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Primary industry and a future Labor Government: SA Farmers Federation Conference, Thursday July 23 1998: address.

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Address to South Australian Farmers Federation


Primary Industry and a future Labor Government


By the Hon Neil O'Keefe

Shadow Minister for Primary Industries


SA Farmers Federation Conference


Thursday July 23rd 1998


Thank you for the invitation to ad dress your conference. This is the first time I have had the opportunity and I regard it as a great privilege.


In my brief presentation to you today I am going to focus a little more directly on overt political issues than I would normally - not-to score some political points which may win some votes for Labor - I'm a lot more sanguine about the farm vote than that.


But everywhere I go rural people are deeply puzzled and angered by what has gone on in the past two and a half years in Federal politics - this frustration is now manifesting itself in the disintegration of a coalition recently elected with an extraordinary authority by rural Australia and yet now being replaced by ragtag of dissidents mouthing populist slogans-very little of which does anything but harm the trade prospects of rural Australia.


So let me divide this speech into two halves - some brief explanation of what has happened to bring all this about and then more positively an outline of Labor plans to turn this mess around.


I have handed out a page which contains three extracts from the media which set the scene better than any thousand word speech from me. The first reporting a statement from John Anderson demonstrating that the Government sees little future in value adding. The second Peter Costello's view that a slump in agricultural sales, matters little because, " agriculture is not a huge part of GDP" - nice to know where farmers stand with the future leader of the Federal Coalition. The third reports ABARE findings that farm profits have collapsed by eighty percent in the past two years under the Federal Coalition.


Those statements reveal- a coalition which does not see value adding as a valuable pathway from the farm gate to the customer. Therefore trade decisions have been around access for bulk commodities at the expense of value adders such as pork, citrus, chicken, salmon and sugar.


On the same theme the very promising "Supermarket to Asia" program started by Simon Crean and Bob Collins and given lip service by Tim Fischer and John Anderson has now fallen way behind the mark - why -because there was no real commitment to develop it strongly.


Take also the stupid decision to dump the Australian Made Campaign -for no other reason that it was seen as Labor's logo - I'm the politician who developed and fought every year for the budget funding of that campaign and I can tell you value for money it was one of the best success stories in the nation - I defy you to find a single conservative politician who can give you a rational reason for dumping it - but they did - what a signal to send to rural Australians trying to compete with cheap imports or wanting to build opportunities on a value adding strategy.


I'll come back later to value adding-much of the voter discontent can be traced back to the "smart" budget strategy in 1996 - straight after the election. The plan was painfully obvious - vilify the budget left by Labor, use it as the reason for making harsh cuts up front in order to have extra money two years later for election goodies. This strategy isn't new but it does require some competence - you actually have to know what you are doing.


Howard and Costello got it very wrong. After three Costello budgets we have slower growth, a bigger trade deficit, less jobs and lower business confidence. Foreign debt is now $33 billion higher than at the change of Government in 1996.


They had no understanding that Labor had already cut the fat out of the system - that further cuts meant job losses - not just in the cities but in country areas where so much of the local economy relies on public sector funds. This was supposed to be about sacking Canberra public servants, not cutting the guts out of country towns. And through the whole process the "B" team, the Nationals have acquiesced without a squeak - until now when they are looking down the barrel of extinction.


Well I've lived most of my life in country towns and I am one of the few Labor politicians left standing outside the capital cities - and I can tell you that there is one golden rule of survival in this game - your constituents have to know that you are t heir man in Canberra, not Canberra's man down here - and that's a lesson many conservative rural politicians are now learning the hard way.


Can I say that the peak farm organisations haven't done a lot to help their conservative political allies in this whole sequence of events. Very little is gained by acting as a cheer squad for extreme or unsound policies and strategies.


Let me give two examples -I have just referred to the devastating effect of the budget cuts on services and jobs in country towns. 1 would have thought farm bodies now understood how much farmers rely on family income support from the Federal budget or off farm incomes provided by public sector jobs in country towns. Yet the NFF has now issued a communique out of its recent economic forum calling for the public sector to be almost cut in half again! They are suggesting it should be 20% of GDP - in other words what is left of the public sector in country towns cut back dramatically again. How many times do your people have to be lashed before they begin to wonder whether whipping is such good medicine for country towns and farmers?


