Outlook 2017 opening address, Canberra
7 March 2017
The real business of politics is not pithy lines or being good camera candy; or the sometime insanity which otherwise counts as Question Time. The real business of politics is managing portfolios.
There are few, I believe, apart from Defence that come endowed with the same sense of noblesse oblige as Agriculture and Water Resources.
Your purpose is to feed and clothe people and to make certain that those who perform this task are fairly remunerated; always striving for a better return at the farm gate.
No matter where you add food to the global stockpile, somebody somewhere avoids starvation because of it; somebody somewhere stays warm because of the endeavours of a farmer.
The roles of other portfolios are vital; but few get the joy of standing in a paddock and seeing the wealth that comes from that vast resource which is agriculture.
Many other portfolios have an incredibly good reason to take money off the table, but agriculture puts money on to the national economic table.
This task is paramount for our economic wellbeing; and will become more so by reasons of the changed economic circumstances of our region.
On a global footing, we have a huge food and fibre task as the population grows to over 9 billion people by 2050. Our national goal should not be to provide the bulk; but to provide the quality.
Ladies and Gentleman, on that note, I welcome each of you to the 2017 ABARES Outlook conference: my fourth as Agriculture Minister and today as Acting Prime Minister.
We gather at a time when Australia feeds about 60 million people; but if we are to do our part for the globe we have to feed vastly more.
As Asia – as one section of this global task - becomes affluent, they want that wealth represented in the clothes they wear, the watch on their wrist, the car they drive and the food they place on the table.
We take for granted our quality. But other nations, by their own experience, are rightly sensitive about what goes into their mouths and where it comes from.
What we sometimes term as "exotic" in foreign food, truth be known, in that community it's known as "poor people's food".
If you have a choice between cow udder and eye-fillets, you might go with "exotic" but eye-fillet tastes better - and I have tried both.
Unsurprisingly, once people start eating the eye-fillet, they are highly unlikely to go back to cow's udder.
Wealth makes this experience of a desire for higher quality food ubiquitous across all sections of the globe.
Agriculture and water resources has for me, always been a passion; a passion built on the seed bed of growing up on the land where your labours become the food and cloth of an ever-demanding global population.
If you reflect on those who attain wealth today, and how they do it, you must admit there is something noble about the person who gains their wealth by feeding and clothing people, as opposed to exploiting people: or preying on their weaknesses; or massaging their conceits. And this has been a sentiment that has been constant through the ages right back to Roman times.
Last week the 'economic nobility' of the agricultural sector was on full display as economic credibility when Australia's National Account figures were released. They showed that the industries of regional Australia continue to drive the nation's economic growth.
The trend growth to December 2016 was 23.7%. This is four to five times the economic growth of most other sectors in that analysis. Its contribution to the 1.1% of GDP growth for the Quarter was 0.2% - no other sector contributed more than agriculture, forestry and fishing.
This is an important economic reminder to those who seek to disparage and ridicule our agricultural and resource sectors; an important reminder to those who mock and snobbishly dismiss the concepts of farmer's property rights, the need to build dams, or the vision of decentralisation. We, in agriculture and water resources, are delivering a vision for this nation.
This afternoon I will see the dams being built in Tasmania.
We will create centres of excellence such as RIRDC in Wagga, the GRDC in Adelaide, Perth, Dubbo and Toowoomba; and the FRDC in Adelaide.
We will set up a Rural Investment Corporation. We have delivered a $4 billion Agriculture White Paper. We are part of the greatest turn-a-round of agricultural commodity process in the history of our nation.
At today's conference, it doesn't matter whether you're running the Federal Government, a national industry body, a representative body, or a broadacre farm near Bunbury, you are all part of this incredible outcome.
It's important to stop: to celebrate, promote and learn from success; to look at the challenges we have already risen to, and to those that demand more attention; and to look to the challenges that lie on the road in front of us.
Performance of the agriculture sector
This year, for the first time, ABARES is forecasting the gross value of farm production will top $60 billion—coming in at $63.8 billion in 2016–17, easing slightly to $61.3 billion the following year.
