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Rural and Regional Affairs and Transport Legislation Committee
18/10/2016
Estimates
AGRICULTURE AND WATER RESOURCES PORTFOLIO
Horticulture Innovation Australia Limited

Horticulture Innovation Australia Limited

[12:02]

CHAIR: Mr Snell, Mr Lloyd, welcome. Thank you for your attendance. I will go to Senator Back.

Senator BACK: Mr Snell, how are you?

Mr Snell : Good thanks, Senator.

Senator BACK: Mr Lloyd, good to see you. I am very keen to know about this new two-tiered R&D program. Are you breaking new ground in the agriculturally related R&D space? Tell us about it.

Mr Lloyd : It is not really two-tiered; it is two separate investment pools. As an RDC, we are challenged—particularly in our industry, which has some 40 different commodities—with doing R&D for the purposes of benefiting specific industries. We are also charged with doing R&D that takes a very long-term view of the industry and addresses some of the major cross-industry issues. Most of our levies—not all of them but most of our levies—that originate from the industries are quite small because the industries themselves are quite small. Much of the investments that are done at industry level are maintenance-style R&D—permits and research that is specific to that industry. There was also a need to do the type of research—in things like robotics or pollination or fruit fly—that could benefit the broader industry and have a longer sustainable investment. That is also not to say, however, that there are not some industries which are quite robust and have large levies and can do their own strategic research as well. So we developed a model whereby our pool 1 investments are levy dollars paid by specific growers. Let us say a mushroom grower will pay a statutory levy that will go into a mushroom fund.

Senator BACK: Matched by government?

Mr Lloyd : Matched by our board. Our board receives money from the government and then makes a decision on how it shall be spent. In this particular case our board has determined that a Pool 1 levy fund—let's say, the mushroom fund that gets $100 in there—will be matched by $100 of Commonwealth co-contribution. That fund then has its own strategic plan. It has its own strategic industry advisory panel drawn from growers, and it gives us advice on the needs of the industry and how that money should be spent.

Senator BACK: How is the weighting of the growers—mushrooms are good example, aren't they, because there is a dominance by one or two players—so how does everyone's voice get heard?

Mr Lloyd : The purpose of the panel is to give advice to us. We try to make the panel similar to a board, for instance—as balanced as possible, based on skills. We also have a weather eye to some degree of representation, obviously, but it is really to give good advice on how the money should be spent. We go through an independent process and advertise to be on those panels. We publish a set of skills criteria and we go through an independent firm to take nominations and screen candidates and put together a committee for that purpose. It is one source of information. We also seek as much other information from the industry as possible as to what the industry requirements are.

Senator BACK: So that is Pool 1. Presumably there must be a Pool 2?

Mr Lloyd : Pool 1 accounts for just over half of the R&D money we spend. Pool 2 is, as a consequence of us doing a series of consultations over the last few years—white paper and green paper consultations—looking at the major issues that face the horticultural industry in the next 10 to 20 years And making the appropriate investments to try and solve those issues. We have taken the view that this should be a co-investment pool as opposed to a levy-based pool, so that in fact most of our funds in Pool 2—we now have six—are largely funded by co-contributions from a myriad of contributors. Sometimes they are levy payers, but often they are not. They are also partly funded by the Commonwealth money that is available to us.

Senator BACK: On the decision of the board?

Mr Lloyd : A decision by the board, but we also have advisory panels for those, drawn from industry and from subject matter experts as well. So we now have six funds in Pool 2. One is fruit fly, the purpose of which is to remove fruit fly as our number one trade barrier. Future leaders of horticultural industries is another fund. Some 20 to 25 per cent of horticulture is non-edible, so it is an amenity horticulture—nursery, garden, turf—and we have major fund there which is the greening of Australian cities and towns, where it is self-evident what the spin-off would be for the industry. We have a fund which is based around healthy eating, which is the USP of horticulture—the unique selling proposition—plus food safety, which is a major issue for the fresh produce industry. We have a fund specifically focusing on Asian markets and seeking co-investors to develop more Asian markets. And we have a recently announced fund for pollination, to ensure that our crops are pollinated.

