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Economics Legislation Committee

BADCOCK, Mr Michael, Board Director and Council Member, Tasmanian Farmers and Graziers Association

WEDGWOOD, Mr Sam, Senior Policy Adviser, Tasmanian Farmers and Graziers Association

Committee met at 09:01

ACTING CHAIR ( Senator McAllister ): I declare open this public hearing of the Senate Economics Legislation Committee. The committee is hearing evidence on the committee's inquiry into four bills that are part of the Working Holiday Maker Reform package. The Senate referred this inquiry to the committee on 13 October 2016 for report by 7 November 2016.

I welcome you all here today. My name is Jenny McAllister, and I should explain that the permanent chair of the committee has been delayed. She will be here, I understand, at around 10 o'clock, but in the interim period the committee has appointed me to chair the meeting.

The committee has received 53 submissions so far, and they are available on the committee's website. This is a public hearing, and a Hansard transcript of the proceedings is being made. Before the committee starts taking evidence I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as contempt. It is also a contempt to give false or misleading evidence to a committee.

The committee prefers all evidence to be given in public, but under the Senate's resolutions witnesses have the right to request to be heard in private session. It is important that witnesses give the committee notice if they intend to ask to give evidence in camera. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may, of course, be made at any other time.

On behalf of the committee I would like to thank all of those who have made submissions and sent representatives here today. I now welcome Mr Michael Badcock and Mr Sam Wedgwood from the Tasmanian Farmers and Graziers Association. Thank you for appearing before the committee today. I invite you to make a brief opening statement, if you would like to do so, and then the committee will ask you questions.

Mr Badcock : Thank you. I would just add that I am a farmer, a board director of TFGA and also a member of the Vegetable Council of TFGA.

Mr Wedgwood : Thank you. The Tasmanian Farmers and Graziers Association is the leading representative body for Tasmanian primary producers. TFGA members are responsible for generating approximately 80 per cent of the value created by the Tasmanian agricultural sector. Agriculture is one of the key pillars of the Tasmanian economy. With current levels of support from government, we are positioned well to further capitalise on the stature of Tasmanian agriculture. The Australian Bureau of Statistics estimates that Tasmania's gross state production for 2014-15 was $25.42 billion. Agriculture, forestry and fishing in 2014-15 was Tasmania's largest industry, representing 9.6 per cent of Tasmania's total gross value added.

The TFGA has consistently argued for a reduction in the 32.5 per cent tax on backpackers and stated that it is unsustainable. We have made it very clear that a tax of this magnitude would ensure that we are not competitive internationally. Effectively, it would slash our workforce dramatically by reducing the financial incentive for backpackers to come to Tasmania and work. Our members are growing increasingly frustrated by the progress being made by this bill, and we are also calling for a speedy resolution to this issue. Affected industries are already concerned about the ability to attract appropriate workers in what has already been an extremely taxing year for many primary producers.

Senator WHISH-WILSON: Pardon the pun!

Mr Wedgwood : Working holiday-makers by their very definition are spending their money in Australia and are the seasonal lifeblood of many rural communities. As such, we expect all sides in federal parliament to put aside their politics long enough to ensure that these valuable workers and their income stream remains viable.

Mr Badcock : I own a 350-acre farm at Forth, on the north-west coast of Tasmania. Recently my farm has become part of a farm grouping under one management system growing various crops including peas, carrots, broccoli, brussels sprouts, leeks, red beet, poppies and grains. Part of this grouping includes a grower/packer/marketer, and they are very reliant on backpackers. For this season they appear to want to utilise about 150 people. They do have a lot of Australian employees there too, but they find it hard to source more and they do have to rely on backpackers.

I am also helping out in the development of a covered protection cropping operation at Kindred, not far away from me. They now have got 25 acres under protected cropping, growing raspberries and blueberries. They are separate from the Costa operation. They will be requiring about 150 people this year. They plan to double their production next year, so there is another 300. We cannot source that type of people from our area.

