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Thursday, 10 October 1996
Page: 3898


Senator MacGIBBON(1.08 p.m.) —We have a bundle of eight bills before us, and I wish to speak principally to the Cattle Export Charges Amendment (AAHC) Bill 1996 and the Cattle Transaction Levy Amendment (AAHC) Bill 1996. I recognise the need for me to be brief. This is yet another levy being put on cattle producers, who have been going through a very hard time in recent years. Particularly in my state of Queensland, we are well into the sixth year of a major drought, the biggest in living memory, and we are facing a market collapse with respect to cattle prices. Anything that increases the costs of production is not viewed with favour in any way at all. But we recognise that there are some virtues in this if it is taken to the objectives that are stated in bringing the bill before the parliament.

I would like first of all to declare my financial interest in this as a cattle producer. It is interesting to see from the statistics here in the parliament that, in the last four parliaments, between five and 10 per cent of legislation that has gone through has related to the primary industries portfolio. A significant part of that legislation has related to increased charges or the imposition of new levies. For example, in 1982-83, $391 million was raised from the rural sector. Ten years later, in 1992-93, around $719 million was raised from levies, almost a doubling in the charges that are applied to the primary industry sector.

These two bills are concerned with funding the Australian Animal Health Council Ltd, at an initial operative rate of 5c per head for cattle or a prescribed rate up to a maximum of 50c per head. Charges are to be imposed on cattle other than dairy cattle exported from Australia by the Cattle Export Charge Act 1990. Additionally, I draw it to the attention of the Senate that the cattle producers pay a levy under the Cattle Transaction Levy Act on the sale of cattle, delivery to a processor and the slaughter of certain cattle. Both of the principal acts are amended here to take account of the need to provide funding for this new body, the Australian Animal Health Council Ltd.

The AAHC is an unlisted public company limited by a guarantee—the partners being the Commonwealth, the states and the territories, and industry organisations. As Senator Collins said, it was established following an agreement on 18 August 1995 by ARMCANZ, the Agriculture and Resource Management Council of Australia and New Zealand.

Its objectives are several: to assist the Australian animal health service system in maintaining acceptable national animal health standards and meeting consumer needs and market requirements at home and overseas; to advise and advocate to government and industry action on such matters as strategic national animal health priorities, animal health system delivery arrangements and resources, and to have an involvement in residue related issues as they relate to animal health and commercial performance.

I repeat what I have been saying for about 20 years: the aim of the industry must be for zero residues. It is not enough just to meet the minimal standards that are agreed internationally; we need to promote Australia as a clean source of pure food. We do that not by meeting standards on residues but by having zero residues. While it might be a utopian ideal, that is the objective that we ought to have. Going back to the objectives of the AAHC, it ought to have international status as the national animal health policy and advisory body to arrange for and assist in research and development matters pertaining to animal health.

Senator Collins talked at length about the diseases that we are free of at the present time, saying that good management was involved. That is perfectly true. There has been a great deal of vigilance in the past to prevent exotic diseases coming into Australian pastoral herds. The point is that the geographic isolation of Australia was our greatest asset, and with the permeability—for want of a better word—of the boundaries that once existed, that isolation is now greatly reduced, with relatively free and untrammelled access, legally and illegally, into the country.

There is a huge influx of passengers and tourists each year into the country. They can bring in foodstuffs despite warnings by the customs department to travellers. We really are in a position where we must increase our surveillance and tighten our regimes and disciplines very considerably on what existed in the past.

I express a concern for the standards of quarantine. I do not think that they are as good as they were, and it is a matter for governments of all persuasions to have that as a top priority. The economic consequence to us of an avoidable breach in the quarantine barrier would be indescribable. The consequences would really be quite enormous.

The funding for the AAHC will come under three categories. Administration and operations will be funded to the amount of $840,000. Key national animal health care programs, according to the ARMCANZ board report into the AAHC, will receive finance to the amount of $900,000 in 1995-96, and a third area to be funded are other national animal health programs, and that will be done on a case-by-case basis.

I would like, in conclusion, to say a few things about the cattle industry. We are in a market downturn at present with respect to cattle prices. It is, far and away, the worst for 20 years. The returns to producers are really very poor. In parts of the country we have drought and, as I was saying earlier, a major drought is in its sixth year in many parts of central Queensland, which is the principal export cattle producing area for Australia.

We are coping with—and it is one of the factors driving the market price down—an oversupply of meat on the market, principally from the United States, where their herd numbers have peaked and they have had good seasons. Coupled with this excess supply, they are marketing very aggressively into our traditional markets in Japan and Korea and around Asia. We cannot compete with them. While we are producing beef through the farm gate at about 60 per cent less than the United States, we are paying three times what the United States pays on average to process that beef. That means that American beef can come in here cheaper than the consumer can buy it from Australian sources. We have got to do quite a bit to improve our processing to get into a competitive position.

We are in a position where we do not have any stability with respect to overheads. Year by year those costs are going up, and the returns to producers have shifted in a major way. Once upon a time, if you took a notional value per kilogram of beef on the consumer's table the major part of that would have gone to the producer. Today, the processor, the wholesaler and the retailer take the major part of that price for the kilogram of beef and the producer gets the minor part. The difficulty with that is that the producer's costs, as I have said, keep going up and up.

