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RESPONSE TO THE AGRICULTURAL WHITE PAPER

16 Jul 2015 9:42 AM - Ian Joseph responds to the government's agricultural paper

Introduction to the Aussie Farmer and our Industry

To really understand the present, we have to sometimes look at the journey, to see why we are in the predicament we are in today. It’s not rocket science.  Those involved in farming, agriculture and agribusinesses in regional and rural Australia and even those in the cities who have an appreciation for, and a love of, all the things our farmers produce each and every day, have known why, for a long time.

In the past the hardiness and durability of the great Aussie spirit was enough to carry people through any drought, fire, or rain but unfortunately it seems today, after such a long intergenerational period of exceptional circumstances, (political, seasonal and cyclical), that our farmers and their families have used up much of their reserves of resilience and resources.  This means now that this past underinvestment is coming to bite the industry on the backside.


Where is the financial liquidity?

It is the lack of ability for our farmers to gain access to appropriate levels of liquidity (suitably priced) to expand, restructure and re-equip now, after such a long harsh cycle that is of greatest impact and concern. This lack of liquidity is partially due to the inability or reluctance of the banking and finance industry to effectively risk rate the industry or farmers appropriately.


Our historic challenges

Without doubt the current state and condition of the entire agricultural industry (the cornerstone to a healthy and sustainable Australian economy) has been a long time in the making.  This situation has been made even worse by the harsh seasonal conditions since the middle 1990’s, coupled with a lack of understanding by industry bodies or government agencies to really understand the impact the past is now having on our present 135,000 farming families and their communities. 

What we are seeing today, is the consequence of a continuing lack of vision, focus, priority resulting in the underinvestment in the agricultural industry (infrastructure, education, technology R&D etc) over many years. 


The release of the White Paper

The issues mentioned above is why the release of the Agricultural Competitiveness White Paper is imperative right now.   With its five priorities of a fairer go for farm businesses, building the infrastructure for the 21st century, strengthening our approach to drought and risk management, farming smarter and accessing premium markets will, if implemented properly, put the focus exactly where it belongs. 

But a focus will not be enough.  It is "money" that makes the world go round and there doesn’t seem to be enough to satisfy domestic needs, hence the accelerating demand for ownership of and investment in agricultural assets from overseas. 


But why is there this demand?

In part, investment is based on financial returns as well as Australia having a stable political, economic and financial system but more importantly, it is because of the ballooning world population of 7.325Bn. World population is expected to grow by another 700M in the next ten years. (Many from Asia Pacific)

As the Australian Council of Deans of Agriculture has previously stated, Australia would have to increase productive capacity by at least 50% to meet the needs of the growing world population.  

Countries in our region like China (1.4Bn), India (1.28Bn) Indonesia (255M), Japan (127M) Thailand (67M), Vietnam (93M) understand that they cannot guarantee their food supplies in terms of quantity or quality and are looking to those countries which can offer greater surety of supply in the future and it is Australia which shows the greatest promise. 

These most populous nations completely understand that it will be “food security” which will provide their own economic, environmental and social sustainability and they have prioritised and priced accordingly the value of land,  water and productive outputs. 


Undervaluing our assets with a Big Picture View

We as a nation are only now beginning to understand this and have consistently undervalued our productive farm, agricultural and agribusiness assets and sold them off to the highest bidder without taking into account their true value.

It was pleasing to see in the white paper, focus on the achievements of the agricultural industry with $4Bn in additional resources being put into competition, regulation and changes to the tax system, RD&E, infrastructure and technology and biosecurity improvements and greater access to markets for our agricultural outputs.  These should at some point in the future, provide greater access and equity for our farmers, our regional and rural communities and ultimately for all Australians. 


Where is the liquidity issue being addressed?

But, and there is always a but, it was disappointing to see that the issues around the lack of suitably priced and accessible liquidity within the agricultural sector were not addressed. The implications will be felt in our lifetime and intergenerationally for Australian agricultural and agribusiness assets.

The Food and Agricultural Organisation of the United Nations estimates that US$83Bn in investment will be needed each year to just meet global food demand. Our $4Bn whilst a good start, will not be enough, so there needs to be a better way. 


A previous but failed attempt

The recent “Economics Legislation Committee” inquiry was pushed by the “Rural Financial Roundtable Working Group” as a means of tackling declining farm viability in specific sectors like the northern beef cattle industry.  The committee was established to help avoid a mass exodus of debt-stricken farmers and aimed at looking the formation of a new board under the umbrella of the Reserve Bank of Australia – was to be one viable and sustainable option. 

It was to be called the “Australian Reconstruction and Development Board” and would have addressed the liquidity issues within the industry. Unfortunately the terms of reference and the voice of the 144 submissions were not adequately canvassed in this “once in a generation” opportunity called the Agricultural Competitiveness White Paper”. 

