2 March 2010
DAFF10/193T

(E&OE)

Subjects: Drought reform, abolition of the single desk, CPRS, APVMA review.

Tony Burke: Thank you very much Virginia, for that very kind introduction and thank you as well to Aunty Ruth for the Welcome to Country.

This is the third Outlook conference I’ve had the privilege to speak at and the second I’ve had the privilege to open, given after the election, the Prime Minister chose to come here himself. When I spoke on that second day in the 2008 Conference, I set out what I believe were the external pressures and how to deal with those external pressures that drive public policy in this portfolio in the years ahead.

Today I’d like to take stock as to where we’ve come in those two years and where we need to head. It might seem a little bit early in the day for me to be getting sentimental but as Virginia referred to I have a rather large and public job interview at the end of the year after which I find out whether or not I get to come to my fourth ABARE conference. So it’s a perfect time for us to have a look at what the expectations were that I set in 2008, where we’re up to and where we need to go.

In that speech I referred to two principle external pressures coming down on Australian agriculture. I referred to the shrinking world – what people often shorthand as globalisation – and to climate change. The issue of the shrinking world has implications for our need for trade and efficiency and our need to be smarter and cut red tape wherever we can. In climate change, I referred to our need to focus on research and development and to start to challenge some of the issues we avoided dealing with as a nation for many years. We need to ask the hard question – are our current settings on drought policy actually working for farmers and for the nation?

Finally I talked about the two concepts of globalisation and climate change intersecting in the public policy area of biosecurity. And the need to ensure that we’re a part of some very serious and very hard reform in biosecurity.

For each of these areas of public policy, if you take the smart political choice, you often end up with the unwise policy outcome. That is a choice you face every day - do we make tough reform decisions the sector needs to be better positioned for the next decade? Or do we keep to the easier platitudes and remain sentimental about the last century?

I’ve been determined to work on a basis that anyone only gets to be in this job for a very short proportion of your total working life. And I don’t intend to waste a day of it. There have been some issues that have been viewed as ‘holy grails’ and ‘ministers-must-not-touch’. That was the attitude in the beginning with respect to the single desk and AWB. It’s an attitude which I’ve heard with respect to the research and development corporations. It’s an attitude which I’ve heard many times with respect to drought reform.

My view is no areas should be considered taboo if we’re trying to land on the best public policy. So I’d like to work through those overarching themes of globalisation and climate change, to look at how last year they formed the biggest issues in the world: climate change, global food security and the global financial crisis. Those three issues brought into general public debate what we’d been talking about well before. We knew if we prepared and modified and got smarter about how we did things, we’d be well prepared for the future and if we didn’t take on that reform task, other countries would start to get ahead of us.

Trade and market access always come to mind when people hear about globalisation. There is no doubt we have had a good story to tell over the last two years. Whether you go to Europe, North America, or throughout the markets of Asia, there are horticulture and red meat markets which we could not access previously but are now buying Australian produce. Throughout the Middle East, the live export trade had felt constantly under risk of ministers unilaterally shutting down markets, because we hadn’t been able to guarantee animal welfare standards which the Australian public believe should be part of what we could deliver.

So we’ve invested in those overseas markets and locked down agreements throughout the Middle East, many of which I’ve personally signed with those ministers in their own countries. Now a situation that live trade meets the animal welfare demands of the Australian community and delivers long-term, secure contracts for Australian producers.

In the same for horticulture, whether it’s mangoes, lychees, cherries, kiwi fruit, there are customers now able to buy Australian produce who simply were not able to three years ago. That has meant we’ve played the rules straight as well. If we want to access markets in other countries, then we can’t play the game here. We have to be honest with having a science-based approach to our own biosecurity rules. Whether it be Filipino bananas, Tasmanian apples or some of the red meat discussions which have dominated the media in the last few weeks, if there is a scientific or public health argument for keeping something out, then you keep it out. If the science says that if protocols are followed there is no possible public health argument here, then there is no biosecurity argument,.

We export 60% of what we grow. We do well out of engagement in global trade. We have every right to protect our biosecurity. We have every right and every expectation to have an absolutely risk-averse set of principles when we’re talking about public health. But when there is no scientific argument to the contrary, we cannot use our quarantine rules as an excuse for protectionism. It’s not in the interests of the economy, it’s not in the interests of our farmers, it’s not in the interests of the Australian consumer.

