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Thursday, 27 August 2020
Page: 4269

Senator WATT (Queensland) (13:33): Labor will be supporting the Primary Industries (Customs) Charges Amendment (Dairy Cattle Export Charge) Bill 2020. The purpose of the bill is to make the current voluntary $6 live dairy cattle export levy mandatory. This levy will fund the dairy cattle export program, which aims to improve research and development focusing on animal welfare, supply-chain efficiency, regulatory performance and market access. In 2018-19, Australia exported 92,456 dairy cows, valued at over $180 million. The countries that dairy cows were exported to include China, Indonesia, Japan, Malaysia, Oman, Philippines, Taiwan, Thailand, United Arab Emirates and Vietnam. China received by far the highest number of Australian dairy cows, at 75,072. That saw an increase in trade of 164 per cent year on year.

Many Australians will be surprised to hear that Australia exports dairy cows to other countries and that levies are used to help exporters develop dairy herds in the importing countries. This is one of the reasons why the bill was referred to a Senate committee on 12 June this year.

The committee received six submissions, and submitters expressed strong support for the bill. The submitters included Australian Dairy Farmers and the National Farmers Federation, who were supportive of the legislation. It is important for the Senate to remind submitters to Senate inquiries that the committee system is there to ensure that legislation is properly scrutinised and that government is held to account. The Australian Livestock Exporters Council has proposed to direct only $1 of the $6 per head to research and development and the remaining $5 per head to marketing activities, which would be spent predominantly in foreign importing countries. The annual report of LiveCorp, which is the live export research and development corporation, states that the current voluntary levy is split so that $4.80 goes to marketing and $1.20 goes to research and development.

As it stands, the levy is voluntary. According to evidence provided by LiveCorp to the Senate Standing Committee on Rural and Regional Affairs and Transport, there are several problems with the voluntary component of the levy. These include the fluctuating and unreliable funding and cash flow, which limits effective budgeting and resource allocation; the limitations on long-term corporate engagements, such as recruitment and contracting; the efficiency losses through monitoring, identifying and chasing payments; the inability to enter into long-term, strategic or higher-cost projects; management of the risks of overservicing the program or the levy payers beyond the levy payments received; and management of the expectations from levy payers and stakeholders that exceed the capacity of the program. In addition, under a voluntary contribution arrangement it is more difficult to get consistent payment across a group of levy payers for industry good functions, as potential levy payers often have expectations linked to the service or benefits received by their individual business. This means that, according to LiveCorp, these challenges have constrained LiveCorp from successfully integrating the dairy program into its routine operations or meeting the expectations of stakeholders.

LiveCorp is not the only research and development corporation that is facing challenges in meeting the expectation of stakeholders. There are 15 research and development corporations, and many Australians will have little knowledge about the work they do. The structure of the RDCs is quite different today from when they were initially established by the Hon. John Kerin 30 years ago. John Kerin, the former Labor agriculture minister, believed—as did Labor generally—that government involvement in research and development is justified on the grounds of market failure, external benefits to society, research that supports the government's role in resource management and national interest consideration. They also believed that R&D is a form of investment and that there cannot be efficient resource allocation unless R&D administration is as efficient and effective as possible.

I won't go through the entire history of the various changes that have occurred since John Kerin established the RDCs, but the Senate should note that over the past 30 years they have morphed into hybrid industry-owned RDCs, such as LiveCorp, who collect levies from their stakeholder—who in this case would be the live animal exporters. Today the RDCs are funded primarily by statutory R&D levies or charges on various commodities, with matching funding from the Australian government. To expand Australia's rural R&D efforts, the government matches expenditure on eligible R&D, generally up to 0.5 per cent of the determined industry gross value of production. RDCs are accountable to both industry and government.

Levies for R&D and marketing are initiated at the request of industry and are collected and administered by the Department of Agriculture, Water and the Environment. These funds are distributed to the RDCs to undertake R&D and industry services. The live animal exporters are strong supporters of this bill, because currently the voluntary levy is undercollected. In 2019 only $15,000 was collected from the voluntary dairy levy. However, if the levy were compulsory, over $550,000 would have been collected. That is quite a difference in revenue for the RDC.

However, more funding does not necessarily equate to better routine operations nor to meeting the expectations of stakeholders. Many levy payers are concerned that their levies are not being used efficiently or effectively with regard to R&D and marketing. This is not just the view of Labor; Minister Littleproud commissioned Ernst & Young in 2018 to undertake a review into the R&D funding. It was a comprehensive review which was undertaken by the minister's current departmental secretary, Mr Andrew Metcalfe.

Before the 2019 election, as the then Minister for Agriculture and Water Resources, Mr Littleproud, claimed, that the report would look at how to get the most out of Australia's rural innovation system through spurring cooperation and collaboration, attracting capital from around the globe and developing our research ideas into cutting-edge technology. Fast forward to today, and what has the minister done to ensure that Australia has a world-class, modern and dynamic rural innovation system? Absolutely nothing. Indeed, post the 2019 election, the agriculture minister was reported as telling the Farm Institute's annual conference that the RDCs could expect a shake-up:

"One focus I had before the election was around our research and development organisations, to make sure they are fit for future," Minister Littleproud said.

He went on:

"We are ranked number 20 in the world, we have just as many researchers as the US and the Netherlands who are number 4 and 6 in the world.

"As I went into South America, I remember hearing the Argentinians say you actually have the best research development people in the world, but they are bone lazy when it comes to commercialising their product."

The minister also talked about a culture change needed in the RDCs, and questioned:

"Are they fit for future? and how do we actually put a rocket under it and really drive it into a new pillar of agriculture," he said.

I would suggest that the minister stop talking about the problem and do something to fix it. We know that the minister's departmental secretary is an expert on the subject, as he was working for Ernst & Young when they spent over $2 million developing a report for the minister. Mr Metcalfe's consultation was extensive and included both international and domestic engagement with stakeholders, a number of regional roadshows and 23 workshops held in various locations around Australia. There can be no doubt that Mr Metcalfe is well aware of both the issues facing these programs and also the solutions.

In March 2019, the minister received the report titled Agricultural innovation—a national approach to grow Australia's future. The report made a number of recommendations aimed at benefiting all participants in Australia's agricultural innovation system. There are five recommendations in the report, including: strengthening leadership for strategic direction but also improving connections, collaboration and culture; balancing funding and investment to solve short-term challenges, as well as targeting transformational and cross-commodity outcomes; establishing world-class innovation practices, including disruptive thinking, ambition and entrepreneurship to maximise opportunities from our investments; strengthening the regions to maximise innovation uptake and to provide regions with a greater role in national priority setting; and establishing the next generation innovation platform for our data, physical infrastructure and regulatory environment.

Sadly, the minister has not acted on the problem and not acted on the report. He just continues to talk about the problem without having the courage to do the hard work of true reform to ensure that our research and development corporations are fit for purpose and that other countries are not calling our researchers 'bone lazy'. Ultimately, while Labor is supportive of the bill, we have real concerns about whether stakeholder expectations will be met, and we urge the government to work a hell of a lot harder to make that happen.