The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Speech of 22/02/2007

ADDRESS TO THE 2007 PASTORALISTS AND GRAZIERS ASSOCIATION
OF WESTERN AUSTRALIA CENTENARY CONVENTION

THE DUXTON HOTEL, PERTH

22 FEBRUARY 2007

I am honoured to be giving the opening address on the occasion of your Centenary Convention.

PGA history

The Pastoralists and Graziers Association of Western Australia has a great history of representing its membership on a diverse range of issues — from the early 1900s initiatives, such as ports and railways infrastructure and the Royal Flying Doctor Service; through to your continued support for a free and competitive marketplace.

The Australian Government values your ongoing contribution to the important policy debates affecting your industry, your State and the national economy.

Of course there are enormous challenges for those engaged in agriculture and pastoral industries today.  But I am firmly of the view that this is still an industry of enormous opportunities.  They will be grasped if, together we properly manage the challenges that currently confront your industry.

Competition and trade in agricultural markets

I know that you share my view that competition and free trade do not threaten your industry.  Your problem is the lack of free trade that prevents you from engaging in fair competition particularly when selling your products overseas.  

You have to deal with restrictive quotas in foreign countries that limit the volume of agricultural imports from Australia as well as high tariffs that reduce their competitiveness.  You have to compete with heavily subsidised producers in the European Union and the United States. 

Multilateral trade negotiations provide the key to reducing these barriers and increasing opportunities for Australian farm exporters.  I have always been a strong supporter of multilateral trade reform. 

Now that negotiations have recommenced, Australia’s trade negotiators have been working hard in Geneva to promote the benefits of liberalising trade in agriculture.  A successful outcome to the Doha Round requires the US and the EU to come to a compromise on further reductions in US domestic support matching additional cuts to EU tariffs.  Our Government will do everything it can to secure progress in this regard. 

Our commitment to multilateral trade reform is backed by a commitment to bilateral trade reform.

Our critics in the Labor Party have attacked the Government’s bilateral trade efforts as “distracting” from multilateral efforts.  But we can walk and chew gum.  The Government believes strongly that it is necessary to pursue all opportunities:- pressing for multilateral reform through the Doha Round while improving access for Australian agriculture through bilateral agreements.

Australia currently has FTAs with four major trading partners.  We are pursuing FTA negotiations with a further 19 countries, including key trading partners in Asia and the Middle East. 

Importantly, the Government has recently announced the commencement of a FTA with Japan.  Japan is a key market for Australian farmers.  In 2005‑06, our agriculture, fisheries and forestry exports to Japan were valued at around $6 billion.  It is our number one market for beef. 

While FTA negotiations will be challenging given both sides’ sensitivities, they provide a valuable opportunity to secure improved access to the Japanese market.  It is a significant step for Japan to begin negotiations without excluding sensitive agricultural products at the outset. 

Through all of its FTAs, the Government will continue to work hard to provide Australian farmers with better market access for their exports.

Australian Wheat Board and the Wheat Single Desk

The Government is currently considering the longer-term arrangements for the marketing of Australian wheat including the Single Desk system and the role of AWB Ltd.

I am aware of the PGA’s criticism of the Wheat Single Desk arrangements.

I congratulate the PGA for taking a leadership role in this debate. 

There is no doubt that the scandalous conduct of AWB in relation to the Oil-for-Food kickbacks has damaged Australia’s reputation as a scrupulous and fair trading nation.  Evidence of the Government’s concern over that conduct can be seen in its determination to establish the Cole Inquiry and its response to the Inquiry’s findings.  The Attorney‑General, Philip Ruddock, has already announced the establishment of a task force as recommended by Commissioner Cole, to investigate whether charges should be brought against those involved in the scandal.  The monopoly arrangements may have contributed to the culture of connivance by reducing the critical scrutiny you would otherwise find from competitors in the market place. 

The Government is considering the long term future arrangements to be put in place.  The most important consideration is that the arrangements maximise growers’ returns on a long term basis.

As many of you would be aware, the Government established the Wheat Export Marketing Consultation Committee to seek growers’ views regarding wheat export arrangements.  Submissions close tomorrow.