Senator BACK: That gets me to my next question, being the Varroa mite. Senator Sterle and I actually saw the Varroa mite in New Zealand, if you recall. The gentleman talking to us seemed to be the authority in New Zealand on this topic. He said that when you get Varroa mite—not if, but when—you need to be prepared. Where is our level of preparedness for the invasion of the Varroa mite, and what are your predictions of the impact on pollination?

Mr Lloyd : The pollination fund is made up of three legs. The first one is a total recognition that the majority of crops, not just in the horticultural sector, are pollinated by the European honey bee and are therefore susceptible to the Varroa mite. For horticulture it is perhaps less critical, given the fact that horticulture is less reliant on open or what I would call non-domesticated honey bee pollination—in other words, volunteer pollination from wild populations of European honey bees, which we are led to believe will suffer more intensely from Varroa mite infestation than managed honey bee hives would.

The first leg of our pollination fund is ensuring European honey bee health. I will come back to that in terms of Varroa mite. The second leg is, as a backup to that, looking for alternative biological pollinators. These include flies, potentially bumblebees, wasps and all types of other pollinators. The third leg of our pollination fund is looking at non-biological pollinators. These are mechanical pollinators or genetic pollinators—in other words, self-pollinating crops.

So it is taking a very long term view. If I come back to the Varroa mite issue: our cornerstone investor in our fund for pollination is Plant & Food Research New Zealand. That was a deliberate decision on our part and their part. They are obviously New Zealand based. We have significant restrictions in Australia on doing any type of Varroa mite research, for obvious reasons. They are one of the world-class Varroa mite and pollination researchers in the world and they are cornerstone investor with us, as indeed they are cornerstone investor with us on the fruit fly fund as well.

Senator BACK: And you would be liaising with other agencies across Mr Quinlivan's portfolio to be surveying the likely incursion of Varroa mite?

Mr Lloyd : Yes, particularly PHA and others.

Senator BACK: It is not here yet, is it?

Mr Lloyd : We do not know yet. There is a variety of Varroa that has a arrived in Townsville, as I understand it, but it is not a destructor, if that is right term. I am not an expert on bees, but I am told that it is a matter of when, not if. Our whole program on that leg of European honey bee health is based around protecting that source of pollination. So it covers many things. It will cover genetics; it will cover chemicals; it will recover remediation; it will cover preventative matters as well.

Senator BACK: I will finish up with the observation that our past colleague and then Senator Sean Edwards says that when the discussion in this committee was around bee semen between himself, Senator Heffernan and the officials, it was the highest number of hits that Sean had ever had on his website or his Facebook page. I will not take you there, but thank you very much for the responses you have given to my questions.

Senator STERLE: When you raised that the Varroa mite is up in Queensland, if anyone caught the end of that conversation they would think, 'Oh, my God!' But you were going to say something, Secretary?

Mr Quinlivan : We have Plant Health Australia and the biosecurity group later in the day, who are actively involved in that and have expertise in the area. As Mr Lloyd described, that is roughly the situation. I think it would be worthwhile coming back to that issue and getting a proper briefing from those people when they are at the table.

Senator STERLE: I say that just so that someone does not run off and give us an irresponsible headline during our lunch break.

Senator RICE: It is very interesting hearing the type of work you are doing, Mr Lloyd and Mr Snell. I want to follow the theme of the structure of the R&D corporation and where you are located. How many staff do you have?

Mr Snell : We have about 70, give or take one or two, depending on the situation. That is quite similar to the number we had before in the old Horticulture Australia Limited, which was 65. The structure is now in place for the new company fully running, fully resourced and running the new models with two pools. It is located in Sydney.

Senator RICE: Your industry is right across the country, obviously. There are whole range of different segments. Where are your offices based?

Mr Snell : In Sydney.

Senator RICE: How do you feel that being based in Sydney works for you in having that central capital city location?

Mr Lloyd : First of all, we are probably the most dispersed industry in Australia, so it is very difficult to land on a particular spot where we should be, given that there are some 40 major commodity groups and 80 different crops. Secondly, we are actually based in the centre of the richest horticultural district in Australia. The Sydney Basin is the richest horticultural district in Australia in terms of production. So it is relatively easier for us to access some of the biggest growers, who are actually on the peri-urban fringe of Sydney. It could be in any city, of course, but it is the richest one.

