10 September 1991
Mr Chairman, ladies and gentlemen.
The year 2000 is just a handful of harvests away. But before then, long before then, we must have achieved fair access to world markets, free of the wastefulness of the and American subsidy systems.
A system which perpetuates this colossal waste of resources, which penalises the most efficient farmers in the world Australian farmers cannot, must not and will not be allowed to stand indefinitely.
That is why I welcome the opportunity to open this
Conference which is important to the future of your industry - and this country.
While the grains industry is experiencing very diff~ icult
trading conditions at present, our focus must continue to be
fixed firmly on the future of the industry. What ktind of
industry do we want in the year 2000.
Farmers have always had to live with changing conditionsever
since grain was first domesticated just 4000 years
ago. We should never forget that it was this great
scientific and social breakthrough the evolution of grass
into grain that marked the beginning of civilization as we
know it.
The discovery of farming meant our ancestors had to stop
being hunter-gatherers and settle down in one spot to plant,
to grow and to harvest. They had to work out a way to trade.
to communicate, to record and tally their crops, to innovate
and invent new techniques and implements.
Farmers have acquired something of a conservative
reputation. In many case~ s that is a justified reputation
especially in Europe but I think if you look fairly at
the record you will see that on the basis of new techniques
and technology, the application of the latest scientific
knowledge, farmers have been at the forefront of change.
Nowhere is this more true than in Australia, and nowhere in
Australia is it more true than here in Canberra.
William Farrer pioneered scientific wheat breeding on his
property Lambrigg here in the ACT for 20 years until his
death in 1906 without, it must be said, a great deal of
recognition at the time. But we know now that without
Farrer's work the wheat industry would not have successfully
adapted to Australian conditions.
There have been other pioneers of course, in other paddocks - but the point is that Australian innovation and Australian
perseverance and Australian capacity to change has got us to
where we are today.
Mr Chairman,
Australia has the world's most efficient, least protected
and most outward looking farmers.
Australia is the ninth largest producer and fourth largest
wheat exporting nation in the world.
In 1991-92 ABARE forecasts agricultural commodity exports of
S12.9 billion, little above 1990-91, but around 10t down on
the years immediately prior to that.
The Australian grains industry is crucial to this
performance
In 1991-92, it is estimated that grains and oilseeds will
contribute 18% of the value of total farm production and
of the value of total farm exports, which is 6.5% of the
total value of all ccmmodity exports.
In forecasts to be released today, ABARE estimates that
production of wheat will decline by 26% in 1991/ 92 to around
11.3 million tonnes. The 1991-92 crop is estimated to be
24% lower than the 103-season average of 14.9 million tonnes.
Wheat prices have been dropping in real terms since 1988-89.
and last year. prices received by wheat farmers dropped by
around 33% on the previous year alone. As a consequence,
the average area sown in 1991-92 is forecast to be only 8
million hectares a far cry from the boom year in 1983-84
when 12.9 million hectares were sown. While wheat prospects
are projected to pick up from last year's slump in line with
moderate price rises, real prices are nevertheless projected
to remain low by historical standards for some time.
Looking at the bottom line. the farm cash operating aurplus
for wheat and other crop farms, whilst still remaining much
higher than the average broadacre farm, is nevertheless
expected to decline by 27% in 1991-92 to S38,800. We know
that this is biting deep in many rural communities.
Mr Chairman,
It is against that background, that I would like to address
the long term future of the industry. Because despite the
present short term difficulties, I believe there are many
reasons to be optimistic about the outlook f or the industry.
There are five key principles which will underpin the long
term success of our agricultural industries trade,
efficiency, competitiveness, equity and environment.
Strategies in these areas cover the rural sector f rom the
farm environment, through the farm gate to the contiumer
from the soil to the supermarket shelf. Let me address each
in turn.
TRADE
Mr Chairman
There is no doubt that a successful conclusion of the Uruguay Round is the most important single factor for the future of the grains industry.
Indeed, no international economic issue is more pressing
than the future of the Uruguay Round. However, time is
running out. Nine months have passed since the failure of
the Ministerial meeting in Brussels last December.