In the same way, accessing those countries is not just about dealing with those quarantine barriers. When I came to office, there were barriers to trade which we had voluntarily imposed upon ourselves. And the classic one was the single desk in wheat. It meant an Australian farmer had the right to plant, grow and harvest their own crop, but did not have the right to sell their own crop. That public policy was patronising in the extreme. I was given advice from people who had been around for a very long time, suggesting if I could find a way out of delivering on this election promise I should. But for me, the principle became clearer and clearer after I continued to spend as much time as I could dealing with farmers on their own properties, not just with the lobby groups and the people from my Department. There was no argument more compelling than that of one WA grower when he said, “Why can’t I sell it to whoever I want? After all, it is my wheat”.

It is so often the case that the easiest public policy stance is the least courageous and the least helpful in the long-term. For all the demonstrations outside of this conference the first time I turned up, and the different protests that inside Parliament and the political arguments in the media that this would be the death of the wheat industry for Australia, I’m very pleased that we have now doubled the number of export countries that AWB was exporting to in its final year of monopoly status. I am pleased that you can go through a whole series of nations including from Saudi Arabia to Malawi, that we access now for the first time in more than four years. How growers choose to take up those opportunities is their call. But it’s important that Government systems don’t get in the way of the ingenuity of smart farmers.

There’s more to be done in terms of removing some barriers and the extra areas where red tape just seems to be almost unwieldy. I haven’t had a lot to say about one agency in my portfolio in speeches so far, but I want to put a flag up about the Australian Pesticides and Veterinary Medicines Authority – the APVMA. From every angle they have a very difficult job to do. They have to make sure that they can have maximum safety standards and specify particular uses for chemicals used on farms. To make sure that we are being safe for the environment, safe for farmers handling those materials, and safe to consumers who end up with products.

But when I’ve been on properties, seen some of the public health concerns raised in the media, and had some of the environmental arguments put to me, I do not believe for a minute that we have an agency that is working under the best possible framework. For that reason, Lindsay Tanner and I have embarked on a reform partnership for the APVMA. Lindsay Tanner and I are working together to make sure that we can keep the principles in place under which the APVMA functions, but find every possible path to deliver greater efficiency. We want to make sure that when a chemical is dangerous, it can be restricted and restricted quickly. We also want to make sure that when a chemical is clearly safe, it can be made available quickly and o in a way that provides a minimum amount of red tape for everybody involved. I don’t believe for a minute that the current framework under which the APVMA is operating is the ideal landing point. And Mr Tanner and I will have more to announce in the future as the next stage of red tape reduction in this part of the portfolio.

When I referred in that speech two years ago, to the two areas of a shrinking world and climate change intersecting with biosecurity, it was before I’d received the report from Roger Beale with suggestions as to how we fix the problem. So it was very easy, to simply highlight problems without highlighting solutions. Once again the solutions from Roger Beale and the Beale Report for how to change from a quarantine system to a biosecurity system involved policy prescriptions which were not the easiest political outcome. If we get it right they will never generate a good media story for one very simple reason: biosecurity is about avoiding the news story from happening. There is no news story when nothing goes wrong. You’ll never know how many times a better system protected people, it’s impossible to quantify.

But biosecurity is the essential national insurance scheme for Australian agriculture. And we were running it under principles to provide key performance indicators for ministers, rather than outcomes for farmers and the Australian environment. There was one very simple principle wrong with our quarantine system. The first principle was not risk management or finding ways of minimising risk. The first principle was a whole lot of individual assessments called IQIs which may or may not be relevant to risk and they were the benchmarks. So long as the Minister was delivering against them, you’d get to put out an annual report and give yourself a tick.

But being able to say you’re meeting all the key performance indicators for a minister provided very little comfort to the Australian horse industry when it had a one billion dollar hit during the outbreak of equine influenza. It would provide very cold comfort in the future for the Australian red meat industry if we were ever to see foot and mouth disease hit Australia again which would be something in the order of an $8-13 billion dollar hit to industry.

The Beale reforms are incremental. There’s no single media release where we get to do the big announcement and suddenly a whole lot is happening at once. You can’t do that in a risk management organisation where you have to make sure that you don’t drop the ball as you move to a new system. With export certification we went through a difficult period last year but ended up getting to a good point of reform so we will see a whole range of efficiencies and red tape removed for Australian exports. We also have something in the order of 70 to 80 or so different computer systems in that section of my department – almost none of which can talk to each other. We need to go through a fundamental IT upgrade in an incremental fashion so that you don’t have the one big day when everything changes and there is some glitch that you haven’t thought of. To go down that sort of path would be putting industry at risk for the sake of a good media engagement and that’s something I certainly have no intention of doing.

We then move to the concepts that I referred to under the heading of climate change. Which go to much more than climate change because part of dealing with tougher climatic conditions is simply to find new areas of efficiency. If you’re more efficient, you can deal with tougher climatic conditions. It was interesting when one of the international bodies not that long ago put forward a report on the adaptation task around the world, particularly in the developing world, for dealing with climate change in agriculture. Most of the changes they recommended were about transport and the need to make sure that food can move.