Mr Snell : We have offices in Melbourne and Brisbane as well.

Senator RICE: Has there been any pressure from you growers to have decentralisation of your offices?

Mr Lloyd : No, not from our growers. And when we were owned—in our previous structure—by the peak bodies of the industry, it was not a frequent but a periodic debate as to where we should be: in Sydney, Canberra, Brisbane or Melbourne, and inevitably they always settled on Sydney as being the most convenient location.

Senator RICE: Obviously, the issue is that you have a very diverse grower base. Can you explain the reasons why you feel it works for you to be located in a capital city rather than being decentralised? We have heard of other organisations that are moving to the 'hub and spoke' model.

Mr Lloyd : For us it is more about the diversity that we have. If we were based in Brisbane, for instance, the tropical industries, I am sure, would be more pleased, but the southern temperate industries would not. There is no particular concentration of horticulture, perhaps, any greater than we find in—well, quite frankly, in the peri-urban area around Melbourne, the peri-urban area including the Lockyer Valley around Brisbane, and the Sydney basin. So if you were going to look at where you were going to be based, it would be one of those three anyway. Were we to be based up in—with the greatest respect to the banana industry—Innisfail or somewhere like that, we would only be exposed to the banana industry and some of the more tropical fruits. There is no ideal location in that sense. What has come about over the years is convenience and given the diversity of industry, ranging from the Huon Valley in Tasmania to just outside Darwin, the most convenient location has always been determined to be Sydney.

Senator RICE: Right. So it is convenient, it is efficient, and it works effectively for you as a diverse industry.

Mr Lloyd : Yes.

CHAIR: Senator Rice, let me put on the record that I apologise to Senator Sterle and his colleagues, who had the call before and I inadvertently took it away.

Senator CAROL BROWN: Is the HIA aware of the APVMA relocation to Armidale?

Mr Snell : Yes

Senator CAROL BROWN: Have there been any concerns raised within your organisation about that relocation?

Mr Snell : Just general discussion—will it happen or won't it happen—but no other observations or formal discussions around the board.

Senator CAROL BROWN: So it has not been discussed at board level, is that correct?

Mr Snell : APVMA is discussed from time to time around our board table with regard to minor use, of which we hold a number of labels. Of course, our growers have demands for different chemical combinations and cocktails which need permits and that is the contact that we have with the APVMA.

Senator CAROL BROWN: Are you aware of the concerns that have been raised by other groups about the relocation?

Mr Snell : Yes, I have heard other people discuss the concerns.

Senator CAROL BROWN: Do you have any concerns about loss of capability, for example?

Mr Snell : I do not know what is the most efficient model for APVMA. For us, I think it would be a very small impact if they did move. I suppose you would have to ask the true stakeholders like the chemical companies to get the real answer.

Senator CAROL BROWN: Thank you. Is the backpacker tax an issue that has been raised at your board level?

Mr Snell : Again, in general discussion. The backpacker tax is something that has been out there for some 16 to 18 months. While we do not involve ourselves in the politics of that, there are concerns that, 'will we have enough labour to pick the crops and deliver the product?' I think that would be our concern. What the formula is, I do not know.

Senator CAROL BROWN: Have you expressed concern to government?

Mr Snell : Through general conversation, yes, I suppose. Yes.

Senator CAROL BROWN: I am sorry, Mr Snell; what does that mean?

Mr Snell : Nothing formal but yes, we have had conversations that—what is happening, and where is it at; that is all we know.

Senator CAROL BROWN: I am from Tasmania and we have had a lot of concern; is that concern expressed because—

Senator STERLE: You sound like you are apologising. You should be proudly from Tasmania.

Senator CAROL BROWN: I am proudly from Tasmania! I certainly was not apologising. But there has been a lot of concern about the labour that will be available.

Senator STERLE: Yes.

Senator CAROL BROWN: I am just trying to ascertain from you, Mr Snell, is that the sort of concern that you have expressed to government?

Mr Snell : Yes, we would show concern that the crop will be affected. We believe that what we are seeing is there may not be sufficient labour to get the maximum yield. Of course our growers are concerned about that and they do talk to us about it. But again, we take a very firm view that our role is for research, development and marketing and we do not get into the political scene.

