31 March 2009
DAFF09/106T

(E&OE)

Thanks very much Alf for the warm introduction there.

It’s a real pleasure to be with you here today. My Department has prepared a very long speech. It’s a very good speech. But very long. And what I’d rather do is just have a bit of a conversation with you and pull out some of the key themes, including some of the issues that Alf’s just asked me to touch on.

Essentially the best thing I can do is tell you my sense of the international pressures and opportunities, the domestic pressures and opportunities, and then talk about some of the government programs that we’ve got in place to hopefully provide an effective way forward.

The international pressures are different for yourselves to what almost any other business in Australia is facing. And it’s about time the international pressures actually did go your way. When the global financial crisis turned into a global recession, and as issues have developed, every month this has taken on a new dimension.

So I can’t give you a clear road map as to everything that is going to happen over the next twelve months to ten years. What I can tell you is the Government’s sense of where you’re positioned now, globally. And some of the reasons for that. And some of the opportunities that will flow from that.

For highly traded commodities internationally, the moment the global financial crisis hit, there was an immediate slump in commodity prices. The world sugar price was no different. With the world wheat price, for example, the mere absence of Lehman Brothers in the speculation market caused an immediate crash in prices, simply because the prices weren’t only driven by consumer demand but by all the speculators in the middle, who were largely making extra dollars between your point of sale and the consumer’s point of purchase.

That now has been compounded by a new and, to some extent, better pressure in terms of how it’s going to affect yourselves. And that is that when you look at world production levels and sugar available for export, Europe, Brazil and India all look at being about to produce a significant undersupply of sugar for export.

So the projections that we have now spell a very good story in terms of world export prices for sugar. Now that doesn’t get greeted with jubilation. And nor should it, simply because you’ve had to deal with some fairly shocking world sugar prices for a long time. But it does create a sense of momentum and some optimism for the future.

In the same way, with the global recession, as people’s budgets get tighter and tighter around the world, it means that there are a whole lot of expenses that people put off. They might be major development and improvements, new factories, new buildings. Major project development around the world is starting to slow down. And then at the domestic level, people putting off the purchase of the new TV, people putting off the purchase of the new item of furniture.

But while you can put of those purchase for a year, a number of years, it’s a little bit harder to put off the purchase of a food product. And that is a big part of the story as to why agriculture generally, and sugar specifically, particularly with what’s happening with production levels among some of your competitor nations, continues to be a growth sector in our economy.

The growth figures, when you have a look at them for Australia are much, much worse if you take agriculture out of the equation. And the role that agriculture is playing and that sugar is likely to play in the years ahead spells a very good and optimistic and important story for Australia. And hopefully will mean, for the first time in way too long, some of what limited prosperity there is around, you’re likely to get a good share of it.

Now that’s where we are globally. But there are also domestic pressures. And it would be crazy of me not to acknowledge them. We’ve heard for a very long time that climate change is going to cause in the south of the continent a hotter climate, a drier climate And in the north, in particular, we’re likely to see more major weather events.

On the back of the more major weather events we’re going to see an increased proliferation of weeds, pests and disease. Those threats you see up-front. And you don’t need me to explain the impact of more and more severe weather events. So there are challenges we have to deal with.

You can never take a particular weather event, a particular cyclone or a particular flood and say, “That one - that’s the climate change one.” The climate change projections are all about the trends. And what the scientists have been projecting would happen, we are seeing occur. And that of itself is a domestic pressure, and one that many of you have struggled with and had to deal with.

We still don’t know the full financial impact of the floods for any of the agricultural industries, yours included. But there’s no doubt it’s a significant hit. And in budgetary planning for the future, there is no doubt that the projections all tell us that those major weather events are going to continue to occur. They’ll occur more regularly than they used to. And when they do come they’ll be more severe.

Which individual event is a climate change event and which individual event is not is a crazy conversation for me to try and engage with. What we can say, though, is that the trends put an extra pressure on domestic production.

The other pressure on domestic production that I’m very much aware of, and I appreciate, Alf, the way you put it, is with respect to pressure on land use. It’s not only forestry. It’s also urban sprawl. And there’s a whole lot of public policy issues that start to come together. From day one when I got this portfolio and started to meet with the Canegrowers organisation and visit individual properties - whether it be through Innisfail, the Burdekin, through the various areas all the way north to Mossman where I’ve met a number of people who I can spot in the room around today - the pressure on land use is a key concern and a potentially critical concern for the future of a number of mills.

