Senate debates

Tuesday, 26 August 2014

Adjournment

Queensland: Agriculture

8:07 pm

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

I rise tonight to talk about debt, in particular rural debt, and drought—the two D's, if you like. When you have debt plus drought, you often end up with desperation, so you end up with three D's. In the parliamentary break, I spent a bit of time driving from Townsville to Mount Isa. It is very dry in those areas. They have gone through two very dry seasons and much of the area is in drought. After those two very hard years—plus a few other hard years, which I will talk about later—there is a lot of debt in rural industries, and they are struggling under that debt. It becomes a bit like a chain around the ankle. It is hard now to have the flexibility to keep going and get back on your feet.

I went to five of the towns along that road: Hughenden, Charters Towers, Richmond, Julia Creek and Cloncurry. I ended up in Mount Isa. In Charters Towers, I was meant to go to the cattle sales that were on that day, but there were no sales; they were cancelled. That was the ninth week in a row that the Charters Towers saleyard had no sales. It is one of the busiest saleyards in the North, yet there had been no sales for nine weeks. That is in the context of record kills in abattoirs at the moment. There are a lot of cattle going through the system, but they are not going through the saleyards. They are not going through the saleyards because people do not have the confidence to send their cattle to yards for auction, where they potentially risk getting a low price. Once they have sent their cattle there, they have no option to take them home, because they have no money to do that. So they are putting cattle straight through the meatworks; they are putting cattle through the grid, as it is called. That leaves people in a pretty desperate situation. There are not many meatworks in the North; if you draw a line from Townsville to Perth there are no meatworks north of that in the country. So when the cattle have to go the meatworks and not the saleyards, the meat processers have a pretty good position in the marketplaces. Prices in our beef markets, as many of you would know, are down to record lows; they are down to levels that we have not seen for 20 or 30 years. That is making it tough for people.

Those low prices come on the back of a rollercoaster ride in land values for our beef sector, particularly in North Queensland. I want to put on record in the Senate something that many people probably do not realise: 10 years ago rural land values had been flatlining for a number of decades. In the space of five years, land values in North Queensland went up by about five times, about a 500 per cent increase. Then we had the GFC, and since then prices have fallen by 40 per cent. To put that in context, before the subprime crisis, residential housing prices in the US cities that were most affected by the crisis—cities such as Phoenix and Las Vegas—went up by two to three times. Since the crisis, prices in those cities have fallen by about 30 per cent. So the pastoral industry and the grazing industry in rural North Queensland experienced a bigger increase and a bigger decrease than any of the cities in America experienced as a result of the subprime crisis. We have all seen what effect those price changes had in America. I reckon that if we had similar price changes on the Australian Stock Exchange or in the suburbs of our cities, there would be absolute carnage; people would be under water and they would have a lot of difficulty getting back on their feet. But that is what happened in North Queensland over the last 10 years, and it is no surprise, then, that people are struggling. What is a surprise is that we still have a beef industry in this country after all of that. It shows the resilience and efficiency of our industry that they still survive.

The industry have been through a financial disaster. They have had some natural disasters, with the drought, with floods in 2009 and 2010, and fires as well in many areas. Then, of course, we saw another natural disaster: 'Tropical Cyclone Ludwig', when he decided overnight to ban live exports to one of our biggest markets. That took 500,000 head of cattle out of the industry, and that further depressed prices. So much of the position that people are in is not a result of their own business management and it is not a result of general market conditions; it is a result of a government decision that was made in 2011 that devastated the industry and is still devastating the industry. Back then, before the live export ban, cattle prices in markets up and down our east coast were about $4 a kilo carcass weight. Last year, they dropped to $3.15 per kilo. A lot of the change is due to the live export ban. So, in the last five years, we have had a 40 per cent reduction in land values, a 20 per cent reduction in prices and a shutdown of one of our major markets for our beef industry. It is no wonder that people are in a desperate situation.

That is all confirmed by data. In the last couple of months, Meat & Livestock Australia put out a situation report on the beef industry. The report had three major findings. It found that the majority of business in the North are not sustainable; they are not making enough money right now. It found that their financial performance has been dropping off, principally because farms are having to take on more debt and pay more interest. They also found that farms are only making about one per cent return on their assets at the moment. ABARES data confirms that over the last 10 years average debt for the northern beef industry has increased from $280,000 per farm to $650,000. The biggest component of that $400,000-odd increase in average farm debt has been to finance working capital. It has not been to finance investments in more fences, more irrigation or more productivity. It has all been made just to keep the business running year to year—to keep buying breeders to keep the business running. That is of great concern, because if people now are at the limits of their working capital finance, if they cannot go back to the market to get more finance, they are going to be in a very difficult position in the next couple of years. Most people, because they have been drought affected, have destocked. There is not a lot of cattle in the region at the moment. But I am of the view that prices are going to go up and that they are going to go up big-time. We want people to restock, but they are going to have to get finance to do that, because if they buy a breeder, if they buy a heifer, they are going to have two years before they get a cheque. They are going to have to have a calf and fatten that calf up, and they need finance in the meantime to do that.

I want to give credit to the Gulf Cattlemen's Association, who are a newly-formed organisation in our North. They have been at the forefront of highlighting these issues for people in their region. They have just completed a survey of 600 graziers in their area in the gulf and Cape York. They got a 26 per cent response rate; 160 graziers filled out the form. It shows and confirms the concerning situation, with more than 50 per cent of graziers not believing they have a viable future in the industry.

I think that all of this points to the fact that there is a role for us here: that we need to help people out. People are in a tough situation and I believe we are a country that helps people out when they are doing it tough. They are doing it tough, as I said before, in large part because of government decisions, because of decisions made in this place, on this hill in Canberra. We should reflect on that when we consider what we should do to help these people out. Whichever side it was—I was not in this place when those decisions were made—I think it is incumbent on us to help people who have been affected by bad decisions made in this place.

We need to get the banks together with the industry. We need to get the government at that table as well to try to facilitate an outcome. People have too much debt. We need those debt levels to come down to more moderate levels. We need the banks to be part of that process and the government has a role in helping to facilitate that. We need that discussion to take place because we need to give people a future. We need to give people some hope. We have an obligation to help out people who are in need.

I also think there are some longer term issues here. There has been some rain in Queensland in the past week—not in all of these areas in the gulf, but some areas of Queensland had some good rain. That is welcome, but the rain is not going to wash away the debt. The debt is an issue that predates the drought—as a result of live cattle, as a result of a change in world economic conditions—and it is an issue that is going to outlast the drought as well.

I and others have called on this place, the Senate, to consider establishing an inquiry into rural debt. We have not had an inquiry into rural debt for some time. These issues, I recognise, go beyond just the beef industry and beyond just North Queensland. There are many other agricultural industries that have also suffered, and are also suffering, under high debt loads, but we have very limited information about their situation. We have obtained some more detailed information on the north in recent months. I do think an inquiry is something the Senate could turn its mind to—and it could be a vehicle for elevating this issue. I think it is our job, when we are not in this place, to spend some time on the ground, to see what people are feeling and thinking, and to bring that back to this place—to try to raise the issue on their behalf. That is what I found over my five-week parliamentary break.