Even our Agricultural Minister Mr Barnaby Joyce, when asked about the ARDB said: 

“I think this is a formidable paper – it has a whole range of issues that have been thought of and the expertise surrounds them in such a way that I believe many of them can progress to a white paper. “I know there was a lot of interest in a rural reconstruction bank but you have to call it for what it is. 

“I don’t think that has the capacity to get up, so there’s no point burning energy on something that you don’t think is going to happen.” 

There is an old saying: “If you always do what you always did, you always get what you always got” doing the same thing over and over again for generations and not thinking differently by looking outside the square is at best, maintenance of the "status quo" at worst a recipe for disaster. 


10 Farmers a Day

If you look at the ABS data there have been 10 farmers and their families leaving the land each and every day for the past 30 years. Obviously some leave because of many varied and different reasons, age, economies of scale, consolidation with their neighbour or an offer too good to refuse.  Probably they also leave because they have waited so long for their voices to be heard and for industry issues and concerns to be addressed in a coordinated, unified, collaborative and bipartisan political way, that they just don’t have any fight left. 

As I said in my submission to the ARDB, Agriculture and the business of agriculture is the “keystone” of a healthy economy and because it is seasonal and cyclical there will be times when the health and wellbeing of the participants will have requirements which need to be acknowledged and supported. I am not talking about a “handout” but a controlled, considered “handup”. It would have been through targeted specific policy outcomes, which would have made the Australian Reconstruction and Development Board, (ARDB) a viable option. 

It would have also become a social safety net which would have provided an environment for economic growth through sound policy, for this generation and for generations to come. Which, as a civilised society we should all endorse.


Current Exposure & the ARDB Revelation

Currently those involved in farming, agriculture and agribusiness are at the mercy of seasonal events, global performance (counter cyclical) as well as those organisations supplying the liquidity to the industry. How they apportion those funds has great impact on the people who work in and for the business of agriculture. 

This is where the Australian Reconstruction and Development Board would have complimented and supported not only the main functions of our banking and finance system, but added considerable value to the role of the RBA especially with the requirement to look at the key drivers of productivity and sustainability and then “consult with government” (Section 11 (1) as well as the other two boards which come in under the Reserve Bank Act 1959 namely the “Reserve Bank Board” and the “Payments System Board”. 

As a core tenant to its functions and operations the ARDB, would have been able to determine the appropriate policy with regards to how best to support with sound policy not only those in regional and rural Australia but those inextricably linked to it, (pre and post farm gate). 

Also, by looking at the industry from a holistic perspective, they will also be able to understand how these policies impact the wider primary goals of the RBA and therefore only those policies with the greatest advantage to the people of Australia will be put up, adopted or explored. 

Additionally the fact that the ARDB could be asked to focus on a particular matter when performing the Board’s functions; or to report to the House or committee of the house or a joint committee on a matter relevant to their functions, would have been a great step forward providing timeliness for the ARDB and at the same time allow the RBA to fulfil its mandate. 

Whilst intervention is not the “ideal” solution in all cases, it is clear that “market failure” exists and the operational functions of the ARDB would have been uniquely positioned to provide informed policy advice and actions linked to the core drivers and deliverables of the other two RBA boards and the RBA itself. 


Concluding Remarks

As I said in the conclusion to my submission to the ARDB inquiry, my goal was to highlight the wonderful opportunities which would have derived from a focus which built specific linkages to the existing RBA boards at all levels. 

The ARDB would have been most beneficial to Australia and particularly for rural and regional Australia as they would have been able to link the facilitative task, the development task and the reconstruction task to the rural reconstruction, infrastructure and development policy initiatives with clear actions for sustainable solutions. 

I went on to say that “The opportunity exists to create a unique policy organisation with an aspirational vision which will: 

  1. Build a continuous improvement culture which is “nimble” enough to address seasonal and unplanned for events and natural disasters.
  2. Have leaders who coordinate, collaborate and communicate with the people who will be or are likely to be affected by the decisions they make.
  3. Put in place a mechanism to address current issues, future challenges as well as meet the needs of the people of Australia.
  4. Develop policy which will identify and create the linkages to other government and business initiatives.
  5. Understand that rural and regional can include urban as well especially as it relates to agribusiness rather than just farming or agriculture.
  6. Be truly bipartisan because of the diversity mechanisms which must be put in place to listen to and hear the many industry voices
  7. Prioritise the urgent and important and then initiate strategic objectives linked to clear and timely actions
  8. ARDB must be a bipartisan organisation board which transcends politics and maintains its independence. 

History has shown that Governments should not run businesses. But their main function must be to facilitate the effective and efficient operation of business, industry and the economy.   This may entail true leaders getting in the way sometimes and sometimes getting out of the way so that ownership, accountability and control can go back to where it belongs. 

In the case of the “Australian Reconstruction and Development Board” the Agricultural Competitiveness White Paper should not have put the ARDB in the “too hard basket” and at the very least, given the ARDB the due consideration it deserved.

 

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