On the north-west coast of Tasmania we are estimating that we would need 5,000 backpackers to cover the projected cropping and the packing for our fresh vegetables—that is for both Australian sales and export—and also for the berry fruit industry. In the processing industry alone for the harvesting of cauliflowers and broccoli we rely on backpackers again, and the thing is that, if we cannot pick them within the day that they are ready, they are gone and we cannot do a thing about it. So it is very vulnerable. In our area there is probably quite a bit of unemployment, but we find a lot of people are not prepared to get off the social security blanket for piecework. They are willing to work. We had a forum in Devonport a year and a half ago looking at developing job opportunities, and we had 800 people turn up. So basically people want to work, but it is too difficult. The thing with piecework is you have got a lot of work all of a sudden and then you get no time off. When you get some time off because of weather or seasonality, they cannot access any dollars. When they finish, they cannot get back onto that social security blanket, so they just do not get off it at all.

Recently, on 15 September, I was part of a delegation to Canberra with Primary Employees Tasmania and I was representing the Tasmanian Farmers and Graziers Association on that trip. It was all to do with the backpacker tax.

The following day, I did an ABC Rural interview re the Canberra trip, which went Australia wide. Following this interview, I was also approached by Macquarie National News, where I did a seven-minute live interview with Ross Greenwood late Monday afternoon; that went to all the major cities in Australia. This was followed up next day with him on the Money Minute on Channel 9. There is a lot of support out there for some changes.

This backpacker tax fiasco has to stop. We need a decision. We needed one by the end of September; that did not happen. It is really sad, and it is hurting our industries. This has been going since May 2015, and it is hurting our industries. We are losing a lot of confidence. Our buyers are losing a lot of confidence; they are saying, 'Can you get the product to us?' and people are starting to look somewhere else.

If a decision cannot be made immediately, I think we need to call a moratorium and put it off until at least 30 June next year, because we need to get people here and it does not look as though they are coming. We have a major problem with that. If we can call a moratorium, we need to keep the status quo we have operated under for the last 15 to 20 years.

For the last 15 to 20 years, backpackers have been treated exactly the same as Australian employees. When you apply, you put your principal place of employment. You have, in the beginning, the standard 13½ per cent. That goes up if you increase your wage rate. That was the same for backpackers as it was for Australian workers. There has been talk about Australian workers getting more dollars per hour in other countries, but there again, Australia is a high-cost country and the cost of living is also greater in Australia, so maybe they do deserve to earn more in Australia than what they earn in New Zealand or Canada.

Why change now? If the tax rate is higher than the 13½ per cent for the backpackers, it is unfair on the backpackers, but if it is lower than the 13½ per cent—standard, say—it is very unfair on the Australian workers, so I think we should be treating the backpackers exactly the same as we treat the Australian workers; otherwise, I do not like it.

As I said before, our industries are very worried about how the current crops are going to be harvested and packed. Basically, towards the end of last season, we were finding it hard to get enough pickers to finish our season off. Now, with this continual delay, I just do not know where we are heading in the future and we do not have any time left. Please, whatever we do, we have got to get a decision out as fast as we can.

ACTING CHAIR: Thanks very much, Mr Badcock. Senators, we have only got about 20 minutes between us, so can I ask you to keep your questioning as tight as you can. I will come first to Senator Bilyk.

Senator BILYK: Thanks, Chair. You might just tell me when my time is up, because I do have lots of questions. Thank you for the submission, and thank you also for your very comprehensive comments this morning. You commented that you are frustrated by the progress being made by this bill. Mr Badcock has put in a suggested timeline for a moratorium. One of the things I am interested in—I was not quite sure of the date you said you went to Canberra, Mr Badcock—

Mr Badcock : It was, from memory, 15 September.

Senator BILYK: Was there any consultation that you were aware of, prior to this proposal, with people involved in the industry—TFGA?

Mr Wedgwood : That would have been nice prior to 2015 and the budget announcement, but that is not quite how budgets necessarily work; I understand that. But no, not really.

Senator BILYK: Following the budget—say, within three or four months of the budget announcement—was there any consultation that you know of?

Mr Wedgwood : Not directly with me.

Mr Badcock : Very minimal.

Senator BILYK: You talked about the change—Mr Badcock, you particularly talked about the day of picking and the need to have people available. I am wondering if there are any ideas on, or if you have got any comments on, how much you think you might have lost within the industry in the time frame since the 2015-16 budget announcement to now, including the crops that are coming through now. What sort of impact is that having—profit-wise, even?

Mr Badcock : Up until now, probably minimal. The problem is moving forward, and the lack of confidence that is out there with our industries. I would think that some developments that were going to happen probably did not happen, and that is going to cost us at the end of the day. I think protected cropping, especially, in Tasmania has got a fantastic future, and we do not want any hiccups going forward. We want to be very positive and proactive. That is where we need the security of knowing that we can get employees.