We remain resolutely comitted to the need for a balanced
outcome in the Uruguay Round. No one can afford an
arrangement that perpetuates the present gross waste of the
world's scarce resources. The Common Agricultural Policy
( CAP) of the EC, the American Export Enhancement Program
( EEP), and, on a lesser scale, the import restrictions in
Japan, Korea and other countries, all add up to ain
intolerable situation for Australian primary producers.
As measured by the OECD, total trade distorting subsidies and transfers rose to $ A385 billion in 1990.
This represents almost thirty times Australia's forecast agricultural exports for 1991-92.
The EC is the main culprit with payments worth about SA171 billion; in the US such payments total SA95 billion; and in Japan SA76 billion, mainly to its rice industry.
In the late 1970s, the EC was a major importer of grains. Now it is one of the world's largest exporters, with ashare of the international wheat market.
ABARE has estimated that the cost to our farmers as a result
of the price depressing effect of the EEP was between $ 125
million and S175 million in 1990-91.
At the same time, however, ABARE estimates that the coat to
our wheat and grains producers as a result of the EC's level
of grain industry protection was S695 million in 1990-91, of
which S430 million was in wheat.
So it is the EC with whom we have most at issue. It is the
Common Agricultural Policy which has turned a major grain
importer into a major distorter of the grain market.
The CAP's impact is less exposed to the public view, but the
cost to Australia is more than four times greater than the
EEP.
And it will receive the exposure it deserves when Dr Blewett
leads a bipartisan mission to Brussels in early October.
Mr Chairman.
Last March. Dr Blewett led a bipartisan delegation to
Washington. This visit and the subsequent officials level
consultations represented a constructive though modest start
to a complex consultative process, to minimise the impact
the EEP has on Australia.
The results have not been as precise or as positive as you.
or 1, would like. But they represent an opportunity which
we cannot ignore and which we will not ignore.
Mr Chairman.
Australia, as chairman of the Cairns Group, will continue to
push in the negotiations for agreement on a comprehensive
agricultural reform package. it must include substantial
reductions in agricultural support including domestic
support, border protection and export subsidies and
provide enhanced rules and disciplines to bring agriculture
fully into the GATT system.
The overwhelming responsibility for a successful conclusion
to the Uruguay Round rests: with the Europeans.
As I wrote to the leaders of the G7 Summit before the London
Summit in July, the key to the future of world trade is
GATT; the key to GATT is the Uruguay Round; the key to the
Uruguay Round is agriculture; and the key to agriculture is
reform of the European Community's agricultural protection
policies.
A successful Uruguay Round will not see the end overnight
of agricultural support, or export subsidies, but it will be
the start of an historic aind sustained process of
liberalisation.
Mr Chairman,
I am aware that there have been some calls from within the grains industry for Australia to join the subsidy war.
The argument essentially goes that if you can't beat themn.
Joinl them. It is a seductive argument, particularly when
times are tough. But It is one which we must emphatically
reject. A subsidy war is a war we cannot win. And by joining it we
would lose the last chance of stopping the subsidy madness
once and for all.
Our subsidies would no doubt be met by retaliatory action.
We are a small trading nation and we export over 701 of our
agricultural product. Retaliatory action would devastate
our farm sector.
Furthermore, a subsidy program would undermine the
credibility of the Cairns Group and thereby significantly
lesson the chances of a successful conclusion to the Uruguay
Round. The key to our prominent role in the Uruguay Round
is that we are a fair trader. That fact has given us
immense credibility credibility that we must cherish.
As a small trading nation, our prospects are inextricably
linked with the world economy and growth in world trade. We
must continue to play a leading role in promoting a fairer
trading system.
That is why we did not introduce a guaranteed minimum price
for wheat. That is why we will not be joining the subsidy
war. That is why we have instead targetted assistance to
those farmers in need during the current rural downturn.
Ladies and Gentlemen,
We cannot, and do not, rely solely on the Uruguay Round.
In 1989 1 initiated discussions with our regional neighbours
that gave rise to the Asia Pacific Economic Cooperation
( APEC) process.
An important pert of the work being undertaken is regional
trade liberalisation.