[Director General of the World Trade Organization] Pascal Lamy when he was last here in Australia remarked this is one of the only countries in the world where the Agriculture Minister could be found attending a friends of trade function. It’s not attached to the portfolio in other countries, even when it’s in their interests, for the simple reason that the politics of protectionism are always easie and the politics of changing nothing are always more convenient.

As an export nation, it certainly doesn’t do us any favours. But that’s an argument about moving between nations. This report that I refer to is about moving food within nations. Every step of the way, that concept of being able to streamline your full value chain is part of making sure that whatever hardships we confront in the future, we can continue to be viable and vibrant and successful as an industry. That’s why we promised to conduct a review for the grain rail lines for both WA and NSW. Those reports are both in. WA are particularly advanced in working their way through different investment models to see how we can find significant improvements to growing freight in Western Australia, the state with the mining boom where we are finding increasing pressures on the available infrastructure and want to make sure that grain doesn’t take a back seat in that.

That concept of looking across the whole of the value chain goes to research and development as well. Ioing in research and development we have been very good at looking inside the farm gate. That’s where the levy payers who have so much say on the research and development corporations are themselves based, so we tended to look at that very strongly. We haven’t done nearly enough, in looking at the whole value chain. And some people say ‘Well, why should we look further down the value chain, isn’t this about helping farmers?’ To which I simply say: we can’t in one breath say every time there is a cost imposed somewhere along the value chain that will be passed back 100% to farmers and then pretend that an efficiency further down the value chain will bring zero benefit to farmers. We can’t maintain the logic of that argument.

We know that farmers have always been more price takers than price makers. But to presume there are no benefits from efficiencies down the value chain is simply rhetoric and wrong. The wine industry has been one of the great examples of this. And you probably won’t notice this if you’re just picking up one bottle. If you’re carrying a case you might spot the difference. Wine bottles are now about 20% lighter than they used to be – making a massive difference on freight charges and associated costs in overseas exports. The new light-weight bottles are also stronger, therefore reducing shrinkage. All of that is incredibly powerful and the benefits float all the way back to the grape growers. At a time where we had such a massive oversupply of wine grapes, every efficiency anywhere along the value chain needs to be found.

I don’t believe the research and development corporations as a general rule have done enough of this. I asked them to do more of that; some did, some didn’t. Some have done an excellent job, some haven’t. That’s why I set up the review by the Productivity Commission which will now be coming back to Government and saying, here are ways of delivering better efficiencies and reducing waste with the same amounts of money. Let’s find ways of putting that waste into better research. And let’s also find ways of targeting whole value chains rather than only looking inside the farm gate. If we do that, we deliver efficiencies that work for everyone along those value chains and help deliver regional employment, whether it be on farm, in food processing or in transport mechanisms.

That research and development needs to look at all of the technology, not close its mind to any areas of biotechnology including genetically modified crops. I am pleased that the WA Government have now lifted their moratorium on the use of genetically modified crops. I always get back to the argument,  ‘But consumers don’t want it’. And it is true, if you conduct an opinion poll: do you want to eat genetically modified food, you will get people saying no. In the same way if you asked people the question: do you want food that has been treated with chemicals and pesticides, you will get people answering the question no. And those two will very frequently point in different directions. In the same way, when you ask people: should we ever hold back on finding better science to make sure we can feed a future global population of nine billion people, people will again answer no. I have no time for a moral argument against genetically modified food when it’s competing with a moral argument for feeding the world’s population. We should close our mind to none of the technology.

The greatest taboo in this portfolio has always been that on drought policy you should keep the current framework and offer them more money. I have had letters from my political opponents over the last couple of months asking me to do just that. People might be aware that the Howard Government put in place a limit of a half a million dollars on the maximum amount of interest rate subsidy any recipient could receive. Some people are starting to reach that limit. They are now making very hard decisions.

The answer proposed by my political opponents is to boost the limit because people are getting near the cap. Before I respond to that, let me go right back to the beginning and spending time with farmers on their own properties as much as I have. If you have a moment of total boredom and decide to visit my webpage, you’ll see a map of Australia with the dots of the places I’ve been to, many of which I’ve been to on more than one occasion. There’s a lot of them and there’s half a dozen farmers for most of those dots. I have had a conversation with each of them, which I’ve largely kept private until recently so I want to share with you now. I can share even though it was a private conversation because I’ve had it with something close to one hundred people. It’s the same conversation and all of them thought they were the only one saying it to me. It happens when I visit a farm, the moment the farmer is on their own, when the farm organisation is not there, the media is not there, and often when my staff and department are not there. When it’s just me and the farmer themselves. And the conversation begins this way: “Now Tony, nobody is going to tell you this, but the drought policy, the interest rate subsidy, sure, there are some people it’s helped, but it is hurting a lot of people.