The real value of agricultural production increased over the three years to 2015–16 at an average rate of 4.5 per cent. This is markedly better than a Term Deposit Rate; and you have the capital growth of the land asset to also add to your overall nett return
Smart wealth is moving into the agricultural sector, because they recognise this.
Total winter crop production is estimated to have increased by 49 per cent in 2016–17 to a record 58.9 million tonnes.
With summer planting almost complete, the total area planted is estimated to have increased by 15 per cent in 2016–17 to around 1.4 million hectares, with total summer crop production forecast to rise by 12 per cent to 4.2 million tonnes.
Under this government, the total value of Australian farm exports has now increased by over $10 billion dollars from $38.2 billion in 2012–13 to a forecast $48.7 billion in 2017-18 – this is an incredible 27% growth over just five years.
These are numbers. But my vision is to ensure the Australian 'mum and dad' at the kitchen table can avail themselves of the wealth that properly renumerates the efforts of privations that they go through in running a farming enterprise.
My philosophy in politics accepts, but is not enthralled by, the corporate farm.
My passion is for the person: that stoic person who by the sweat of their brow creates wealth from soil and holds in their heart a love for our nation so dear that every town has war memorial reflecting their forbears who either died or served for it.
So it's only proper that real net farm cash income is estimated to have been $25.7 billion in 2015–16, well above the 20-year average to 2014–15, of $15.6 billion.
Broadacre farm cash incomes are estimated to be the highest for twenty years, averaging at $216,000 a farm.
Under this government, we've had some remarkable price turnarounds and volume increases. Here are only some of a list that can go on for pages if I wished to bore you to death.
- As at last month, around 100% increase since 2013 in the price for Australian feeder steers at $3.20/kg for live export to Indonesia;
- Highest wool prices since 1988: last week closing at 1449c/kg, with wool exports valued at $3.3 billion in 2015-16;
- Over 40% increase in lamb prices - over $6/kg dressed weight, and 100% increase in mutton prices at $4.22/kg dressed weight;
- Sheepmeat exports are worth over $2.2 billion in 2015-16, and live sheep exports worth another $226 million;
- A 191% increase in the price of goats, to over $6/kg; and with goat meat exports worth $226m in 2015/16, up 55% from 2012-13
- Chickpeas in 2015-16 averaged $650/ tonne: over 75% increase from average price in 2012-13; a remarkable growth in chickpea exports to almost $1 billion in 2015-16; and
- Sugar is up to just under US 20c/lb, or around $550/ tonne, a 33% increase since 2013
Australian farming is booming: we have had banks let us know of record pay-offs in farm debt.
And this is before we talk about a turnaround in wine exports, almond exports, and tropical fruit exports. Even where there has been a downturn such as the dairy industry, prices are now stepping back up.
And as I predicted in the past (and was ridiculed for it) there would be a protein deficit and the prices of cattle would go up; I will make another bold prediction: I predict in the future we will have a fats deficit and we will be searching for global dairy product.
I've referred to the 'golden age' for agriculture but, in doing so, I am very conscious that there are exceptions in some sectors such as the dairy industry.
Opportunities for Australian agriculture
The UN Food and Agriculture Organization has forecast significant growth in global food and fibre demand, requiring 70 per cent increase in food production alone by 2050 compared to average 2007 levels – and that's not including fibre production.
For example growth will include:
- Grains demand of 3 billion tonnes per annum - up by 1 billion tonnes from current levels; and
- Meat demand of 470 million tonnes per annum – up by 200 million tonnes from current levels
In China, the real value of food consumption is projected to more than double between 2009 and 2050; and most of this increase will originate from urban high income households given their rapid shift to more western style diets; and transition of people from rural to urban areas.
In India—where the value of food consumption is projected to more than double over the same period—diets will be characterised by increasing diversity, with higher intake of vegetables of quality, fruits of quality, and dairy products. Vegetable protein will be at a premium for this market.
And the real value of food consumption in Indonesia is projected to increase more than fourfold between 2009 and 2050.
This is why it is apt that the portfolio of Agriculture and Water resources at this ABARE conference today resides with the Acting Prime Minister. This is not parochial, it is logic.
And it is disappointing – to be frank – that there is a total lack of attention in the political discussion in favour of other issues which will make us neither richer nor poorer.