The Government has also set up temporary arrangements to give certainty to Australian wheat growers for this harvest, transferring the veto power from AWB to the Minister for Agriculture, Fisheries and Forestry, Peter McGauran.  These arrangements have enabled the continued supply of Australian wheat into our most important markets and allowed some Western Australian growers to achieve a price premium for the sale of their wheat.

Domestic competition reforms

The Government is also implementing a number of reforms to improve competition under the Trade Practices Act 1974 (TPA).

From 1 January 2007, a new process has come into effect to allow businesses to obtain authorisations for mergers by applying directly to the Australian Competition Tribunal and new time limits have been introduced to get speedier decisions from the Australian Competition and Consumer Commission (ACCC).  The Act also introduces a quicker, cheaper and simpler notification process for small businesses, including farmers, to obtain immunity when engaging in collective bargaining. 

Other reforms underway include amendments to enable the ACCC to bring representative actions for breaches of the secondary boycott provisions of the TPA.  A secondary boycott involves action by two or more people acting in concert, which prevents a third party, such as a potential customer or supplier, from dealing with or doing business with the target.  These kinds of boycotts are commonly organised by unions or single issue protest groups. 

One such campaign has been led by People for the Ethical Treatment of Animals (PETA), who are campaigning for the boycott of Australian wool in protest against mulesing of sheep.

They have been joined by tennis legend Martina Navratilova and the popstar “Pink”, neither of whom are known for their expertise in primary production.

You would be aware that the campaign has given rise to legal action by Australian Wool Innovation against a boycott of Australian wool by the People for the Ethical Treatment of Animals (PETA).  The Government’s reforms would enable the ACCC to bring representative actions on behalf of wool growers in cases like this.

This would protect Australian farmers from these boycotts.  Ignorant commentary from misguided celebrities would remain legal.

Strengthening the secondary boycotts provisions of the TPA by allowing the ACCC to take representative action is important to assist businesses in recouping losses suffered as a result of illegal boycott conduct.  Many businesses, especially farmers, have neither the time nor the resources to fight for compensation in the Federal Court. 

The Government is also working on Bills to clarify the misuse of market power provisions of the TPA and introduce criminal penalties for corporations and individuals who engage in serious cartel conduct.

Economy and drought

While the issues I have described above are important for the long-term future of Australian agriculture, I would like to assure you that the Government is very aware of the most immediate challenge: the drought.

The drought is expected to subtract ¾ of a percentage point from the growth of the whole economy in 2006-07.  Farm output is forecast to fall by around 20 per cent in 2006-07. 

Winter crop production is expected to fall by 62 per cent to around 15.5 million tonnes in 2006-07.  This would be the lowest production in over 10 years.  In Western Australia, ABARE estimates that winter crop production will fall by 48 per cent in 2006‑07.  The drought will also severely affect Australia’s sheep and cattle farmers who, following the 2002-03 drought, had been rebuilding their herds and flocks.

The farm sector is forecast to recover in 2007‑08 assuming a return to average seasonal conditions.  As such, the risks to the wider economy are weighted to the downside, particularly if dry conditions continue.

A drought can only end with rain.  Unfortunately the Government cannot make it rain.

But there are two things that I can promise.  We will do what is necessary to keep the overall Australian economy strong and supportive and we will see Australia’s farmers through this time of struggle and hardship.

The Australian economy is now in its longest recorded period of expansion.  Despite the severe drought in 2006‑07, we forecast that the economy will grow by 2½ per cent. 

The Government’s strategies for monetary and fiscal policy have contributed to economic growth and stability in contrast to the episodes of boom and bust that were a feature of Australia’s economic performance in the past. 

Since March 1996, annual inflation has averaged 2.5 per cent, well below the high and variable rates of inflation experienced in the 1970s and 1980s.  Low inflation, in turn, has allowed interest rates to be set at low levels.  A stark reminder of how different the economy is today is that the reference standard variable home loan rate, is now around 8 per cent rather than the 17 per cent seen in the early 1990s. 

Over 2 million jobs have been created since our Government first took office in 1996 and the unemployment rate is now at its lowest level in over 30 years. 

