13 May 2009
DAFF09/113T
E&OE
Good morning to each and every one of you.
I understand, it’s been mentioned to me, that this is the 21st anniversary of these post-Budget breakfasts. At the first one you had [former Federal minister] John Kerin here. So I’m very pleased to be here in that tradition.
And certainly it’s a different Budget than what we saw 21 years ago. It’s a different Budget than what we saw 12 months ago, because we’re in a different global climate to where we were 12 months ago. And the extent of those differences couldn’t be more stark. You probably wouldn’t find a 12 month period where the international climate has changed so dramatically.
It’s important within that international climate to also be able to work through, “How does agriculture fit into that global positioning?” Because we actually fit into it differently to most sectors of the economy. And that’s for a pretty simple principle, which is that at times of global contraction, people start to put off purchases, people start to put off economic decisions. They’ll put off purchases about a whole range of commodities but they won’t put off purchases about food. That’s part of the story as to why agriculture has a different story to tell in the current economic climate compared to any other section of the economy.
You’ve only got to look at the last two sets of national accounts. National GDP went up by 1% in the September quarter. Farm GDP went up by 14.9%. Similarly in the December quarter – that was our first quarter of negative growth – national GDP went down by half a percent, but farm GDP increased by 10.8%.
So the story for agriculture is different to the story for the rest of the economy. But at the same time, the story of agriculture is, as it has always been, different from one end of the country to the other and different from one property to the neighbour’s property.
I don’t want to pretend for a minute that because the national figures on agriculture are very strong that doesn’t mean there isn’t genuine hardship. Of course there is. Particularly in the south of the country you have people who are going through the longest and deepest drought in their living memory. At the same time, many of them are now dealing with the recovery from bushfire. Similarly, while you’ve got people in the north of the country who are very used to having to deal with floods, it has been rare for them to have to deal with a flood the size of South Australia, and a flood where it takes in excess of six weeks for the flood waters to subside.
So to try to get a picture of where agriculture fits into the current national and international figures is complex and always has been. But we shouldn’t deny the fact that, as a general rule, we are in a situation where agriculture is doing far better than the rest of the economy.
The current Budget has created a whole lot of really challenging principles. And the starting point is it’s important for everyone to get a sense of, “Ok, for the Minister for Agriculture, Fisheries and Forestry, what’s the principle that you have to approach this Budget with?”
In times of boom you can probably approach a Budget on the basis of, “What are all the things I would like to do?” and start putting in Budget bids for them. In the current climate, where you have had a massive write-down in revenue, resulting in $22 billion of savings across the next five years, the question that a minister has to ask is a bit different, which is to say, “What can we afford to do?” It’s a fundamentally different question. And obviously in times of boom you can afford to do more than you can during a global recession, during a time of economic contraction, during a time of massive write-down in government revenues.
So in my comments today I want to be up-front about some of the cuts, about precisely where they fall. I also want to talk about the commitments that have continued through the Budget, some of which are unsurprising because we’ve spoken about them some time in advance, and some of the new areas of expenditure.
Also I want to have a chance to talk about the final report of the Productivity Commission, the final stage of the inquiry into drought reform, which had to be tabled yesterday. It had to be tabled yesterday for one simple reason - that I wanted to talk to you about it today. And we’re not allowed to table things at 7am. So it had to be done yesterday so that I can talk to you in some detail about that now.
So let’s go through each of those issues. If I can start with a principle which has been made clear to me by every farmer with whom I’ve met. And I’ve got to say, it was made clear to me in a fairly forceful and on-the-record way, by every journalist I met at every farm visit I’ve had. It is that journalists have been unapologetic for the fact that people don’t tend to care whether it’s technically within my Department or within my portfolio or not. If it’s a water question, I’m expected to talk about it. If it’s a taxation question relevant to farmers, it’s not considered a reasonable excuse to say, “I’ll need to refer that to the Treasurer.”
For a range of portfolio issues, there’s an expectation that I don’t just have carriage in the formal sense of the work that’s done by my Department, but I also represent a stakeholder interest in the work that’s done by a range of departments. And there’s a good deal of work relevant to farmers in the taxation space, in the infrastructure space, in the health space, which has come out in the Budget, which I do want to take you through during the course of the morning.