We have got to get of the political glossy pages, and on to more substantial debates that will actually determine our nation's future.
And water and agriculture most definitely fit that bill.
Since coming to office in September 2013 the Coalition Government has concluded the Korea-Australia Free Trade Agreement which has already triggered four tariff cuts in a row and seen agriculture exports to Korea increase by another $1 billion, to a total of $3.2 billion.
The Coalition government also concluded the Japan-Australia Economic Partnership Agreement which came into effect in January 2015. We have already benefitted from three tariff cuts into a market worth close to $5 billion for Australia, with the next tariff cut due to take effect this April.
And we concluded the China-Australia Free Trade Agreement which took effect in December 2015 allowing two tariff cuts in quick succession and a third at the beginning of this year.
China has become Australia's top market for our agricultural food fisheries and forestry exports, up 38% from $7.3 billion in 2011/12 to $10.1 billion in 2015/16.
Tariff cuts are one half of the story – the other is gaining technical market access and this government continues to work hard to achieve these.
Recent gains include:
- New market access to China with a 2015 protocol agreed for live slaughter cattle exports; and protocols for Australian nectarines;
- New market access to Japan with an import protocol for table grapes signed in 2014 which helped increase exports over a 12 month period by 244 per cent; and new import protocols for Australian melons, pumpkins and related produce signed last year.
- New market access to Korea for blood oranges with a revised protocol singed last year, and market access for table eggs.
The Coalition Government has allowed farmers to fully deduct the cost of water facilities and fencing in the year they are purchased; and deduct the cost of fodder storage assets over three years.
We've improved the Farm Management Deposit by increasing the deposit limit from $400,000 to $800,000 to deliver greater flexibility to manage income fluctuations.
We have allowed these farm management deposits to offset other facilities that have been lent by the banks to the farmer; and I call on all banks to honour this commitment and show their goodwill – a litmus test of their community obligation.
I know how important equity in the farm is.
The Coalition re-established an 'early access in drought' provision, allowing affected farmers to withdraw their FMD within 12 months of deposit without losing their taxation benefit.
Our plan for agriculture included a $4 billion Agricultural Competitiveness White Paper.: one of the most substantive pieces of agricultural policy in living memory.
Now, 22 of 31 measures in the Ag White Paper are fully implemented. The remainder are well underway.
The White Paper on Developing Northern Australia also presents a vision—and a practical plan—to unlock the great opportunities of the north… opportunities in the past, I believe, through 'political correctness' were derided and delayed.
The Northern Australia White Paper will deliver $700 million for priority road projects in northern Australia, including $100 million to improve northern cattle supply chains.
Country of origin labelling
Country of origin labelling is a stand out example of the White Paper delivering.
The new labels are easy to identify, meaningful and clear. Consumers will no longer have to search for country of origin information hidden in small print.
And these changes will make it easy for families to see how much of their food is grown in Australia, and in turn make it easy to support Australian farmers.
Likewise, people from overseas have a trust in Australian quality.
These reforms will also clarify the definition of 'Made in' Australia. For example, importing ingredients and simply slicing them will no longer qualify for a 'Made in' claim.
We are also investing heavily in our biosecurity system, including a boost of close to $200 million through the Agricultural Competitiveness White Paper.
Protecting our enviable pest and disease status is an ongoing challenge.
We can't afford not to meet it. A $50 billion hit to our economy is the estimated price tag of a foot and mouth disease outbreak; and bring the whole nation to a standstill. And there would be further multi-billion dollar hits to our economy if there were outbreaks of Screw Fly, Panama Race4, TB, or brucellosis (which my father in a previous life, as a vet, was responsible for the eradication of)
We also need to take decisive action when our biosecurity is at stake.
A key example of this is the suspension of the importation of uncooked prawns from countries affected by White Spot Disease that was put in place in January.
The Biosecurity Act 2015, which this government delivered on, enabled the suspension to be put in place and also contains heavy penalties - up to $360,000 or 10 years in prison - for those who seek to cheat the system.
Water Infrastructure continues to be a priority of the White Paper.
Through the $500 million National Water Infrastructure Development Fund, we have committed $60 million for 39 feasibility studies across Australia to fast track identification and planning needed to bring new water infrastructure on stream.