My second example goes to the hysterical and unthinking support for the failed waterfront fiasco. Here we are at a time when the Government has dramatically underestimated the Asian downturn, dramatically underprovided for the climatic events taking place across the continent, at a time when the farm sector is going to need every ounce of political and community goodwill you can muster - its leadership marches hand in hand with illegal conspirators and asset strippers for a cause that anyone could see was never going to yield a single dollar of benefit to any farmer at the farmgate.


I observed the spectacle of a Parliament full of conservative politicians whipped into a frenzy at the prospect of illegally sacking four or five hundred wharfies and bringing the nations ports to a standstill, yet the same MP's absolutely mute on the subject of the beef and sheepmeat sectors being on their knees and four thousand meatworkers stood down round Australia - all in country towns - not because of industrial relations - but because of the downturn in commodity prices and the mess the government has made of restructuring of the meat industry. No wonder country people are wondering about their politicians!


One Nation has now ceased upon the intense disappointment resulting from policy after policy and claim after claim that have been-little short of fraudulent and have been very quickly exposed as being a hoax on rural Austral ia.


Take the much heralded AAA farm package - launched amid so much fanfare 9 months ago and now totally exposed as nothing more than a rebadging of the programs Labor already had in place - with hardly any extra money either. Remember the intergenerational transfer of the farm. Estimates of 10,000 on launch day - now down to 600 and continuing to fall.


Then we have the savings tax rebate, the new farm deposit scheme, even the Landcare Tax rebate - all wonderful if you're making a profit and have some savings to make or dollars to spend - but the Government knows very well that farm profits have collapsed - there is no prospect of the allocations being taken up - more ingredients in the continuing rural hoax. Who do they think they are kidding?


Let me turn now to the Labor alternative


Jobs in country towns


No matter which way I come at it I think the major issue for agriculture and rural Australia comes down to jobs in country towns.


There can be no greater goal at the moment than reversing the drift away from our towns and the only way to do this is by putting the jobs back. Our proposals focus around two main policy areas


(1) Government services


The slashing of these jobs and projects in country towns has been one of the great misjudgements of government policy - State and Federal - and it is stark all over the nation. It must be turned around and only a Labor Government can do it.


(2) Public infrastructure


We are acutely conscious that a federal government must ensure that there is a significant upgrade in major infrastructure in rural and regional Australia.


We intend to intervene strongly with the incentives and authority which a Federal Government can bring to bear if it has a genuine will to make these things happen.


On Tuesday Simon Crean signalled very clearly that such incentives are a clear part of Labor's regional development strategy.


Value adding.


We can point to a very distinct and major policy difference between Labor and the Coalition.


You have seen John Anderson's comment:


"Australia should focus more on improving its exports of raw materials rather than developing processing industries",


And in the same speech


"improving the quality of our raw materials will become much more important than value adding".


Most of us would wonder how a Cabinet Minister in a modern government could hold these views - yet many of the policy mistakes can only be explained by this belief.


I am signalling very strongly that Labor rejects this approach - that we consider an intensive drive towards value adding as the central thrust of our jobs policy in regional Australia.


Labor intends to conduct an urgent full scale national audit of opportunities to value add to agriculture in each region.


We will base consistent policymaking and resource allocation around import replacement and export development opportunities identified in the audit.


We see a leadership role for the Federal Go vernment in a policy of “strategic intervention” - not let the markets speak for themselves -Howard/Costello orthodoxy. This approach is not new for Labor but it is at the heart of the issue of economic competence and credibility. Remember, that in 1986, when Australia suffered a collapse in the terms of trade - our dollar fell by 40% - similar in magnitude to the scale being faced by our neighbours such as Malaysia, Thailand, Sth Korea and a greater extent Indonesia.