But first of all – cuts. There has been a massive write-down in revenues. There has been, over the next five years a $22 billion savings exercise [across the Government]. Have we been hit? Yes we have. Have we been hit to the extent of the $1 billion figure some of my political opponents have wanted to throw around over the last 12 hours or so? No, it’s nothing like the $1 billion figure. But let me be completely up-front about where those cuts have fallen.
First of all, you’d be aware from speculation that’s happened over the last week and the Budget Papers overnight, Land and Water Australia will now begin a process of winding up. It’s probably an easier space for a minister to initially try to discredit an organisation before it ceases funding. You won’t find me doing that with Land and Water Australia. Land and Water Australia was doing good work. The reason that the cut has come on Land and Water Australia is not based on criticism of the work that they’ve done. It’s on a basis of having to ask the question, “What can we now afford to do?”
On research and development, my principle’s simple. I think we should do as much of it as we can afford to. And in boom times you can afford to do more. And in times of economic contraction, you have to make some very hard decisions. And when you have to make those hard decisions, I applied one question as to where cuts potentially could fall: “What’s the best chance, if cuts were unavoidable, of trying to make sure that the best part of that work can be picked up by other areas of my Department?”
And with the Bureau of Rural Sciences there and with ABARE there, the work of Land and Water Australia - while very good, and you won’t find me criticising the work that they’ve done – there is the best chance of any R&D work of it being picked up by the rest of my Department than in any other area. And that’s the reason behind the Land and Water Australia decision.
In the same way, the cuts to RIRDC – the Rural Industries RDC – now they’ve been reported in part as R&D cuts. Not strictly true. We’re actually talking about their Rural Issues program. Now some of that work has a fairly close alignment with the work that’s being done by Australia’s Farming Future. There’s also some of the work though that RIRDC’s been doing that I don’t think my Department will be able to pick up effectively. Those parts of it are not being cut.
For example, the rural women and youth programs, the rural leadership programs that are run out of RIRDC, everything that I’ve seen of those I think are absolutely first rate. And I don’t have a belief that the Department would be able to effectively pick up that work. For that reason, that part of their Rural Issues program does not get the funding cut. And we’ve tried to design it in those ways.
If we were in a boom time, would there be a cut at all? No there wouldn’t. And once again, you won’t find me criticising the work that RIRDC did. But the question had to be asked, “What can we afford to do?” And when cuts had to fall, the two critical ones were Land and Water Australia, and $3 million from the Rural Issues program of RIRDC.
There’s a further cut of $3.4 million that hits [the Department of Agriculture, Fisheries and Forestry] directly. Now that work probably will go beyond natural attrition. And it will involve some tough decisions within the Department.
Now very different figures have been spruiked around. I have to say if you take $13 million from Land and Water Australia, $3 million from RIRDC and $3.4 million from my Department, it’s difficult to arrive at a figure of $1 billion. That’s because the $1 billion figure is a fiction that is being bandied around by a misreading of the forward estimates. I’m not going to pretend on that basis that there aren’t cuts. There are. But the cuts are precisely as I’ve described.
To have a Budget that involves those cuts but at the same time involves spending in other areas allows us to meet two critical priorities. The first is to make sure that we are delivering a Budget which stimulates the economy now. The second is to make sure we’ve got the structural changes so that into the future we are building long-term infrastructure for the future. And to make sure that we are set up to return to surpluses to the future.
You’ll see from the Budget papers that we have a situation designed now where we can have the deficit halved in three years and eliminated within six. And that’s the process it goes through. You can’t do that without structural changes. You can’t do that without significant savings. But in the context of $22 billion over those forward estimates, the extent of savings that have had to come to DAFF is certainly not out of kilter with what’s been borne by other departments.
There’s key election commitments which remain completely unchanged in the portfolio. So the commitment to Australia’s Farming Future, the work that’s being done there, through adaptation, through to the FarmReady program, through the Climate Change Research Program; all of that still funded. All of that unchanged.
Caring for our Country, the work that’s being done there, continues. With our long-term commitment to natural resource management, in particular the Landcare and also the Reef Rescue work, all of that is unchanged.
