RESTORING THE DROUGHT REFORM PROCESS – A SUSTAINABLY PROFITABLE AGRICULTURE SECTOR
SPEECH ON THE FARM HOUSEHOLD SUPPORT AMENDMENT (TEMPORARY MEASURES) BILL 2018
Many are dismayed by the failure of the Australian Parliament to reach a settlement on energy policy. Over a period stretching more than a decade, political partisanship has run interference on every attempt to put a carbon constraint in place without unnecessarily pushing power prices up, or undermining electricity reliability.
It’s both a bewildering and sorry story.
But there is an even more bewildering story. Next year marks 10 years since the completion of the Productivity Commission’s (PC) inquiry into government drought support. The PC’s work should be compulsory reading for anyone with an interest in farm and drought policy.
Like the energy sector, we still have no coherent and effective drought policy 10 years on. What makes this more even incredible than the energy story is that we managed to lose 10 years despite a lack of partisanship. At least until the Member of New England came along.
In 2008 Commonwealth and State Primary Industries Ministers reached an historic agreement on drought reform. They agreed, and I quote: “drought support based on Exceptional Circumstances was no longer appropriate in the face of a variable climate”. Sitting as the CoAG Committee known as the Standing Committee on Primary Industry (SCoPI) – which the now Government abolished in 2013 – Ministers further agreed to commission the PC inquiry and report.
Another historic agreement followed. On May 3, 2013, SCoPI Ministers, including the former Queensland Agriculture Minister and now Federal Minister for Regional Development, signed the InterGovernmental Agreement on National Drought Reform Program (IGA). Five of the nine Ministers who signed the agreement represented Conservative Governments.
It is important to note that both the 2008 and 2013 Agreements enjoyed not only bi-partisanship support across the political parties; it was backed by the key farm leadership groups.
So why is it, 10 years on, we are now dealing with the third Government drought announcement in 2 months? Why is it that only a fortnight separated the second and third announcements? Why is it we still have no coherent drought policy based on the 2008 and 2013 Agreements?
The answer can be found in the September 2013 election result. Two things followed. First, the Member for New England became the Minister for Agriculture. Second, the now Turnbull Government abolished the SCoPI, the key CoAG Committee.
Remember, underpinning the Commonwealth-State agreements was the recognition that changing and more challenging climatic conditions demanded a new and different approach to drought. As the new minister, the Member for New England had a different view. He doesn’t believe our climate is changing or that we should act. His 2015 failed Agriculture White Paper made only passing reference to it.
So I suppose we should not have expected him to embrace a policy approach based on that proposition. Minister Joyce made his view well known – climate change is a conspiracy and the best way to deal with drought is to build dams. I always said he’d never build one and he never did. His response no doubt will be he didn’t have enough time. Well, he had five years and the question becomes: how long would he need? Ten, twenty or twenty-five years?
SCoPI was the key driver of national drought policy reform. As a CoAG Committee, it was properly resourced and structured. It held regular meetings, was supported by public servants and had a diverse agenda including drought, biosecurity and productivity.
Members of the Government will argue it was replaced by AGMIN. This is a fiction. AGMIN is no SCoPI. Indeed the Department of Agriculture website says:
“The Agriculture Ministers’ Forum (AGMIN), which is chaired by the Australian Government Minister for Agriculture, agreed to meet face-to-face once a year and for ad hoc meetings as required.”
And that’s what AGMIN has done: meet once a year. The Member for New England was often absent. I suspect he viewed it as a bit of a waste of time.
SCoPI was the vehicle for drought reform and its abolition cost the nation five years of drought reform progress.
Following the 2009 PC report and prior to the signing of the 2013 IGA, SCoPI agreed to trial new drought measures. The exercise was held in the agriculture region on Western Australia.
The measures aimed to achieve the following outcomes:
- ensure farmers and their families were better equipped to adjust to the impacts of drought, increased climate variability and reduced water availability.
- a more effective social support system for farming families and communities.
- encourage farmers to adopt a self-reliant approach to managing farm risks.
- encourage farmers to use Australia’s natural resource base and water resources more sustainably and efficiently.