At the next ministerial meeting in Seoul in November, the
three Chinas Hong Kong, Chinese Taipei and The Peoples'
Republic of China will be formally joining the APEC
process. I n 1990, existing APEC participants and the three Chinese
economies accounted for almost $ 900 million worth, or 40 per
cent of our wheat exports, and $ 240 million worth, or 54 per
cent, of our barley exports.
The work to liberalise trado barriers beyond GATT, to
develop trade under APEC is; going to be long term but we
must pursue them now to ensure that the benefits to us in
the future are not lost today.
in addition, we can and wil. l be able to use the standing
Australia has with some of the key players in the Uruguay
Round to influence its outco~ me and to consider where the
future may take bodies such as APEC.
President Bush will be visiting Australia in December at a
time of momentous change in international relations. The
focus of this visit will be much wider than agricultural
issues. Nevertheless, the President will, I know, want to
learn more about issues of interest to the Australian
agricultural community. I hope that we can constructively
give him that opportunity.
The Uruguay Round will, hopefully, be reaching a high-point
of activity and, if it is not, we will be able to put our
ideas for breaking the impasse direct to a leader who will
have great influence in fav. our of reform.
EFFICIENCY
Mr Chairman
Underlying the principle of efficiency is the recognition of
the complete interdependence of the whole economy, and the
interdependence of the world trading system.
In order to remain internationally competitive we must have
the right macro-economic fundamentals in place, and we must
continue vigorously to pursue micro-economic reform.
The March Industry Statement accelerated the process of
unprecedented tariff reforms, and introduced structural
reforms designed to improve the efficiency of primary
industries in the context of a more general package to speed
our industrial reconstruction. We also advanced taxation
reform, notably the simplification of depreciation
provisions; and the widening of sales tax exemptions all
of which will benefit farmers.
The commitments undertaken through the Special Premiers'
Conference process are also fundamental to micro-economic
reform.
The July Special Premiers' Conference agreed to establish
the National Pail Corporaition, the National Road Transport
Commission, the Electricity Grid Management Council, and to
business deregulation which will sweep away the stupidity of
having six sets of regulations around our nation. These are
all major reforms fundameantal to building a competitive
Australia.
The -Government recognises that land transport costs form a
significant part of the costs of producing and marketing
grains.
The Government agrees with the industry Commission's draft
recommendation that State Governments eliminate, without
delay, restrictions of bulk commodities to particular modes
of transport. The Commonwealth considers that the
reservation of particular commodities to rail to be
undesirable, and has deregulated the transport of grains
purchased by the Australian Wheat Board in South Australia.
I know that some in rural and remote communities fear that
the road transport reforms agreed to at the July Special
Premiersl Conference will be to their detriment.
Research is being undertaken by the Bureau of Transport an4
Communications Economics and by ABARE and preliminary
indications are that Primary industry will not be unduly
disadvantaged by the new charges which constitute a very
small proportion of the total costs of operating a vehicle.
For example, the Bureau has found that for Darwin consumers
a typical example of a community dependent on road
transport the cost of the reforms would be less than
cents a week, at worst. The nonsense that has been put
forward in this area about damage to rural communities is
now exposed for what it is. Yes, we will recover costs from
road users, so we can provide better roads. No, consumers
will not suffer.
The grain industry was the first to benefit from the
Government's waterfront reform program. Manning reductions
of between 50 and 80% are leading to considerable
productivity gains and ongoing cost savings calculated by
the Wheat Board as annual savings for the industry of at
least $ 10 million for wheat and other bulk grain industries.
COMPETITIVENESS
Mr Chairman
One of the fundamental building blocks to building a
competitive Australia are the microeconomic reforms I have
just mentioned. But being competitive means more than that.
It also means being flexible and sensitive to the changing
nature of dynamic markets. we must develop and produce
products that are wanted. we can't assume that traditional
markets will stay the same forever, or that new markets
necessarily will want the same basic products we have always
provided.
A simple example of this are the changes occurring in demand
for hard wheat and high quality, higher protein wheat, as
well as alternative grains.
If Australia is to reach its true potential in the next
century it will have to be at the forefront of research,
development, and application of new technologies. So too
will we need to become more export oriented in value added
downstream processing. Food processing is Australia's
largest manufacturing activity, accounting for around 20% of
total manufacturing sales.