I probably haven’t been as frank as this until now because I know that working your way through Government handing money to individuals is really easy politics and difficult for anyone to criticise. And there is no doubt a lot of good done by the interest rate subsidy and no doubt for people in the current drought it must remain and see them through the current times they are in. But just think through the logic of that payment. Point one: government support and assistance is conditional upon how much debt you are in. If for whatever reason you’ve made some really hard decisions during the good times and are not in debt, your reward for that is to get no government assistance. Secondly, by virtue of it being an interest rate payment it is effectively effectively a payment to the bank, not to the farmer.

People have locked themselves into those financial arrangements and they’ve got to see the policy through under its current policy settings. But I don’t believe for a minute that’s the best way to do things. And beyond that, what does it actually mean right down to the individual farmer? It means they were confronted with a really tough decision, for some of them seven years ago, and instead of helping them out of that we gave them just enough money to hold them in that precise situation. They then had seven years on the property where it’s not making money, where they’re only staying just afloat. And at the end of it, either because they lose their EC declaration or because they reach the maximum of the half a million dollar payment they are told, “Now you’ve got to make the hard decision that you probably could have made seven years earlier.”

I am not surprised at a whole lot of mental health challenges in this portfolio. I am not surprised, when people talk about the latest act of self-harm in a town, that very frequently it was somebody who was getting very significant amounts of Government support. I think we need to be brave enough to acknowledge that just because we are giving people money does not mean we are doing them a favour. We need really strong transitional mechanisms as we move to the new drought policy. But I don’t believe I could leave it any longer before I acknowledge squarely the extent of harm some of the policy settings are doing. To unilaterally get rid of it would cause more harm so that will not happen. The Government position remains – any reform of drought policy is about the next drought, not the current one. But I cannot see any justification as to why a future drought policy would involve an interest rate subsidy.

I do not believe we are doing people a favour by continuing to have those policy settings for the next drought. I don’t believe that gets us off the hook in money. It simply means we’re going to have to find a way of facing the music in a way that no Government ever has. Because when times are good there’s no pressure on us to give anyone anything. But if, when times are good, we can find a way to co-invest with farmers and help them prepare for future challenges, then we’re not waiting for someone to hit crisis and then come in and keep them in suspension for seven years. We actually have policy tailored to fewer people ever hitting crisis in the first place.

How does all of this come back to the farmer? At this point I’ll refer to the CPRS as well, because we did a terrible job explaining the final package at the end of last year. There were a lot of changes in that final package, very different to the legislation we first introduced. I mentioned this to one of the farming groups on the other side of the country last week and I’d like to explain the nuts and bolts of where the emissions trading and Carbon Pollution Reduction Scheme actually ended up – what that legislation before the Parliament means. Not in terms of overarching policy, but what it means for someone on their own property. Inputs – fertiliser price, chemical price, unchanged. Fuel price goes up, fully offset by a rebate. Electricity prices do go up. And there’s a direct line of money to help people with cash to move to lower energy use for their electricity, with a particular focus on meat processors, dairy and malt.

So in terms of input prices, it’s pretty hard to argue that that in its final form it meant much of an increase at all. For emissions under that legislation the farming sector, the primary produce sector – farms, forestry, and the fishing industry – these are the only sections of the Australian economy where we ignore the emissions completely. Even if they go up, we ignore them – the only section of the Australian economy where it did that. But if you reduce your emissions through abatement, you get cash. If you improve the amount of carbon in the soil through sequestration, you get cash. People can do their own sums as to what sort of deal that would end up being for farmers. But simply: inputs roughly the same, cost of emissions completely ignored, opportunities for new lines of income created. That is the legislation in its final form. That is the agreement formed at the end of last year. That is the legislation for this sector that is currently before the Senate.

But what do the rest of the policies mean for that same farmer? What it means is this: through our determination in our reforms in drought and research and development, we’re making sure that we help people prepare for all the challenges of the future. We’re finding every possible line of inquiry to improve productivity. We make sure with our market access that we significantly increase the number of customers available to that same farmer. And finally we look along the whole value chain to make that path to market as efficient as possible. To do all of that means confronting some areas where politically it’s a whole lot easier not to. But I have no intention of simply occupying this job. I have no intention of using the opportunity to make speeches being sentimental about all the good things in the last century – and there are plenty of them. When it’s a choice between the good things of the last century to be sentimental about and a tough reform agenda that prepares us for the next decade, I’ll take the reform agenda every time.

Best of luck for the conference.

[ENDS]