Senator BILYK: One of the other suggestions was about the superannuation payments and the government taking 95 per cent. I am wondering if you have got any comments to make about the cost of the churn of administering that super and who would actually bear the cost of that happening?

Mr Wedgwood : The more important question is who benefits from them paying the super? What is the point? It is the farmer who pays the price of actually processing it; they have to spend the time doing it. Superannuation is not always the easiest thing to do, and I assume it is a lot harder for somebody from outside of Australia. Mike said yesterday that he is still getting letters from superannuation funds for people who worked for him 10 years ago who are no longer in the country. What is the benefit? Who does it benefit? The only people who are cashing in on it are superannuation funds.

Senator BILYK: And if the government takes 95 per cent one can presume that is a nice source of income. What is the significant difference then between the working holiday visas? Why is it important, as opposed to just having a seasonal workers program? Do you have any comments about the difference in the two?

Mr Wedgwood : I assume the Seasonal Worker Program would allow individuals to return on a fairly regular basis, so you build up a skill base there. But that flexibility is not there, I would assume, either. Mike might be able to elaborate on that.

Mr Badcock : They are two separate programs, but they are both very important to us. One serves a purpose one way and the other serves a purpose another way, so I think we need to access both.

Senator BILYK: Do you have a comment to make with regard to the labour hire companies acting as intermediaries between working holidaymakers and the farmers? For example, would the new provisions of allowing working holidaymakers to work for the same company over 12 months in two locations lead them to give preference to being employed by labour hire companies do you think?

Mr Wedgwood : It may very well, but that depends on the individual and what they want to do and what their plans are.

Senator BILYK: But does the TGA have a view either way?

Mr Wedgwood : I would suggest not at this stage.

Mr Badcock : On the practical side of things, I see a fair bit of that. The labour hire companies are a very important part of the process. They consolidate groups of people and they can move them from one farm to another farm to another farm all in one season. It is very difficult to do it any other way, so they are, as I said, a very important part of the process.

Mr Wedgwood : It is also worth noting that the regulation around those labour hire institutions needs to be tightened. There is stuff in the media currently about people being exploited in these systems. That is something we need to be very aware of, because it not only affects the farmers but it also affects the whole industry.

Senator DUNIAM: Thank you both for appearing today, and thank you for your advocacy on behalf of the industry you represent. I want to start with the points you have made around your preferred way forward. It is my understanding that your preference is for the legislation—so what is before the Senate and what this inquiry is all about be dealt with—to be dealt with in a timely fashion, but if it cannot be dealt with you have suggested a moratorium. Going to the moratorium proposal, what does that look like? Is it a reversion to what has been in place to date? If that is the case, what does that look like? Is it a reversion to 32½ per cent tax rate that is the law—because we do have that finding from the AAT about the application of that tax break? If you could just explain that, I would be grateful.

Mr Badcock : I think the moratorium would be an emergency situation, and maybe it is an interpretation of the law. An interpretation of tax law is how we got ourselves into this mess, so I do not know whether it can be reinterpreted back for a temporary period so that we can revert back to what we were exactly doing for the last 10 to 15 years.

Senator DUNIAM: My understanding is that would be incredibly difficult.

Mr Badcock : I do not think anybody realises the importance of getting some workers into our country at the moment. We need to really do something. I do not know how we are going to do it, but it needs to happen. The consequences are going to be a lot more serious than the half a billion dollars that Treasury was going to get out of the 32½ per cent tax—a loss of confidence in our industry and developments and everything else. So we really do need to have action. It is probably a shame that the whole thing has got into the political sphere. That does slow the process up. That is why we are suggesting a moratorium: because the debate will probably be ongoing for some time.

Senator DUNIAM: But your preference would be that the debate was not ongoing, and that we deal with the legislation and pass it, so you can get on with doing what you do best.

Mr Badcock : Definitely. Yes.

Senator DUNIAM: All right. I want to go back to your opening comments. With regard to the tax rate that is proposed under this legislation, do you think it is internationally competitive?