Assisting farming communities

The second thing I can promise is that the Government will continue to provide assistance to the agricultural sector in this period of difficulty.

Agriculture is important to the economy.

During the last financial year (2005‑06) agriculture added over $25 billion to our economy and accounted for around 15 per cent of Australia’s total exports.  Agriculture’s contribution reflects, in no small part, the hard work of Western Australian farmers. 

In recent years, Australia accounted for almost 15 per cent of world wheat exports on average, with Western Australian growers as key producers of the Australian wheat crop.  Western Australia was also a significant producer of wool, meat and livestock.

Only four years ago, we endured one of the worst droughts on record and for some that drought has not ended.  Many farmers are now facing their fourth or fifth year of drought.  Across much of the southern half of Australia, 2006 was the driest year in the historical record dating back to 1900.

The Government is working to ensure that this challenge is met.  To date, the Government has provided over $1.3 billion in income support and interest rate subsidies to help farmers in need get through this difficult time.  This includes $47.2 million to help Western Australia’s drought affected farmers in the Southern Rangelands and the North Eastern Wheatbelt.

Furthermore, recent changes to drought assistance measures have made it easier for farmers to apply for assistance, and will ensure that they receive assistance for long enough to recover when the drought finally breaks.

In recognition of the fact that the drought’s impacts are felt by more than just farmers, exceptional circumstances assistance has also been extended to those small businesses that depend on Australian agriculture for their livelihood.  This will ensure the important goods and services they provide will remain available throughout and once the drought breaks. 

The severity and length of the drought is also having an enormous impact on the emotional wellbeing of farming families and rural communities.

Therefore, the Government has increased funding for the Family Relationships Services Programme to provide social and emotional counselling services, and is working with the Country Women’s Association to distribute emergency grants to families desperately in need.

Efforts for the future

As time passes, it will be important to shift the focus from drought assistance to drought preparedness.

Droughts have been a feature of Australia for centuries.  Droughts are not a recent or new consequence of global warming.  Regardless of what actions are taken globally on that issue, droughts will be a reality of life in Australia.

That is why the Government has continued to develop measures that will help all Australian farmers better prepare for future droughts.

For example, the Farm Management Deposit (FMD) scheme encourages primary producers to put aside money in good times to cover the inevitable poor years that will occur.  We recently increased the maximum deposit limit from $300,000 to $400,000, and lifted the non‑primary production income threshold.  This should further help farmers to prepare for and manage future shocks and downturns, such as another drought.

There is currently $2.3 billion (at September 2006) invested in FMDs.

Our Agriculture – Advancing Australia package also continues to help the rural sector become more competitive, sustainable and profitable.  By supporting skill development and innovation and by promoting better risk management, this package will also enhance the capacity of Australian farmers to manage future difficulties.

Labour

Finally, let me turn to the challenge of labour supply.

Over 100,000 jobs have been created in Western Australia in the past three years and WA’s unemployment rate has fallen from 5.3 per cent to its current level of 3 per cent. 

Low unemployment is very welcome.  But the limited supply of labour represents a serious challenge for businesses and farmers, particularly in Western Australia.  Over the past 20 years, agricultural employment has fallen on average by 1.7 per cent a year in this State, while overall employment has grown by 2.5 per cent a year.  

The response of Australia’s agricultural sector to this challenge has been a substantial improvement in productivity.  According to official statistics, agricultural sector productivity has grown on average by 3.2 per cent per annum over the past 30 years, significantly higher than Australia’s market sector productivity growth of 2.1 per cent.

The productivity growth resulting from the use of new knowledge and technology is to be commended.  It has allowed Australia to not only compete against overseas producers, but to flourish in world agricultural markets.  Australia’s farmers, pastoralists and graziers are world leaders in science and technology of farming.  They are the most productive in the world.  They have nothing to fear from competition and free trade.  They are positioned to take advantage from it.

Concluding comments

The Government will continue to support Australian farmers and rural communities.  Through sound economic management and direct action where needed, the Government is securing the future prosperity of the nation and the agricultural sector. 

I congratulate the work of the PGA and its members at this Centenary occasion.  I wish you well in your discussions today as you look forward to the next century.