Senator CAROL BROWN: So there has been no consultation with the HIA about this move?

Mr Snell : No.

Senator CAROL BROWN: In the discussions that you have had with some of your stakeholders, have they indicated what sort of labour shortages they are experiencing or expecting to experience?

Mr Snell : I have heard from several and they think it will be up to 40 per cent effect. That is the figure that has been explained to me.

Senator CAROL BROWN: And is that across all those stakeholders?

Mr Snell : That would be some major stakeholders, particularly in the export marketing. They are concerned that they can get their crop off.

Senator CAROL BROWN: Now with the change from 32.5 per cent tax rate down to 19 per cent, has that concern dissipated or has that remained?

Mr Snell : I believe so. That is my impression but I cannot really answer that question. Mr Lloyd?

Mr Lloyd : No.

Senator CAROL BROWN: But is there no indication that the concern has lessened because of the new position that the government has taken?

Mr Snell : No, I think the message we are getting is: can government move this on, get it solved and allow people that want to come to this country the time frames to organise themselves. I think that is the issue.

Senator CAROL BROWN: The issue is whether 19 per cent is enough of an incentive to come. What I am asking you, Mr Snell, is whether your stakeholders are saying that 19 per cent is any real difference in terms of backpackers coming here to work and whether that will actually be an incentive?

Mr Snell : All I can reflect on are conversations that I have had. Industries have said to us that what is on the table now, if you can move forward, will most probably resolve the issues so that is all I can say.

Senator CAROL BROWN: Really?

Mr Quinlivan : We will be able to explore that issue a bit later when the relevant people are at the table under output 1.

Senator STERLE: Can I just touch on this? Mr Snell, at the last sitting period here, so probably a month ago, things changed because of the uncertainty that was out there. There was absolutely no direction as to where government was going to land on this. As we know, former senator Colbeck was trying to put forward a position then the election was called. We were bombarded by Tasmanians—not that that was a bad thing at all. They were all of your mob from down Tasmania—horticulturists, grape growers everything—and they were fuming. In fact, they were that mad that they made Senator Lambie look like a pussycat. But they are all happy down there now, are they? I am not having a crack at you but is that the case now? Because what they were saying was it did not matter what it was; it was the uncertainty. They said, 'We cannot get people to come to Tasmania. We need people to pick and we recruit now.' I did come in on the back of your answers to Senator Brown but am I right to say that in the last couple of weeks or week since the announcement of that backpacker tax rate at 19 per cent that all of those problems have gone away and they have now found people?

Mr Snell : I cannot say the problems have gone away but I can say that there has been a decision made and a statement made and there is a lot more certainty about what the situation is. I think the uncertainty has gone away to a certain degree. Whether they are satisfied, I cannot tell you.

Senator CAROL BROWN: But that was not actually my question. My question was not about the government's now position, which has changed after a number of reviews. My question was actually what your stakeholders have indicated what they think about it. I know from talking and listening to what they have had to say in Tasmania, but it is not completely the case in Tasmania that 19 per cent will actually offer any real difference in providing an incentive for backpackers to come and work in Australia.

Mr Snell : Let me try to summarise it from our point of view. The backpacker scenario, and how it works for Australia, has been very successful over the years. We have seen that success in that people prefer to come to Australia on some sort of program to pick crops and deliver them. That has been very successful.

That is all I would like to say: it has been a successful program. However you change that, you would want improvement. Can you give improvement? I think there are places where you could get improvement. Obviously, you are looking at the structure, the model, the taxation and how those might affect it. Does it incentivise them to come here? I just think it has been a source of labour for the horticulture industry that has been reliable and, up until today, it has been very successful.

Senator STERLE: No-one is arguing that. We agree.

Mr Lloyd : That level of dialogue about particular rates and those types of things is not one that we would generally have in any specifics with any of our stakeholders. They do not generally talk to us about that.

Senator CAROL BROWN: I understand that, and I thank you for your comments.