It is a competitive industry. You have to have herd improvement, improvement in pastures, water retention, and the rest of it. Those are really big sums that have to be met, and they do require a higher profit level than the industry is getting at the present time if the industry is to be sustained. The whole of rural Australia is declining in population and that has some significant sociological consequences. I do not want to get into that, but I was reading the other day that the ABS has claimed that in the last 30 years we have lost over 100,000 farms. That is a pretty significant factor.

To turn back to the industry itself, it really is in crisis. I look at an industry such as the cotton industry, which is one of the great rural successes in Australia, and I wonder why it has been so successful compared to the beef and sheep industries. One of the conclusions I reach is that the cotton industry is a new industry and it does not carry the baggage in its haversack that the older, established industries which have been around for a hundred or a couple of hundred years do. They can use new and efficient management practices and, starting with a clean sheet, they can optimise their size to maximise their results.

I do think that, to survive, the cattle industry has to change—and change significantly—from what it is today. I say `to survive' advisedly because, for the first time in my life, I have doubts about the long term survival of the cattle industry in the export field in Australia. It will be a tragic loss for us, economically and in other ways, if we lose this great industry which I think is probably the biggest of all Australia's export primary industries.

The only area where we have had any success in recent years has been the live cattle exports from northern Queensland and the Northern Territory. That has undeniably been a godsend for us. There would have been many more people driven out of the industry but for that. But, at the end of the day, that is not the field that we want to focus on and put our emphasis on, because there is no value adding in that. In a sense, it is just a rather feudal way of trading—you are just producing young cattle and exporting them. We want to be in the business of value adding and exporting high quality carton beef. But, before we get there, the industry has to be reorganised very considerably.

One of our principal problems relates to abattoirs. I would say—just off the top of my head—that we are down to between one-third and a half of the abattoirs that existed 20 years ago. The significance of that is profound because the abattoirs are very important players in this. They are really the price setters for the producer. The producer is a price taker, and if the abattoirs are not buying the producer cannot get rid of his stock. There is now no competition between abattoirs. They are enjoying a degree of natural protection because of their few numbers. And the geography of Australia means that if you are going to truck 500 miles to a competitor you are going to pay an economic penalty, whatever price he is offering you, and you are not going to recover that. So the shrinkage in the number of abattoirs is very important.

The relationship between producers and abattoirs has changed very considerably in my lifetime. Once upon a time, established reliable producers, working with abattoirs, had a good give and take relationship based on mutual trust. In other words, if an abattoir got an export order and wanted to fill that order, it would ring up a reliable producer and the producer would let cattle go even if they were not ready for market. The producer would take a little bit less than the payment for them, because they were not as far forward as they might be. The producer would know in return that if he got caught out with the dry season, or a drought or something like that, he could ring up the abattoirs and they would oblige him and, even if they did not want the stock, they would take them.

A totally different relationship exists today between the suppliers and the abattoirs. It is one dictated by the abattoirs and it is on a very hard commercial basis that favours the abattoirs at all times.

The other thing that the abattoirs do is that they write the export orders. Therefore, they have a dominant role in selling and moving the product. When a percentage are owned by overseas interests—and a very high percentage of those abattoirs are now owned by overseas interests—you have got to wonder at times what is happening. It is certainly very much in the interests of the Japanese or Korean owners of a abattoir to pay the minimal price in this country and maximise their returns in their country of origin, or where the final sale is made.

I am very much of the view that we ought to be seriously looking at the ownership of abattoirs. I have no objection at all to overseas interests owning the source of production—owning cattle properties and sheep properties—subject to following good farming and environmental practices. But I think that it is a different matter again when we get into the abattoirs. I do think that we ought to have in place some mechanism which maximises Australian influence and control over those. I am not interested in seeing vertical integration in the industry from the field to the table.

If we do not do something seriously about this, I believe that we will end up importing carton beef from somewhere like Indonesia for consumption within Australia. The live beef trade will go on. It will be processed overseas and come back to us in polythene wraps. I think that would an economic tragedy for us of enormous proportion.

So, getting back to the abattoirs: I think that the important thing there is to encourage new players into the industry. We cannot encourage them unless they are profitable, and they cannot be profitable with many of the work practices that exist at the present time. The passage of the industrial relations bill is absolutely essential for us, so that we can get good employer and employee relationships there that are based on productivity and provide an incentive so that we can get our unit costs for processing down to about a third of what they are.

The other thing that we have got to do is to be able to market a consistent product with known grades of quality. This is a very difficult problem. The Americans are moving well down that path and the Australian exporting industry also has to get to the stage where it can market beef that is graded and consistently reliable in quality, so that the consumers know what they are going to get when they buy it.

We have also got to establish an Australian brand. I think that the industry may well go to a regional basis. I would like to see the feasibility explored of something like the Central Queensland area running Capricornia beef, or something like that, and marketing that internationally with a consistent product available with consistent quality, and having it recognised as such.

I do not really want to take too much time in the Senate this afternoon, but I believe that the industry is in crisis at the present time. I think that it has to do a great deal of analysis of where it is going, and take the steps itself to address those problems. Along the way it does need support from government in things like maintaining the health of herds through quarantine procedures and through government allowing it to operate in an economically competitive way, by passing legislation that allows competitive international practices to be introduced into the abattoirs.

With those few words, I wish the bills good passage.