Weeds research funding - the $15 million that we set aside to establish the National Weeds Centre following the decision of the previous government to abolish the Weeds CRC has ensured that there is an on-going basis for that weeds research. And you don’t need me to tell you the enormous impact on productivity that happens through weeds. The importance of a significant government investment in that in terms of research and combating weeds is for the public good generally, but also let’s not ignore the immediate business hit if we don’t conduct weeds research. So those commitments are all there.
Other things that remain unchanged at the moment – and I’ll say more about this in the context of the Productivity Commission report – we are not yet at a landing place on the drought reform. We are close. I thought it important that we not leave it any longer before we release the Final Report of the Productivity Commission. As I said I’ll get to that at the end of the speech.
We then go to what appears in the Budget for drought support. And essentially, because we’re not yet at a landing place on drought reform, the Budget papers reflect the same as each previous year. They look at current EC declarations and do forward projections based on them.
That means, because a number of areas have come out of drought assistance, the forward projections are slightly lower than what they have been in previous years. That does not mean a cut in drought funding. Drought funding remains a demand- driven program. And as new areas enter drought, they’ll be referred to [the National Rural Advisory Council] in the normal way. And if the funding for drought needs to go beyond the projections in the Budget paper, the contingency funds are used in the normal way. In the rare situation that it ends up going beyond even the contingency funds, then extra appropriations are moved in the Parliament, as I have done in my time as Minister.
This is one of the examples of where people have tried to have a bit of fun and claim that there is a cut in drought support. No, it’s a demand driven program and remains that way. But we haven’t taken our foot off the accelerator in terms of our determination to find a better way forward for drought. And I’ll come to that shortly.
Because we were delaying the decision on the final landing place to continue to consult with industry about the drought reform package, there are a number of expiring programs that were due to finish in this financial year which I thought it was important to keep on-line, simply because they were essentially part of the framework of the current drought system. So they go to Rural Support Services, mental health support for drought affected communities, Drought Assistance for Schools, Family Drought Support Response Teams, Re-establishment Assistance, Professional Advice and Planning Grants and Assistance for Isolated Children. All those programs that were otherwise due to expire have all been extended for a further twelve months so that we can then have that breathing space while we move forward on drought reform.
There’s a couple of key issues that are raised with me technically outside my portfolio – but where I’m given absolutely no sympathy if I offer that response if they’re raised with me either by journalists or by farmers – they’re the need to invest in infrastructure, the need to take into account taxation arrangements, and also people’s genuine irritation at the state of rural health and the availability of medical services in the bush. I’ll go through each of those.
First of all, you would know the small business tax break used by a large number of farmers to get, effectively, an accelerated depreciation or tax break back on purchases of equipment. That had been put up, I think from ten to 30 percent during one of the earlier stimulus packages and was due to expire.
I guess you can say the 30 percent expires – we’re replacing it with a 50 percent tax break for small businesses. That applies to purchases made in this current calendar year and then need to be fully implemented in the following calendar year. So, from 30 to 50 percent, on something that people had a reasonable expectation was going to expire altogether, will provide a real opportunity for primary producers who are on a small business model. That’s with turnover of less than $2 million, so it won’t affect everyone but there’ll be a good number of family farmers who get a really significant benefit out of this, to invest in some significant equipment.
Why does that matter? Why does that fit the whole framework of the Budget, or is it a giveaway? We want to make sure we’re planning for the recovery. We want to make sure now that we are positioning people to be in the front-line as the world and Australia moves into the recovery phase.
That means the smart time for people to buy equipment is now. We don’t want to wait for the recovery, then maybe there’s more money floating around, we offer the tax break, and by the time they buy the extra equipment, the rest of the world’s already got in front of us. So that tax break is not only important in terms of the financial benefit for family farmers looking at their accounts and saying, “How do we work through this?” It actually makes a very real difference in making sure that we are well-positioned for the recovery.
But being well-positioned doesn’t just depend on the infrastructure on-farm. It depends on the general community infrastructure as well: $22 billion in infrastructure - now that helps in a series of ways. First of all, let’s work it in reverse chronology.