At present, however, the export market is seen primarily as
a convenient means of disposing of surplus product. Each
year, tens of billions of dollars in value is added overseas
to Australian food commodity exports.
We have a market of some 2 billion people on our Asia-
Pacific doorstep, but far too little has been made of our
natural advantage of strong public research infrastructure;
access to high quality, unpolluted, competitively priced raw
materials; and a skilled and highly-educated workforce.
EOUITY
Mr Chairman
For rural Australia, social justice means effective support
of farmers and their families in times of crisis, improving
the access and relevance of education and training programs,
enhancing business skills and opportunities, and building
strong and diverse regional economies able to withstand the
ups and downs of the commodity cycle.
What equity does not mean is the adoption of untargetted
assistance measures which will distort markets by offering
industry-wide subsidies, or which subsidise farmers who do
not need assistance.
Mr Chairman,
I am very conscious of the difficulties being faced by Rural
Australia and that in 1990-91, about half of farm families
had taxable income of less than S10,000.
The Rural Adjustmnt Scheme, the Countrylink program, the
Income Equalisation Scheme, and our package of rural
education access programs are some of the services this
Government is providing to rural Australians.
In April we announced a major rural assistance package. The
most important measure in that package was the increase in
funding for the Rural Adju. ntment Scheme by almost S100
million to S160 million in 1991/ 92 an increase of over
150%. An ex gratia payment of up to $ 35.1 million has been
allocated for the grains industry to cover losses incurred
as a result of the United N4ations sanctions against Iraq.
Ini addition to that allocation. more than S280 million has
been paid by taxpayers under EFIC National Insurance Cover
in relation to Iraqi debt to the wheat board. Payments by
the end of 1992 wnder this insurance cover may reach S500
million. I said at the time that the burden of sanctions in
this area would be shared. It has been.
Mr Chairman,
The Budget announced changes to the eligibility rules for
family payments to rural Australians.
The new rules involve changes to the assets testing
requirements for the Family Allowance and Family Allowance
Supplement components of the new Family Payment. The rules
recognise the particular circumstances of farm families who
are, as we say, asset rich but cash poor.
Despite the introduction of an assets test on the family
allowance at $ 600,000, for two years from 1 January 1992.
families will continue to receive the Family Allowance
component of the Family Payment regardless of the value of
their assets if current income is less than the basic rate
of Social Security benefit S13,078 plus $ 624 per child
and liquid personal assets are less than $ 10,000 in the case
of a couple.
From the same date, families meeting the above tests and
with net business assets up to the value of S600,000 will
became eligible to receive the equivalent of the pre!; ent
Family Allowance Supplement.
ENVIRONMENT
Mr Chairman,
A fundamental goal of the Government is to ensure that our
primary production is ecologically sound and environmentally
sustainable for the long term. The health of the economy
depends on the vitality of the land itself. Land
degradation costs our economy an estimated S600 million a
year in lost agricultural production alone. This is roughly
equivalent to 20 per cent of the value of our grain exports
last year. Individual producers and the nation, cannot
afford to sustain these losses.
The Government has made an unprecedented commitment to
overcoming this country's land degradation problems. It Is
our responsibility to farm in an environmentally sustainable
manner to safeguard our prosperity for future generations.
This is the Decade of Landcore, and we are providing $ 320
million for land care and related tree planting and remnant
vegetation preservation programs. At the same time, we have
changed tax deductability rules to encourage primary
producers to spend more on correcting environmental
problems. The cooperation between the National Farmers'
Federation and the Australian Conservation Foundation on the
development of policies to Vrevent land degradation has been
particularly important in the battle against one of our
major environmental and economic problems.
CONCLUSION
Mr Chairman, the grains industry has a proud past which has made it one of Australia's mrost Important and innovative exporters; it faces a turbulent present over which neither you nor the Government has 811 the control we would like.
But once we have accomplished this round of reforms. the grain industry has a future more secure than any in the past or than you presently experience.
I say that with confidence tLecause at the end of the day the world's most efficient and most innovative farmers will harvest their reward.