The pilot consisted of seven programs:-
- Farm Planning
- Building Farm Businesses
- Farm Family Support
- Farm Social Support
- Farm Exit Support
- Beyond Farming
- Stronger Rural Communities
While the results of the trial were mixed, Ministers agreed to soldier on with reform.
The 2013 IGA set similar objectives:
- Assist farm families and primary producers adapt to and prepare for the impacts of increased climate variability.
- Encourage farm families and primary producers to adopt self-reliant approaches to manage their business risks.
- Ensure that farm families in hardship have access to a household support payment that recognises the special circumstances of farmers.
- Ensure that appropriate social support services are accessible to farm families.
- Provide a framework for jurisdictions’ responses to needs during periods of drought.
Ministers further declared that the agreement should facilitate two key outcomes:
- Primary producers have an improved capacity to manage business risks.
- Farm families are supported in times of hardship.
In the past five years, little progress on these objectives and outcomes has been achieved.
Commonwealth and State Ministers also agreed in 2013 that FHA should be a temporary payment only. This decision was consistent with the view that drought cannot be treated any longer as an abnormal event. Rather, protracted dry events and higher temperatures can be expected to be regular events. There is no justification for providing ongoing income support to farmers who are not viable during protracted dry spells. I’ve heard no one suggest otherwise.
FHA was designed to provide farmers with the support and time they need to either adjust and adapt or leave the farm business.
The latest iteration of farm income support – FHA – is both time limited and comes with mutual obligations. Farmers can opt-in and opt-out of FHA and can receive the payment for no longer than three years in total. Until the Turnbull Government increased it from three years to four years, just prior to the winter break, which Labor supported because there is a complete and utter absence of any long term drought reform policy.
The mutual obligation requires recipients of the FHA to enter into a Financial Improvement Agreement (FIA). An FIA requires recipients to accept case management and enter into activities like further study, training or paid work which may contribute to self-sufficiency.
As stated already the Turnbull Government has extended FHA for an additional year. There is little evidence the mutual obligation side of the Government’s FHA design has been a success. Both outcomes reflect poorly on the Government’s performance on drought and drought reform policy.
Every time a government concedes a need to extend income support or spend more on farm welfare it is also conceding failure, including a failure to meet the agreed objectives of the 2013 IGA.
There were aspects of the PC’s report that surprised many policy makers.
For example it alerted us all to the fact that:
- In 2005-06, the largest 30 per cent of farms generated 82 per cent of the total value of agricultural operations, while the smallest 50 per cent of farms generated 7 per cent.
- As a group, the bottom 25 per cent of broadacre farms have not made a profit in any year from 1988-89 to 2007-08.
- In 2007-08, 23 per cent of Australia’s farms received drought assistance, totalling over $1 billion, with some on income support continuously since 2002.
These revelations were - or should have been - a wake-up call.
The PC also pointed out that the most vulnerable farmers are not necessarily those most facing drought conditions. Rather, the most vulnerable to drought are those who are already marginal – my words, not the PC’s.
The most vulnerable farms are those which:
- Lack scale.
- Suffer the effects of land degradation and have not embrace regenerative practices.
- Have low liquidity and capital.
- Lack diversity in their income sources.
- Have a broken business model.
- Have a poor take-up on the innovation front.
This brings me to the counterproductive nature of past approaches to drought policy.
The drought policies of the past created a moral hazard – sending a signal to those who don’t adapt and prepare that the taxpayer will always be there in their time of need. This of course undermines the incentive to build resilience.
In building resilience and self-reliance a farm business relies on five levels of capital:
- Natural capital – the soil and water resources on which it relies.
- Physical capital – the infrastructure and technology the farm business uses in production.
- Financial – income, both on-farm and on-farm and capital, both debt and equity.
- Human – the labour, skills, education and experience of those who work within the business.
- Social – the ties between people – on the farm and with the community.
These are the areas which should have been our policy focus over the course of the last 5 years. Sadly, that hasn’t been the case.
Despite the length and severity of the current drought, the Turnbull Government has been asleep at the wheel. It only focused when the media started to bring drought to the top of public discussion.
