Thursday, 21 October 2010
Australia’s farmers have an international worldwide reputation for producing safe and high-quality food products. In the OECD’s ‘Food safety performance world ranking 2008’, Australia was one of the top five performing countries, all of whose food safety standards were rated as superior. The top five were the UK, Japan, Denmark, Australia and Canada. The other OECD countries tested were rated average or poor. Can you imagine the results if the same test with the same standards was applied to non-OECD nations? There is no doubting the quality of Australia’s food production. The Department of Foreign Affairs and Trade advises that Australia has a worldwide reputation for producing superior quality premium food and Australian food producers are committed to providing the highest international standards of quality, management and food safety. But how are Australian farmers recognised and rewarded for the work they do to achieve this?
The income derived from food production certainly does not reflect the investment, the work or the risk involved. The income and profits of Australia’s food producers is lower than other industries. Farm incomes compare poorly to the average Australian income, as demonstrated in this graph I have that shows that farming families are overrepresented in incomes from $200 to $1,000 a week and from $10,400 to $52,000 a year. It should be noted that, in the general category, pensioners and welfare recipients are included and dominate in the $200 to $400 category. But the number of farming families on the equivalent of welfare incomes, despite working, is surely a significant and pressing issue for this House and this parliament.
The number of farming families with a negative income is, in my view, a national disgrace. The low comparative level of income is particularly important when the cost of capital is considered. A return on investment of two per cent is considered completely inadequate in business circles but represents an average return to farms. This is another driving force pushing farmers out of food production—and this is for our innovative, progressive farmers. According to the Western Australian department of agriculture, the broadacre region of Western Australia averaged a rate of return to capital of around two per cent from 1989 to 2002-03. In comparison, the business world usually works on a minimum acceptable rate of return, or hurdle rate, of 12 per cent.
The good news is that should the Labor Party plan to apply a superprofits tax to farmers, as they proposed for miners, which would kick in at almost six per cent, almost no farmer would have to pay. The bad news is that poor returns on investments are driving the current generation of farmers out of food production industries and, unfortunately, keeping the next generation away. The number of farmers, especially on family farms, is declining and that is a concern for all of us. The ABS have reported that farming families may leave agriculture for a variety of reasons that include personal or retirement, economic, industry restructuring or environmental such as drought. They said that between 1986 and 2001 the number of farmers leaving agriculture was greatest during periods of high commodity prices as land values were high and neighbouring farms had the financial capacity to expand. The decline in the number of farming families from 145,000 in 1986 to 120,000 in 1991 was partly influenced by favourable economic conditions. The lower commodity prices in broadacre industries through the 1990s resulted in some farmers delaying their decision to retire, leaving farming or handing over farming to their children. As a result, the number of farming families declined by smaller amounts between 1991 and 1996 and between 1996 and 2001. This indicates that poor economic returns are a driver of farmers exiting the industry, resulting in farm consolidation and the semi-urban encroachment.
It is apparent that many farmers are struggling to make commercial returns. They are also struggling to sell their farm asset, having to wait for a good year to achieve both. Many have to wait for upturns of economic cycles to be able to attract prices to make selling feasible. In layman’s terms, farmers are hanging out for a good season with reasonable prices, not to get ahead to prepare for the future but just so they can sell the family farm and get out. I would ask: is this the legacy that we want to leave with our farming community and our nation?
I support our farmers and our food and fibre producers. I recognise that the farm gate price for our agricultural products has really lost touch with the retail price. Labor government cuts to a range of programs, including the agricultural research of the department of agriculture budget, eliminating the farm business training programs, slashing 25 per cent from environmental stewardship programs and the abolishment of $54 million from the national food innovation strategy—these are all factors that contribute to the issues affecting farmers now and in our future.
As I said, when you look at the retail price it certainly makes it extremely difficult for our growers to be commercial in this environment. Recently I saw $2 and eight or nine cents for a two-litre carton of milk in a supermarket. That is great, but when you look at what that translates back to the grower we have a problem. (Time expired)
The honourable member’s time has expired, and the honourable member was somewhat fortunate because there was a problem initially with the clock. I think the honourable member got 6½ minutes. Having said that, she obviously had all the material necessary to fill that period of time!