Mr Badcock : I believe that, at the 19 per cent rate which is mooted, I do not think we are going to get our workers in—because they have not been used to it; it is a psychological thing. There is social media—there are no secrets in the world anymore—it is out there. With the 19 per cent, I believe we are going to get just about as much rejection of that as of the 32½ per cent. I do not think we can sell that, 'okay, 19 per cent, you are actually going to get X amount of dollars'—knowing the type of people we are getting, I do not think it is going to work. That is why I say that if we can somehow revert back to the status quo for the time being, then still have the debate and sort something out for the next season.

Senator DUNIAM: Sorry; I am just trying to understand your position. Your initial response was to deal with the legislation and get it through.

Mr Badcock : Yes.

Senator DUNIAM: But you have a problem with the tax rate, which is part of what we are dealing with today.

Mr Badcock : Yes; we have a problem with the 19 per cent. We do not believe that we will get the workers if the 19 per cent is passed.

Mr Wedgwood : But the 19 per cent is better than the 32.5, and it is a good starting point.

Senator WHISH-WILSON: It will be the ending point!

Senator DUNIAM: Okay, I understand your point, Mr Badcock—and it answers my next question—with regard to where we are now, from 32½ to 19; you have said it is better. You made a comment, and this is probably where I will leave it for others to question, about developments that have not happened because of uncertainty around what is going on. Is there anything you can add to that? Is it investments that farmers were going to make, such as purchases of equipment? What sorts of developments are you talking about?

Mr Badcock : All of that. It is just the lack of confidence in even having the workers to pick the crop that we have got in the ground this year. That puts some unsureness into the situation. We have got some great opportunities now with, maybe, a new freight system operating out of Tasmania with Mr Lu and his milk, and we can piggyback on that. We really need everything going for confidence, for us moving forward.

Senator DUNIAM: Okay. So the first, best-case scenario is certainly moving forward—and the government has proposed a piece of legislation we are examining today which has a certain tax rate; it will not be in everyone's mind that it is the best rate, but the alternative is a moratorium which may well produce greater uncertainty. But I take your point about getting the bills through.

Senator WHISH-WILSON: I am a little bit unclear here as well. I think we need to look at the evidence which the committee received from the ATO and from Treasury at the last hearing. If this legislation does not pass, the default position is that some backpackers will pay no tax, as they are entitled to; and some will pay 32 per cent, depending where they are. That is the default position. But to all intents and purposes, the big majority of them pay no tax, because the ATO does not have the ability or the resources or the priorities to target them. So the default position is what it is now, as you point out—and not what Senator Duniam is trying to make clear; that they are all going to pay 32 per cent. My question was this: in terms of a moratorium, do you mean a moratorium on no legislation passing until you guys have an agreement with the government?

Mr Badcock : Yes. Because if the debate within parliament keeps on, and you take this inquiry back and you cannot come to a conclusion, that will do a lot of harm—a lot more harm—to our industry. We really need something to happen quickly so we can move on.

Senator WHISH-WILSON: But you have made it clear today that you do not believe 19 per cent will be a competitive position for your business—and you are not the only one who has said that. Our view is that this legislation should not pass, and that the default position should remain as it is—which means most of them will not pay any tax and we can keep the workers coming in—and that we can find the money elsewhere. Half a billion dollars is actually not that much in the scheme of things. Mr Wedgwood, you said quite clearly you wanted a quick resolution, whereas Mr Badcock said he backed a moratorium for the status quo. I do not know if you have different positions within the TFGA but could you clarify that?

Mr Wedgwood : No, not necessarily. We would like to see this progress to a point where it is dealt with. If that means that we need the best outcome and we need to wait, that is fine. But there needs to be certainty in this for producers.

Senator WHISH-WILSON: I am not trying to be political here. I understand that it is not your role to be a political advocate, but it is a bit unclear what you are advocating for as an organisation.

Mr Wedgwood : We are advocating that, if it is required, yes, a moratorium may be the case, but most definitely we are not looking for 32.5 per cent from the first dollar.

Senator WHISH-WILSON: But you said just a second ago that 19 per cent was a good start. Does that mean you would support legislation locking it in at 19 per cent so that, beyond doubt, every backpacker in the country will pay 19 per cent, rather than some paying zero, and they are legally entitled to pay zero at the moment?

Mr Wedgwood : If I thought that we could get something lower, I would be advocating for that. And from what Senator Lambie said, I would like to advocate for much lower, but—

Senator WHISH-WILSON: The legislation can be amended. We can put amendments up in the Senate that we can vote on, which means you may get a lower rate. That should be pointed out too.