Australia took 10 years to work its way through the restructure and shift to clever exporting and import replacement. It was never a policy of opening up the borders to trade and hoping for a level playing field. Billions were invested in strategic industries which needed to survive -basket cases like cars, textiles, heavy engineering and steel which were turned around and saved - along with heavy investment in people and equipment for new industries which presented opportunities for Australia - tourism, professional services such as finance, education and health, telecommunications, film and television -the list goes on.


We are proposing now a similar policy of "strategic intervention" - but this time it is heavily focussed on the regions - and we have placed food processing - value adding to agriculture at the top of that list.


Investment capital


We intend to actively pursue new forms of ownership and investment by Australian capital in regional Australia.


This opportunity stems from one of Labor's most undersold achievements - the development of a long term patient capital base in the form of superannuation funds.


In 1986 when we negotiated with the ACTU the wage trade off for superannuation, everyone could see the merit of saving for retirement rather than relying on the age pension.


But we failed completely to explain the role of this capital in weaning tire country off overseas borrowing and buying back the farm.


In 1986 we had about forty billion dollars in our superannuation funds -less than half the net foreign debt which was around one hundred billion dollars at the time. National foreign debt is now around two hundred and twenty billion but the super funds have already climbed to four hundred and fifty billion - twice the foreign debt. The funds are expected to reach seven hundred billion by the turn of the century.


It was always Labor's intention to encourage these funds to look at regional investment opportunities. Agriculture is a long term industry and superannuation is long term capital - there should be a natural partnership and I am interested in exploring ways we can bring it together.


National Water and Salinity Strategy


Water and salinity are emerging as critical social, economic, environmental and political issues almost everywhere in regional Australia. Despite the fact that Governments have been talking about it for one hundred years Australia doesn't yet have a National Water and Salinity Strategy.


Labor will redress this from the ground up. We will begin by tackling the conflict of interest that comes from expanding intensive agriculture and using more water and the dire need to restore water flows and a balanced environment in badly degraded areas.


It seems to me that the most constructive thing we do as a national Government is a major assault on our public channel delivery irrigation system. I envisage this project as the centrepiece of a cooperative effort between all levels of Government, users of the system and those in our community who understand the problems and wish to play a role.


Our intention is to set the example by driving investment in channel modernisation and upgrade so that everyone, including producers can then focus investment on conservation and efficiency in the drawing of this increasingly scarce resource.




Labor is proud to have introduced the Landcare Program. Local Landcare groups are doing enormous good work in communities across Australia. Labor is committed to retaining this excellent program.




At the moment the Federal Government owns 66% of Telstra. The more John Howard sells the more it becomes a private company which answers to the shareholders, not the general community.


Why is Telstra important? Take just three examples:


1  local industry - at the moment we require that Telstra buys Australian equipment - a major boost to industry. Overseas experience shows that privatised telephone companies turn to cheap imports to lift profits. John Howard may not care, but we can not let this happen here.


2 fair prices for country people - at the moment the profits earned in the city are used to average out losses in the country. The present cross subsidy is at least $1 billion annually. However, the more Telstra is privatised the more the profits belong to the shareholders - not the community. Country people face an increase of up to $500 per year in phone bills just on today's figures.


3 20,000 - jobs to go - John Howard has authorised Telstra to slash 20,000 jobs as soon as possible. The aim is to reduce wages, increase profits and push up the share prices.


The Howard/Fischer argument that we need to sell Telstra to pay for Public debt is rubbish - we do not have a public debt problem.


In 1995 under Labor Australia had the second lowest public debt amongst the world's industrial nations - in 1998 we still have the second lowest Public debt. Foreign debt however has grown by $33B to $224B under Howard's/Costello's financial management - this is a problem - but not Public debt, which is the reason the Government gives for selling Telstra.


Business doesn't slash jobs in profit centres- they make their cuts in loss making areas. The bulk of these 20,000 jobs will he in country centres.


Rural Banking


Last week Gareth Evans announced that a future Labor Government will begin the task of putting back a bank in these country towns.