Senator STERLE: Information was provided to me from the tourism industry, particularly in WA. I am not going to argue with Mr Snell. If we did not have tourists working in the Kimberley, the IGAs would not be open, the pubs would not be open, the resorts would not be open, fuel would not get pumped—do I need to go on? You understand what I mean.

Has your association, in horticulture, had it reported to you that there has been a drop-off in applications for foreign workers to come and perform fruit picking, or is it just all systems go and no-one is worried?

Mr Lloyd : No, nothing has been reported back to us in any factual form. The most we ever hear is anecdotal discussion, but I have not been party to those.

Senator STERLE: What about you, Mr Snell?

Mr Snell : No, I have not heard anything formal.

Senator STERLE: You said that there was a 40 per cent drop-off?

CHAIR: No, that is not what the witness said.

Mr Snell : No, I have not had anything formal telling me that there has been a drop-off.

Senator STERLE: Oh, there has not been?

Mr Snell : No.

Senator STERLE: Are the Tasmanians all members of your mob?

Mr Lloyd : We have a lot of Tasmanians; Tasmania is very important to us.

Senator STERLE: They are up here kicking the doors down—they did not tell you the same stuff?

CHAIR: We have had a fair go with editorialising on some of this. We might move on if we can.

Senator STERLE: I do not think the Tasmanians would think like that, Chair!

Senator WILLIAMS: I have a simple question to any three of you out the front there beside the minister: is there unemployment in Tasmania?

Mr Snell : Are you asking me?

Senator WILLIAMS: Yes.

Mr Snell : I believe so.

Senator WILLIAMS: You believe so?

Mr Snell : Yes.

Senator WILLIAMS: Do you think some of those unemployed might be young and in healthy physical condition?

Mr Snell : Yes.

Senator WILLIAMS: I wonder if it is ever possible to get the young, healthy, fit unemployed to pick fruit, or do you need a tertiary degree to do that?

Mr Snell : I do not know where your question is going to, but—

Senator WILLIAMS: My question is this: we have this backpacker's argument and we have 735,000 unemployed Australians, many of them young and fit, and they cannot pick fruit. I think it is outrageous. I am doing a bit of a Bill Heffernan here, sorry, Chair.

Senator CAROL BROWN: Yes.

Senator STERLE: Look at—

CHAIR: Yes. Thank you, Senator Williams. We will take that as further editorialising.

Senator STERLE: Uncertainty, created by your mate Barnaby!

CHAIR: Order! I am losing control of the meeting!

Senator Ruston: For the record, in relation to some questions that Senator Brown was asking HIA: Growcom, which is one of the peak horticultural industry bodies, made a statement when the announcement of the 19 per cent backpacker tax rate was made, basically expressing relief at the decision having been made—

Senator STERLE: I bet.

Senator Ruston: and also indicating that they believed it would be competitive with other working-holiday destinations, and that backpackers would no longer be discouraged from working in Australia. I will just put that on the record as a direct quote from Growcom.

CHAIR: If I might, I want to go to the legislation that went through the Senate that is going to allow HIA to create a register of your 'stakeholder levy payers', for want of a better description. Mr Snell, do you see that as a positive measure for your industry, in R&D and marketing?

Mr Snell : Yes, I do. I think it is a good step forward. I think the register is necessary for us to understand who is out there, what action and what they are growing. Obviously, it means we would be able to track that and know the information. That is one of the things that has been bugging the horticultural and agricultural industries for a long time—having registers of growers and knowing who is who and where they are. So, yes, I see it as possible.

CHAIR: Now, I will not labour on this because it is a matter of public record now that this committee has determined to make an inquiry into the use of drones. Has your industry, generally—and I am now looking at the R&D side—considered this and other developing technologies? In particular, drones—whether you think they are going to be important to the industry and what part they might play?

Mr Snell : I will answer that question first and then pass on to Mr Lloyd. I would have to say that Horticulture Innovation Australia—that is our name—is looking at all of those things, and we have investments in some very creative robotics. Mr Lloyd might like to explain that to you, so that—

CHAIR: Including unmanned vehicles—

Mr Snell : Unmanned vehicles particularly.