Now it is true, as Alf describes, where that problem first eventuated. It is also true that I’m the Minister now. And future policy is something where it’s going to have to be my engagement with Wayne Swan as the Treasurer who’s in charge of taxation policy.

I certainly never intend to be in the space where I’m telling people what to do on their own land. I have no interest in doing that. Farmers and graziers will make smarter decisions on what to do with their own land than a minister based out of Sydney, Canberra and travelling is going to be able to make.

Those decisions belong to landholders. But when those decisions are being in-part driven by taxation policy rather than your own agricultural decisions, then there are some public policy problems that we still have to work through.

Some of the information, to work through, particularly with MIS, was only made available when a court decision came down in very recent months. And that’s given us more information to work through. Up until then we had a taxation ruling that was still being tested through the courts. There’s been a review conducted by Treasury which now feeds into the Henry Review of all taxation.

I’d love to be able to stand up today and tell you that we’ve found a fix and announce it immediately. It’s not the ideal policy space when those land-use decisions are not based solely on someone saying, “What’s the most profitable thing to do with my land?” but instead having to ask the question, “What’s the most tax advantageous thing to do with my land?” Yet it is where we are at the moment.

So you can be assured, as an issue and in terms of the distortions that are currently there, it is well understood. It terms of being able to announce a solution to it today, we are not there yet. But I do not want you to think that this is not front-of-mind for the Government. It is. And it’s an issue which is playing very differently in the south of our continent to how it’s playing in the north of our continent. And the issue of critical mass for mills is one that I’m very, very cognisant of.

The other pressure which is more difficult to deal with directly is the uncertainty around renewable energy. And the uncertainty, in particular, given that you are constantly competing with an oil price that has been fluctuating wildly. There have been times where it has crept up to the point where biofuels such as ethanol have looked like they were about to be completely market-driven. And then you get a sudden shift back downwards in the oil price. And the question marks start to occur again. You then get the dollar moving down. And it starts to become more viable. The dollar goes up again, increasing our purchasing power overseas. And there’s more question marks there.

I’ve been working closely with Martin Ferguson to give you more specific guidance as to government policy on ethanol, the specific work that we might be able to do in R&D and to have a look at the infrastructure underlying your decisions. Once again, that work that in the middle of a budget process is under robust discussion. And the timing of how we deal with those policies is something that is still being worked through with Government as well.

The issues that I can give you clear guidance on now, in terms of Government policy, are attached to the Reef Rescue program. And this is probably going to be unreasonably blunt, but I am sick to death of hearing people badge farmers as though they are environmental vandals.

If any of you have had a moment of total boredom and decided to visit my web page, you’ll see a little map there. There’s a fair bit of the continent that I’ve been to so far since I’ve had this job. But obviously there’s a lot more to come. Property after property that I visit around Australia, wherever I go, I see best-practice land management being done on private land by people who work the land and love the properties they’re on. I see it consistently. And that’s why our commitment to Reef Rescue is a commitment to an incentive-based program. That’s the way we think it should be run.

That’s the way, when we were in Opposition, before I held this portfolio, discussions were held with Canegrowers, to say, “If we were to win government, this is the sort of project we’d like to do. How do you think we could make it work?” That’s why we’ve ended up with a package worth $200 million for Reef Rescue. That’s why we’ve got $23 million going through current phase in the current financial year. Eighty percent of that money will go directly to landholders.

Now how that money is used will be different from property-to-property and different from industry-to-industry. Obviously some of the run-off issues for a beef property are radically different to the run-off issues on a cane property. But the principles are the same. We’ve got nutrients that are valuable and you want to keep on your soil, both because there’s a productivity gain for you in keeping them on your soil and because you’re good land managers. And we respect that. And we want to be able to help you do that.

We then have the impact at the other end - that the more we can help you in that task, the more we can meet the nationwide expectation which you’re all passionate about too: to be doing what we can to preserve the Great Barrier Reef, that magnificent icon.

So that’s why we’re working with Canegrowers. And we’re using Canegrowers as one of the key consultative mechanisms in working out, property by property, how this process will go forward. At a beef property, for example, it will be things like fencing off areas. On some of your properties it may be issues like vegetation in particular areas, to do something about holding back nutrients on key run-off pathways.

It will also be working together with you on some of the laser levelling projects to try to make sure the run-off is reduced. There will be a series of different approaches. But the approaches that Reef Rescue takes will be targeted to your individual properties. And you, through your relationship with Canegrowers, will be in the front-line of that decision-making process of working out how we can do it best.

