Speech - Northern Australia Food Futures Conference - Embracing innovation and securing premium food markets - Wednesday, 4 July 2018

It is a great pleasure to address the third Northern Australia Food Futures Conference.

This month I reached a milestone - five years in the Agriculture, Fisheries and Forestry portfolio.  For a brief time I had the great honour of serving as Minister, and since 2013, as the Shadow Minister.

In that time I’ve learned a lot, experienced a lot, and made more than a few good friends.

I’ve nothing but the greatest respect for those who produce our food and fibre.

The work can be hard, the hours long, prices unpredictable, and the climate unforgiving.  Like any business, risk is ever present but that is particularly true of agriculture.

Sometimes governments can be bastards too!

I note we won’t be joined by a representative of the Turnbull Government. That’s both a shame and a lost opportunity.  No areas of public policy are more deserving of bipartisanship than agriculture and the development of our north.

Shadow Minister for Northern Australia Jason Clare and I are both in Darwin this week.  We believe we can still learn much from those who have gathered here for this event.

We are all enthused by the opportunities the north has at its feet, particularly those offered by its proximity to a growing Asia.

But we’re also alert to the challenges: climate; biosecurity; land management; distance; workforce; capital; innovation; barriers to trade; and product market development.

Australian agriculture is at a crossroads.  We can stay on the current path to moderate success, or take the high value road to more prosperous outcomes.

Given growing middle class wealth in Asia, the opportunities are significant.

But the rewards won't come without hard work.  They won't come without new thinking and new attitudes. 

They certainly won’t come if we don’t:

  • Spend our limited research dollars wisely;
  • Embrace innovation; and
  • Secure greater levels of investment.

In the past five years we’ve had both a Northern Australia White Paper and an Agriculture White Paper.  The former was signed off by Tony Abbott, Warren Truss and Andrew Robb.  Did you spot the theme?

The latter was commissioned by Barnaby Joyce. Yes, the theme continues.

Released in 2015, these documents are now three years old.  Their only real success has been to raise expectations. 

Expectations matter in both business and politics and the expectations raised by the White Papers have not been met.

Beware governments – any government – promising to spend considerably more on infrastructure in what are challenging times in the life of Commonwealth Budgets.

Over the last twenty years Commonwealth infrastructure spending has been pretty steady across Australian governments of all persuasions.  The only time that changed was when a Global Financial Crisis caused a Labor Government to take spending to record levels.

Beware also a government offering off-budget need-to-be-matched loans to build dams, ports, roads and railway lines. Loans for projects which may or may not be economically viable and loans people may or may not be able to match.

Our experience with both the Northern Australia Infrastructure Fund and the National Water Infrastructure Fund appear to justify my call for caution.

I say let’s get back to the practical.

Let’s:

  • Build the workforce;
  • Allocate our natural resources efficiently and sustainably;
  • Increase our research, development and innovation efforts;
  • Identify the products and the markets; and
  • Create the business environment and encourage the private sector to lead the way on infrastructure investment.

And let us be clear about what the opportunities are and which we want to pursue.

 

Australia’s key competitive advantage is our reputation as a provider of clean, green, safe, high quality, and ethically produced food. 

In the near future, our strong commitment to environmentally sustainable farming practices and animal welfare standards will also count in our favour.

That’s why our biosecurity and traceability structures must be a first priority for government. 

And it’s why I fought so hard for the retention of the former Labor Government’s Inspector General of Biosecurity when Barnaby Joyce tried to abolish the position.

As important as our bulk commodity exports will continue to be, our production volumes are limited by the extent of our natural, labour and capital resources.  It’s also hard to imagine farm returns rising markedly in increasingly competitive global commodity markets.

That’s not to say we can’t raise profitability in commodities production by lowering costs and raising productivity.  We can and we must.

Government has a role to play, by improving market access and guaranteeing appropriate levels of public investment in research and development, innovation, road, rail and telecommunications infrastructure. 

And of course, lowering regulatory costs.  Sadly, the 2016 Productivity Commission Report on Regulation in the Agriculture Sector is another body of work collecting dust on the Prime Minister’s book shelf.   

But I believe there is a growing consensus that our greatest opportunities for higher returns lay in premium markets.  In selling the higher margin products our increasingly wealthy Asian neighbours crave.

Whether it’s a healthier product, a different coloured product, a uniquely tasty product, or just a product cleverly packaged and labelled, we need to chase the big premiums our customers are showing an increasing willingness to pay.

Do northern producers and growers have a clear view about where the key product opportunities lay?  Have we clearly and definitively identified the premium product opportunities are and where they are?

These are questions I want to discuss with stakeholders this week.  Because we really don’t know whether infrastructure projects stack up until we can answer that with certainty.

And we need to be better at marketing our product.  Branding is critically important and another area where a “Team Australia” approach is required.

Language is important too. Government has a role to play in managing expectations and behaviour. For example, keeping the benefits of preferential trade deals in perspective is important. 

They are unequivocally a good thing and both the major political parties can take some credit for those most recently concluded.  Despite some community disquiet, they have been an area of strong bipartisanship and of course, Labor has a very strong track record on trade liberalisation.

Securing access to markets on the same basis – at the same tariff rate – as our competitors is a good thing.  But it’s anything but a licence to succeed.