Mr Lloyd : A couple of weeks ago the minister and I opened the horticulture hub at the Australian Centre for Field Robotics at Sydney university. This is a longstanding investment that has now matured into a structure. I think there is a lot of concentration on the robot side of things. What we are finding is that the most exciting area is actually data, and it is the data that is changing things. So this Centre for Field Robotics is capable of utilising drone technology and robotics technology, effectively managing the crop by individual plant. But the thing that facilitates it more than anything else is not the mechanics, it is actually the data—and particularly the data sourcing and interpretation, and algorithms associated with that.

So that is a very big investment that we have made over the last five or six years, and we will continue to invest in that area.

CHAIR: So you would be aware that there is technology that could give each plant, in most instances, its own specified identity?

Mr Snell : We have the technology now.

CHAIR: Okay. With the application of drones, is it within consideration that a drone might deliver a payload specific to that plant, unique to its requirements: its stage of growth, its performance and so on?

Mr Snell : It depends on what type of plant you are talking about. I think it comes down to a mathematics and physics equation. If you are talking about a major productive perennial tree, perhaps a drone might have a relationship with that. If you are talking about a piece of cut lettuce, then it will probably be a machine that does that. But drones are particularly useful in sourcing data about the field itself and many aspects of that—moisture, disease, nutrients and these types of things as well.

So it is not a drone solution and it is not a robot solution; it is a combination of many solutions, largely based on data.

CHAIR: Do you see the use of drones in the application of pesticides and herbicides, and some uplift in the volume of the payload that might be required and the ability to put it on the job—mitigating against spray drift, waste and overuse?

Mr Snell : I am probably not the best qualified to speak on the drone issue is self. The information I have to hand is that the drones will be data sourcers, largely, in our area of horticulture—I cannot speak for other parts of agriculture—whereas the method of application and addressing individual issues will probably be done mechanically.

Senator McCARTHY: Mr Lloyd, HIA invests around $100 million in research, development and market programs annually—is that correct?

Mr Lloyd : A little more than that, yes.

Senator McCARTHY: How much of that would be done in the Northern Territory?

Mr Lloyd : I cannot give you a definitive figure on that now. I can give that to you later on, after I make an inquiry. These regional figures are often difficult to come by, because there may be research applicable to the Northern Territory that has been done in collaboration with the Department of Agriculture and Fisheries in Queensland, for instance. That is a very similar story to other states.

But in terms of commissioned research there: I know we do a lot of tree crop research in the Northern Territory at the moment. We have just done a major program on magpie geese, for instance, up in the Northern Territory, which is almost unique to the Northern Territory.

Senator McCARTHY: What is your research with magpie geese?

Mr Lloyd : Magpie geese have an effect on tropical fruits as a pest. Again, I will find more information for you if you require that. The Northern Territory is becoming increasingly important to the horticultural sector. As you are obviously familiar with, there has been a lot of trial and error, but I think we are now down to the crops which are highly effective up there. My chairman and I attended the northern futures conference earlier this year, in April, specifically for that purpose.

Senator McCARTHY: It is certainly an area we are looking at with northern development generally, especially in horticulture. When you say it is becoming increasingly important, in what way are you looking at the Northern Territory?

Mr Lloyd : It is really the way the market looks at the Northern Territory. To a large degree the Northern Territory has solved some of its own issues recently. It has now become a major centre of mango production, for instance. That is very different, perhaps, to 10 years ago. And it is the commercial operators who are heading north to take advantage of the environment up there for mango production, diversifying their production from elsewhere. There are some other smaller industries, particularly the vegetable industry, that we are working with as well in the Northern Territory. We have also worked with a number of industries which are probably not as suited to the northern climate—or for economics or other reasons.

Senator McCARTHY: What about in Central Australia?

Mr Lloyd : In Central Australia, as opposed to wine grapes, which are part of the grape and wine organisation, table grapes are part of the horticultural organisation. We do work and have done work in Central Australia on table grape production as well.

Senator McCARTHY: Are you aware of discussion around a vapour heat treatment plant possibly for the Northern Territory?

Mr Lloyd : No, I am not, Senator.

CHAIR: Thank you, colleagues. That brings to an end Horticulture Innovation Australia Limited. I want to thank you both. We wish you save travel back to your destination. I now call to the table the Australian Pesticides and Veterinary Medicines Authority.