This whole approach gets back to that philosophy that I spoke about at the beginning. You will not find me, as a minister, telling you what to do with your land. That’s not how I operate. And it’s not the way that I think we get the best public policy and the best outcomes for Australian agriculture. But we are trying to make sure that through incentive programs and different tools, we’re able to arrive at win-win outcomes that deliver for you. And win-win outcomes that deliver for what the requirements of the nation are.

That’s why we’ve also had the commitments with respect to research and development. By anyone’s book, not enough had been done in Australia on the potential impacts, adaptation techniques and mitigation methods of CO2 in the context of climate change. It’s an area where the rest of the world started to move before we did, the problem of course being that we’re actually more affected than most of the rest of the world.

There’s a few issues that have been dealt with very directly. Obviously in the White Paper and the Carbon Pollution Reduction Scheme the zero rating of biofuels has been very important. It makes sure that under any system of emissions trading you’re not disadvantaged in terms of global trade on those products, where other countries that have emissions trading schemes already have zero rating for their biofuels industries.

But it’s also been a case of making sure, with research and development, that we can say, “Ok, how can we find creative ways of being able to harness carbon within the soils? How can we find creative ways of accurately accounting for the entire life cycle of what you’re doing?” Rather than have situations where, for example, under the cane burn it gets counted as an emission while ignoring all the sequestration that happens during the growth phase.

We need to be at the front of this science. And to-date we haven’t been. That’s why when I looked at an initial promise made by us in Opposition that we’d increase funding in this area to $15 million, I said, “No, we’re breaking that promise. We’re going to change the $15 million figure to $42 million.” No-one complained too loudly for breaking the promise in that particular way. But it meant that we were able to radically increase the research and development in this space, and particularly do some serious work on accounting mechanisms and methods for being able to store carbon in the soil.

And basically think of carbon emissions the same way you think of those nutrients through run-off. It’s another form of agricultural waste. And the more you can limit the waste off a property the more you can improve your own productivity. I’ve made it clear to the Research and Development Council that I’ve established what I want them to do in all of this climate change research.

I want them to work on the basis of, if we’re out of the system at least until 2015, and possibly beyond - we make that decision in 2013 - what is the best incentive to have people use farming techniques that also reduce emissions. The answer is simple: the best incentive is if we drive research and development down a productivity path.

If doing the right thing in terms of climate change also boosts on-farm productivity, then that is the perfect space. All the research and development in this field is being driven with those principles in mind. Those principles are in the absolute front-line: that I want them to find areas where reduction in emissions and improving productivity work hand-in-glove the whole way through. And that’s been the nature of the R&D money that we’ve been putting on the table.

It would be outrageous of me to stand up, give a speech to you and not refer to the work the sugar industry has already done in preparing for the future. Because I have seen fantastic work, whether I’ve been to Sarina, Proserpine, whether it be the Mossman Mill. The work that I have seen on the ground in terms of moving forward as an industry to be in front of the rest of the world is absolutely first-rate. And I think you would be hard-put to find better examples anywhere in Australian agriculture.

I was really pleased a couple of weeks ago to launch the low-GI sugar from the Mossman Mill. I was devastated when they told me it did not mean I could eat unlimited amounts of sugar. It will never overtake the prime product. But it’s another example of diversification and value-adding, of being able to make sure that we farm smarter than the rest of the world.

We’ll never be able to compete with some of the other export nations in terms of wage levels. I don’t think we want to be the sort of country that has their wage levels. But we can be a country that farms smarter than the rest of the world.

I know some of the pressures on labour supply have eased. And that’s been another thing that happened in the context of the global recession. It was harder and harder for you to get labour as you just couldn’t compete with the wages that were offered in the mines. Some of that has eased temporarily.

But I don’t want us to rest on that and presume we’ll be able to ride on the back of that. I want us to continue farming smarter each year than we did the year before. And I want to help you in that process. Long before I arrived in this portfolio, you were doing exactly that sort of work. Now I want to walk that path with you.

The news for the future, while always uncertain, carries globally a higher level of uncertainty than it has for many, many decades. But within that mix two things are true. First, if you were going to be anywhere in the world, you’d want to be in Australia. Second, if you were going to be in any industry in the world, you’d want to be in agriculture in Australia.

The opportunities that we have in the current global market haven’t come our way for quite a while. And we’ve got to grab them and embrace them while they’re there.

Sugar is well-positioned. Sugar has a good story to tell of preparing for the future so far. Some of the optimistic opportunities for that future are on our doorstep now. And I want to work with you to make sure we grab them with both hands.

Best of luck with the conference.

ENDS