First, there are many non-tariff barriers still to be overcome.  Second, we still need to be able to compete on the level playing field. 

If you were a football coach you wouldn’t tell your player group in your half-time chat that because the wind will now be behind them the game was in the bag.

That would only seed complacency.  No, you’d say the playing field just levelled but only commitment and smart, hard work will secure the prize.

Complacency is death in any human endeavour.

It is also important for government to send the right signals to foreign investors.  Lifting farm productivity will require significant additional capital investment.

Our aspirations for northern development cannot be realistic if we are not determined to attract more foreign investment?

The 2012 ANZ report entitled Greener Pastures suggests that to reach our aspirations in agriculture, Australia will need $600 billion of capital investment, and another $400 billion will be needed to support demographic driven farm turnover out to 2050.

To put this in context — the agriculture sector in Australia would need investment of just over $26 billion per annum on top of existing levels of investment in order to meet the investment levels needed to achieve the production targets needed to satisfy both demand and the cost of acquiring land and farm assets between now and 2050.

In other words, just over two and a half times recent annual levels of investment in agriculture.

With a population of only 24 million, we have a limited savings pool and by necessity, much of the investment will come from foreign sources.  Our language, attitude, and rules must be clear, concise and consistent.  Our potential investors are watching and listening.

Playing to populist community concern is a zero sum game.  Everything we do and say as industry and political leaders must be designed to help people understand why foreign investment – including Chinese investment - is so important and to build community confidence in it. 

Fiddling with Foreign Investment Review Board thresholds and membership sends all the wrong signals to potential investors and our own local communities alike.

Offending our largest trading partner with reckless language just to win votes at home doesn’t help either.

In our plans for a stronger future in food and fibre we must look forward not back.

We must focus on the technologies of the 21st Century rather those of the 19th.

An obsession with catchment dams for example, will cause farmers and investors to look back, not forward.  Again, it risks breeding complacency.

Improved water infrastructure will be important to our future.  Projects like Tasmania’s Midlands Water Scheme are a perfect example.  There, the former Labor Government partnered with the State Government, private investors and farmers to build a magnificent productivity and profitability enhancer.

The capital outlay was just $170 million.  The economics stacked up.  Investors were able to foresee a return on their investment.

This won’t always be the case. Partners need to be able to make money and farmers must be able to afford the water.

Nor will the benefits of every dam proposal outweigh the environmental costs.

Using 21st century technologies and the knowledge we did not have twenty, forty and 100 years ago, we can do plenty to improve water efficiency and utilisation.  We can do it more quickly and at less cost.  Our research in, and commitment to, the quality of our soils is just one example.

It is a constant source of disappointment to me, that we spend so much time talking about water, but so little time talking about our limited and depleting soil resources.

Food, land, water and energy are a continuum.

Which takes me to the question of sustainability.  Our climate is changing and we should not spend too much time arguing about what’s causing it.

Our dry continent is becoming drier and our weather more variable and erratic.

No group is more acutely aware of it than our farmers – the custodians of our farming and pastoral lands.

The management of Murray Darling Basin water has not been painless and Labor has worked with the Government to achieve some fine tuning.

But no one would now argue the Murray Darling Basin Plan was a mistake, or suggest an alternate course.

Through the Plan, we’ve taken a market-based approach to water management and water efficiency.  Just as important, we’ve ensured that our precious water resources are allocated where they provide the highest return.

Resource misallocation is an economic curse.  It undermines our productivity and profitability.

Recognising this, we should also be turning our minds to our soils.  We need market-based responses there too.

A Labor Government began the work in soils by attaching a value to carbon. Sadly, that work has fallen away.

Sustainability programs like Caring for Country and the Carbon Farming Initiative are gone or have lost their grunt.

We must have market-based mechanisms guiding resource allocation, guaranteeing sustainability, and lifting farm productivity.  But the reality is, the current Australian Government has no plan.

This should be of grave concern to all of us.

I’ve said a lot about resource allocation.  Our most precious resource is our people.

The 2016 backpacker tax debacle demonstrated one thing if nothing else; we haven’t given enough thought to labour force issues.

Technology is allowing our farm enterprises to be less labour intensive. 

But manual labour will always be a necessary ingredient to success.  We need a serious conversation about giving locals a greater chance of being part of the equation while also making sure our regulatory and tax settings for foreign labour are both competitive and welcoming.

Of course, a profitable sector will bring skilled employees, good money attracts good people.  But we must provide the opportunities and institutions for them to acquire the skills in the first place.

People often ask me: “how do we further encourage our young people to stay or return to the farm”?

The answer is the sons and daughters of farmers will return to farming when there is good money in it.

Family farms will always have a place in our food and fibre landscape.  But corporate operations will increasingly be critical to our success.

The opportunities for Australian agriculture are huge.  But so too are the challenges.

Overcoming those challenges and capitalising on the opportunities will take new thinking, hard work and cooperation.

And it will require all of us to spend more time talking in positive rather than in negative tones.

In any successful economy the heavy lifting is done by the private sector.  But government has an important role to play too and I look forward to working with all of you towards a more modern, diverse, sustainably profitable and productive agriculture sector.


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