Four years ago the Opposition was telling the Government farmers were finding it too difficult to access FHA. Minister Joyce’s flippant dismissal of our concerns led him to an unfortunate answer to a question from me in this place and subsequently the doctoring of his Hansard and the dismissal by Prime Minister Abbott of the highly regarded Secretary of the Department.
As I noted, after five years of policy inaction, the Turnbull Government has now made three drought policy announcements within two months.
This Bill seeks to give effect to one of them:
- The increase in the assets test for FHA from $2.6 million to $5 million.
- And the introduction of the supplementary payment of up to $12,000.
These changes are being made despite consistent claims by Government Ministers that FHA required no adjustment.
Now its changes are almost daily. Only last night we were told the Government would be moving an amendment today to this Bill.
All this is happening as the Government continues to progress a review into FHA, a review we are told will not be completed this year.
A year to work out what is needed to change to a system that didn’t need changing but is being changed daily! It’s chaos.
The Opposition will support the changes contained within this Bill. But we are obligated to point out that there are many part-pensioners in this country doing it tough because their pension begins to taper off when their assets are greater than $375,000. Not $5 million - $375,000.
Also facing that tighter assets test are many unemployed people in this country struggling on a Newstart payment which hasn’t kept pace with cost-of-living increases.
We’ve always supported a more generous assets test for farmers, it makes sense.
But the $5 million threshold threatens the ongoing community support for the FHA. When so many are not afforded the same consideration.
This cannot go on infinitum. Income support must be the bridge to something better, not a bridge to nowhere, not a bridge to doing the same thing.
The mistake too many often make is to treat famers as homogenous. Every farmer is different and every farm business is different.
We have older farmers, younger farmers, people for whom the farm is a secondary income or the dominant of two incomes. We have growers, croppers, producers, graziers, pastoralists and apiarists. There are those who grow fish and trees.
There are publically listed companies, privately-owned corporates, cooperative and of course, the family farm.
Some have scale, some don’t. Some have embraced technology, some haven’t. Some take a science-based approach, some not so much. Some are on good land and others are on marginal land. Some rely heavily on chemicals others do not. Some are organic others are not. Some export. Others do not. Some want to grow in size, others are happy not to.
They all have one thing in common, they need their government to:
- Keep the economy strong.
- Keep interest rates low.
- Keep costs and red-tape compliance down.
- Make sure there is a workforce with the necessary skills.
- Maintain a strong biosecurity system.
- Grow and maintain markets.
- Provide the supply chain infrastructure and connectivity.
- Provide data and climate information.
- Ensure we have strong research, innovation and extension systems.
- Address market power inequality.
Many of them need help to adapt to a harsher climate. Adaptation and resilience building must be our key response to a hotter and drier environment. We must help farmers regenerate their landscapes; to improve the quality and biodiversity of their soils and to retain water. Raising the soil carbon levels by one per cent on an acre of land will hold 140,000 litres of water.
As scientist and author Charles Massy says, we have to work with not against our ecological system to empower them. We must help them embrace holistic grazing methods and embrace biological agriculture.
What they don’t want or need is more debt. What they don’t need is more political spin. What they don’t need is wasteful exercises like the relocation of the APVMA and the establishment of an unnecessary Regional Investment Corporation. That’s around $100 million that could be spent helping struggling farmers adapt to harsher weather conditions.
We can’t continue to ask more and more of a natural resource base which is in decline. As we grow towards a global population of 10 billion, we should be asking ourselves how we are going to feed all of these people. It is clear to me we won’t be able to unless we deal with the decline in our soil and water resources.
Indeed how will we feed 40 million Australians in 2050 if our natural resource base continues to deteriorate?
We owe it to future generations to change our course, to focus more on product value and less on product volume. To ensure our natural resources are allocated to the product which creates the greatest value and return for both our framers and the economy.
And most of all, we need to do so in a sustainable way.
That means further progressing the science and increasing the number of farmers embracing it must be a priority. Recently I announced that a Shorten Labor Government will charge our agriculture-based Research & Development Corporations with the task of both progressing the science and innovation and ensuring it makes its way to the farm.
That’s the best way to tackle drought and the best way of putting our agriculture sector on a path to sustainable profitability.