It works for the purposes of what’s actually been built. So whether it be port development in Western Australia; port development in Darwin; investment in roads, roads going all the way in what’s being referred to as the M1, from Melbourne through to Cairns to end up with dual carriageway the whole way; whether it be rail development in Tasmania – all of this infrastructure helps a farmer get to market. That’s the end point.
And that sort of infrastructure, are there long lead times of those sort of things? Yes there are. Would it be better if we’d actually invested some money into these sorts of things during the boom? Absolutely. But if we’re going to be serious about planning for the recovery, then there’s no point for us, as a Government, crossing our arms and saying, “Well, this should have happened during the boom time.” We need to make sure it happens now so we are well-positioned for the recovery. And that infrastructure work that had been previously banked in the infrastructure funds has now been committed. So we’re now able to name those projects and move forward with them.
I should also refer to the climate change accounting – $16 million is available over four years for the Carbon Accounting Toolbox for agriculture and forestry. I know there’s a number of people in the room – Mick [Keogh] we’ve had many conversations on these issues – trying to make sure that we are not penalised as a sector because the accounting didn’t match the science. To try to make sure that we can bring that up-to-date and provide that better quality toolbox is important on-going work. It also helps to make sure as we move into the recovery, and as the world itself has a determination to see a lower carbon world economy, that we are again in the front-line of that and able to take advantage of the recovery.
I referred earlier to the drought. Drought’s nothing new for Australian primary producers. But an irrigation drought is new. An irrigation drought is not something of which Australians have had decades and decades of experience. You’ll be aware of the central infrastructure work and efficiencies that the Government has committed to there.
But the feedback has been relentless on-farm that people have also wanted government co-investment in on-farm infrastructure. That’s why the $300 million is now there in the Budget for new irrigation on-farm efficiency grants. This comes out of the Sustainable Water Use money.
It will help irrigation communities adjust to a future where, no matter what government policy paths we go down, we all know the projections say the future will involve less water. On-farm efficiency is an important co-investment between government and farmers. It’ll be available to irrigators in the Lachlan and the southern connected system within the Basin, including river catchments in the NSW Murray, the Victorian Murray, the Murrumbidgee, Goulburn – it’s a very long list, we’ll table the list later. But throughout the Basin you’ve got a long list of areas that are able to take significant benefits there.
Now I referred earlier to infrastructure. And infrastructure’s been understood by most people for a long time to be infrastructure about rail, about roads, about ports. It’s been understood for a more recent period of time to also involve broadband. And if there is any sector of the economy where people are logging on constantly to the internet, and then punching the computer because it is too slow, it’s this sector.
One of the most highly visited sites in the Australian Government portal is the Bureau of Meteorology. That is not people in the city checking whether or not they’ll have good weather on Sunday for a picnic. That, overwhelmingly, is primary producers checking what the projections are at the Bureau of Meteorology. And the importance of broadband for the bush is well understood.
One of the things that the Government’s been determined to avoid as we roll-out the National Broadband Network, is to make sure it’s not done in the easy commercial way of simply saying, “We’ll roll out all the big areas first and worry about the smaller population centres later.” We want to make sure that regional Australia and rural Australia gets its fair share right from the beginning.
To that end, there’s significant new initiatives announced in the Budget, including an extra $14 over four years for the Digital Regions Initiative to accelerate those benefits to regional communities to access high speed broadband. Additional to that is $5 million over four years for rural NBN coordinators.
Their role is similar to what we do in employment situations where you’ll have an employment coordinator in an area, whose job is to build the capacity to make sure something does become more economically viable. Coordinators will encourage local government, community and business usage of the broadband opportunities, to make sure that the infrastructure is not just being put out there, it’s also being taken up.
One of the reviews conducted into drought was, on any analysis, technically entirely outside my portfolio. That was the review into the social impacts of drought. As a portfolio that’s largely regarded as within the economic team, there’s an argument that that [social impacts] work probably should have been done elsewhere.
But I took a view very early on, you can’t have the health and mental health issues that we have in many of the communities that we care about and say, “We’re just going to look at the economics of the drought.” And so it was important to be able to commission that report that was headed by the social panel headed by Peter Kenny. A good amount of that work will come out in the drought policy. But on some of the particularly urgent issues on the health, we’ve been able to put a down-payment on the response now.
