not-too-distant future the equities market and others will start taking an interest and will look at our agricultural sector and farmers in trouble and say to themselves, 'We can have a win-win here. We can take an interest in these farms. We can provide much needed cash flows through some of these difficult periods. We can even help with consolidation and producing economies of scale for farming enterprises and make those farming enterprises more productive and more profitable, both for the farmer and for us as external investors taking a stake in that farm enterprise.'

These might be radical ideas for some people, but I believe they are worth investigating. I encourage the private sector to start taking an interest. While they might be radical for some, they cannot be any less effective than our very real and genuine attempts to address the drought in the past. It has been expensive in the past. Our attempts have contained those perverse incentives that I have talked about. You would have to say, given that here we are in 2014 talking about drought in the same way as we were at the time of Federation, the government has not been all that successful in dealing with this question. So we should be partnering with the private sector to see whether it cannot do better than governments have been prepared to do or able to do. As I said in the article I wrote for Fairfax, there might even be a quid in it for them too.

I welcome these changes. As I said, they were initiated by the former Labor government. I am very pleased that the change to the farm management deposits scheme is now being supported by the government of the day. I think the outcome will be a very significant win for the farm sector.