Mr Wedgwood : Well, if I could lean on you to lower it, that would be great.

Senator WHISH-WILSON: Your position has become very clear. Thank you.

Senator POLLEY: I think we have to be very clear that we now face having to pass legislation and having this inquiry when this issue has been going on for some 18 months. What the government has managed to do, in fact, is put a whole lot of uncertainty into primary industry in this state—and we are not even talking about the tourism industry or the mining industry, where people also work. Can you estimate what the cost will be to Tasmanian producers if this tax gets passed through the Senate at 19 per cent—because there will be a resolution to this effect—and we do not have those backpackers coming here because we will not be competitive?

Mr Wedgwood : I could not give you any exact figures, but if you increase competition in the market farmers are going to have to increase their level of pay to compensate. It is going to cost all producers a lot more money over the long term and short term.

Mr Badcock : There is a danger. A lot of these companies are development companies. It is a new industry that a lot of these workers are coming into. They are probably running on a fairly fine line. If all of a sudden they cannot get product away from the farm and their costs run away from them, they will probably close up. That is the danger we are looking at.

Senator POLLEY: And if we do not attract the backpackers to Tasmania for this season, isn't there a likelihood that they will not return?

Mr Badcock : Yes. With social media the way it is, there are no secrets in the world. They can communicate daily what is happening everywhere, so they know exactly what is going on. Yes, there is a fair bit of danger and, because they have lost confidence, it could take several years to get them back to the numbers that we were getting previously. Now, they really want to come to the country. They love Australia. They want to come here. They want to work. They want to come and, at the same time, tour the country. So they are prepared to work to get some money, and then they want to tour, and then they take the story back to their own country. Now, we are missing out on all this if we do not get the backpackers into the country.

Senator POLLEY: My understanding is that evidence was given at the hearing in northern Queensland that there was great disappointment that, yet again, the government has not released any modelling upon which they based the analysis that the 19 per cent would be fair and reasonable. Have you seen any modelling?

Mr Badcock : Not very much. I think our NFF has done a bit of modelling, but—

Senator POLLEY: But the government has not released their modelling.

Mr Badcock : Yes. I am not aware of it. I think they have done it on a financial basis, on an estimation of X amount of dollars in their pocket, but I do not think they are taking into consideration the damage that might be done—what that is going to cost our country or anything else.

Senator POLLEY: My final question is: would you be happy to have a tax rate of somewhere between 10 and 15 per cent, with the middle at around 13 per cent? Would that be more palatable to you and your sector than the 32 per cent and the pressure the government is putting on you by saying, 'Well, okay, if you're not going to accept the 19, it'll have to be the 32'? Would your preference be somewhere around 13 per cent?

Mr Badcock : Yes, definitely. I think we really have to try to keep it the same as for an Australian worker, because they are working side by side. We should make it the same.

Senator POLLEY: Absolutely. Thank you very much for your submission and for coming before us.

Senator DUNIAM: I have one quick follow-up question. The call for certainty: other people have put submissions into this inquiry and have said, 'Well, okay, how about we have a look at this thing in 12 months' time, after the bill has been in operation and the tax rate has been applied, say, at the 19 per cent? You have asked for certainty; you want to have a good, hard look at it and make sure that it is right.' Is that sort of thing something that you would be open to?

Mr Badcock : That is a very high priority. We do need certainty, and—

Senator DUNIAM: But in this situation you could deal with the bill, get it through and then in a year's time, once the tax has been in effect, we could have a look at it then. Is that something which is an alternative to a moratorium?

Mr Wedgwood : We need to recognise that all media around this is damaging the reputation of Australia.

Senator DUNIAM: Yes, hence the uncertainty.

Mr Wedgwood : Anecdotally, in this room this morning, I have been told that an individual would not have come to Australia if they had known of all this confusion. It would have made them avoid the place. They would have gone to New Zealand.

Senator DUNIAM: Yes. So bill passed, review in 12 months is something that you think might work? That is basically the nub of it.

Mr Badcock : I would rather sort it out now, but if we have to go there then we have to go there.

Senator DUNIAM: Okay, thank you.

Senator BILYK: Wouldn't you rather there were no change?

Mr Badcock : I think that is the best situation we could get.

ACTING CHAIR: Thanks, Mr Badcock and Mr Wedgwood. We appreciate your evidence. I call our next witnesses.