Almost 500 communities around Australia will become eligible for Rural Incentive payments. Almost 2,400 rural doctors will, for the first time, become eligible for grant payments to remain in rural and remote areas. The way these grant payments work – there’s a complex formula but the principle of it is simple: the more remote you go, the higher the incentive payment.
That’s to make sure that we have a serious Government commitment to try to boost the number of GPs in the bush. The Relocation Incentive grants now go to a maximum of $120,000 for doctors relocating from a major city to a very remote area.
Around 260 doctors currently practising in the most remote locations can now get up to a maximum retention grant payment of $47,000 per year. That used to be $25,000. More than 3,600 overseas-trained doctors who have restrictions on where they’re allowed to practice will be able to discharge their obligations sooner by going to more remote locations.
So these three packages combined should put the framework in place to get the doctors that may unreasonably congregate in medical centres in the city and start to see more of them in rural and remote areas. And if you go through the issues on the social panel report, access to health services is absolutely on the front-line of responses that people were expecting the Government to make.
Let me now just turn, before I get to some concluding remarks, to the issues of drought reform. The Productivity Commission report is now released. It went up on the PC website overnight. It is different from the draft report in a very specific way and also goes into a fair bit more detail in a number of areas.
First of all, you would have heard me arguing with the draft report when they were saying we needed to have a sudden end, or sudden death, approach to the old system – to set a deadline. I always argued that I couldn’t see how the logic of that held up. How do you go to a preparedness policy and tell people that they need to be better prepared for something that we’re already in? The logic of that never held up for me. My view was that any changes to drought support needed to help people prepare for the next drought. And we should not be unreasonably change the rules under people during the current drought.
The Productivity Commission, in their final report, now agree with that principle. And the Productivity Commission has withdrawn its hard deadline that they were recommending to Government. So I do think that puts the debate on a far more logical footing and a far stronger footing than where we otherwise were with the first report of the Productivity Commission.
The other principle that they run very hard – and I’m glad to see there in an independent report – is that we are not doing people a favour with the current system of lines of a map. It is difficult to move away from lines on maps. But we do have to try very hard to find a way away from it.
It does a whole lot of things that divide communities and fail to actually help them. You get farmers sharing a fence who have been put in different official sections. One gets benefits, the other doesn’t, but they are going through identical hardship. That cannot be the best policy option.
You also have a situation leading up to the end of declarations where people in genuine need who know that the drought has not broken get up to six weeks, and sometimes even sooner than that before all the benefits might stop, before they find out what their future is. So if they were going to have to sell, the only option would be to have a complete fire-sale. Those sorts of principles cannot be doing people a favour.
Also, it only acknowledges drought as the only form of hardship for which you could have had no way of preparing. The people around this room know all too well that there are many forms of hardship that can hit a farm business. So we do need to find another way through that.
The conversations with industry are continuing. I think we’re getting pretty close. But certainly I was quite determined that we would not have a rushed outcome just for the sake of getting it into this Budget. I would much rather continue the sensible discussions we’re having with industry, to say, “How can we find a way forward that actually delivers a better outcome for farmers than the problems we have with the current system?” We’re close. We’re not there yet. But the Productivity Commission report, I think, is a good downpayment on the debate moving forward in a pretty commonsense way.
The Budget then needs to be understood very much in the world context, but also understanding you don’t deliver a Budget simply on the basis of, “What’s going on everywhere else and how do we respond to that right now?” You deliver a Budget based on, “How do we set ourselves up for the future?”
We’re limited by what we can afford. But within that framework we have a Budget that provides a strong down-payment, a down-payment on infrastructure, whether it be road, rail, broadband or ports. It is a Budget which provides some of the immediate financial incentives that allow farm businesses to choose what infrastructure they want on-farm and to get a significant tax benefit for doing so. We get the co-investment on irrigation that people have been calling for for some time.
We essentially get to one thing. That is, that we are setting Australia up to be well-positioned for a recovery where we’re able to move back into surplus and make sure that the agricultural figures continue to be as strong as they’ve been of late, and that Australia remains a world leader in this sector.
[ENDS]