We are prepared to use our authority over the banking industry to ensure that the funds are there to provide a minimum level of service.


The plan is a good one - it is practical and despite the moans from the banks - it is fair and equitable. It becomes a very visible plank in our strategy of putting bank jobs back in country towns.




Whenever the next federal election takes place I think we can still assume that a GST will be at the centre of the debate. But for Howard and Costello the GST has become a substitute for policies - policies that need to add value and generate jobs and investment.


Labor won't shirk the tax debate. We'll he bringing forward our proposals on tax reform when the time is right.


I can tell you now, that we won't be having a bar of a GST or anything that remotely resembles it. No one will be a stronger advocate of this within the ALP than me because as the voice for the farm sector I think that primary producers have the least to gain from a GST. Can I briefly outline a few of my reasons.


We haven't seen the package yet but it seems to be based on the concept of tradeoffs from scrapping particular taxes and replacing them with a tax at the consumption point (GST).


Let's look at them so far as they relate to farmers.


Tax cuts : most farms run at a loss or breakeven and don't pay much tax. Therefore very little payback from tax cuts.


Scrap wholesale taxes: most farmers have a primary producers exemption and pay very little WST. Therefore nothing to gain. If the argument is that the prices of cars, trucks, tyres etc will fall, all 1 can say is that it is a huge leap of faith to believe that these will be passed on to the consumer by the manufacturer. It certainly hasn't been the case to date with the scrapping of the sugar tariff and the price of a can of Coca Cola!


Scrap payroll taxes : farmers don't pay it - no gain


Lower fuel prices: farmers already receive the diesel fuel rebate - little to gain.


Low income compensation package: many farmers would qualify if there is one - but very little has been said by the prime minister or the treasurer lately about this - only tax cuts for wage earners.


Improved export performance: the argument goes that shifting the tax mix up the scale to the consumer and lowering costs back along the process will improve competitiveness in export industries such as farming. I would like to see the modelling. If I'm right and there are very few offsets to be gained and even less likelihood of them being passed on down the line this begins to look theoretical at best.


On the other hand three things are certain.


1 Farmers will have to pay the GST on inputs up front and then wait to have it rebated by the tax office. Someone has to fund that float on the overdraft.


2 Increased prices for food and other items not tax ed now will certainly increase the amount of tax farm families pay and will probably not be compensated by any offsets.


This means an overall increase in the tax paid by farm families. We have calculate from ABARE farm figures for the beef industry that t he net effect lies between $23 per week extra tax on the bottom 25% of incomes and $32 per week for the top 25%.


3 Increased prices will lead to a fall in demand from consumers or a move to cheaper substitutes, which are generally imports. Not much joy fo r Australian farmers in this.


As I said at the outset, it is not my normally my style to be politically aggressive in my speeches - but I will not stand in front of a farm audience and waste your time or mine on rhetoric or ideology. In the tradition of K erin, Crean and Collins you won't find anyone more determined than me as the voice for primary industry at the peak levels of the ALP. I regard myself as solid, tough, intelligent and articulate - people tell me I'm a good listener and certainly I'm pretty experienced - and I'm prepared to bring every one of those strengths to the cause for you.


You have copies my primary industry policy statement which won unanimous endorsement from the ALP National Conference earlier this year at Hobart. I invite you to study it carefully because there is inherent in each of those principles an action plan which we will be developing together - and I can tell you that some of the ideas will be innovative and far reaching - but something has to be done. We don't solve big problems with big answers - we break them into down into components and we solve them one at a time together - and the solutions for each become the solution for the whole.


In the end Kim, Beazley and I are very different from John Howard, Peter Costello and John Anderson. We see agriculture and fisheries as key players in the revival of the regions, we see them as highly significant in Australia's GDP and along with people like Simon Crean and Gareth Evans back absolutely the plan to place a very high priority in restoring jobs to country towns.


Thank you for allowing me the opportunity to talk with you today. I look forward to some pretty challenging times ahead in our work together and take great pleasure in formally opening the conference this morning. I wish you well with your deliberations.