Additionally, we have made $440 million available, including $170 million for projects in northern Australia, to co-fund the construction of shovel-ready water infrastructure projects from 1 July 2017.
We have already committed $247 million to co-fund the construction of new water infrastructure projects including Rookwood Weir in Queensland which has a standalone commitment of $130 million; there's the Dungowan Dam in New South Wales with a $75 million commitment; the Macalister Irrigation District Modernisation and South-West Loddon Pipeline in Victoria with a $20 million each; and in north Queensland, we've also made a $5 million commitment for a feasibility study to get the Nullinga dam underway.
The response from some states – from all sides of the political equation – has been promising. While in others, such as Queensland, a barrier-wall made up of excuses, dithering, red-tape and a sop to the extreme environmentalists, stands in the way of vital water projects.
We've delivered the first Register of Foreign Ownership of Agricultural Land to ensure transparency in the industry.
We have also reduced the threshold for Foreign Investment Review Board scrutiny of private sector foreign purchases of agricultural land from $252 million to a cumulative total of $15 million; and $55 million for the category of agribusiness.
And overseas investors are still lined up down the street wishing to invest in our land.
We have passed legislation to create a similar register of foreign ownership of water access entitlements.
Australian super funds have to get more with the program than buying a top tier agricultural asset that's right in front of their face.
Australian asset managers must learn more about agriculture, or their investors will continue to miss out. It's always surprising when overseas pension funds see more opportunities in agriculture, than our own.
This government is committed to the decentralisation - or relocation to regional centres - of some government agencies relating to agriculture.
As noted previously we have already seen the GRDC expand its footprint to Northam, Dubbo and Toowoomba; the RIRDC in Wagga; and the FRDC in Adelaide.
At the APVMA will be going to Armidale.
We believe in the socialisation of skill sets to create centres of excellence in regional towns.
We resolved the backpacker tax issue; and we have delivered the Biosecurity Act 2015; and we will now bring about improvements in the Agriculture Export legislation reducing the complex web of 21 Acts and 40 other laws down to something more coherent.
We have ruled out a sugar tax; and stopped the forced sale of farmland in central Queensland against an owner's wishes to the Australian Defence Force.
We are currently dealing with the Wilmar/QSL issue – we believe in a fair outcome and not being held ransom to a monopoly.
At a government level we have managed both the macro and micro issues in agriculture.
Regional Investment Corporation
In the year ahead, we will construct the Regional Investment Corporation, which will act as a single agency for up to $4 billion in Farm Business Concessional Loans and the National Water Infrastructure Loan Facility.
And we will continue to support farms in crises so that they can be beneficiaries of this global buoyant times that lie ahead.
We have assisted the Dairy industry with a substantial package; and we will continue to roll out water infrastructure.
We will continue to manage the day-to-day requirements of free trade agreements to move product at a better price: meaning a better return for our farmers.
As an accountant and a banker in the rural sector, I was fascinated by two groups of people: those who became exceptionally wealthy and those who went broke. You learn from both these groups.
The latter group's circumstances were determined by a range of factors and these included a concentration on peripheral issues not essential to their business plan, such as (to give an example) purchases of polocrosse ponies and other personal accoutrements of a lifestyle that could in no way be supported by the basic economic fabric of their business.
They were ill-disciplined in the way they attended the day-to-day running of their business. And they had a litany of excuses and hard luck stories as to why they were in the position they were.
The former category had a ruthless almost zealot like approach. They started early in the morning and finished late at night. Even their financial records turned-up bound in a bow. They had a short, medium and long-term vision of what they wanted their business to look like. They may not always have been able to articulate it on paper, but they were clear in their mind. They were logical and unemotional in how they assessed where their business would go. They purchased on facts; and were forensic in their research. And they worked very hard.
Today, this conference is the symposium for this group.
Our nation should also borrow the ideas and attitudes from this latter group.
Our nation should also be wise enough to understand that this pillar of the economy must be politically supported at the highest levels.
Our nation should be proud that our presence in the global economy is fundamentally underpinned by the noble pursuit of feeding and clothing people; and those families that do it mst, therefore, be a breed of the noblest people in humanity.