YOU REAP WHAT YOU SOW - SUSTAINABLE PROFITABILITY IN A CHANGING POLITICAL ENVIRONMENT
AUSTRALIAN GRAINS INDUSTRY CONFERENCE, MELBOURNE
WEDNESDAY, 2 AUGUST 2017
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It’s a pleasure to address your premier event for the third time.
I believe it fair to say that the quality of industry leadership in the agriculture sector is patchy and sometimes unproductively conservative. But in my four years in the portfolio, I’ve been impressed with the thoughtful and professional leadership I’ve seen in the grains sector.
The first time I addressed you I did so as your Minister. On that occasion I took the opportunity to introduce myself and to share my guiding principles for policy making; a belief in the market and support for government intervention but only where market failure is apparent.
On the second occasion I shared my hopes for the farm sector: enhanced market access; better natural resource allocation; more value-adding; smarter branding; and greater levels of investment – including foreign investment – to give the sector the lift in productivity and competitiveness we need to fulfil our aspirations.
Today I’d like to reflect on the changing political climate. I know some of you were in Canberra last year for my address to the NFF Congress. Back then I spoke about the unravelling of what were once considered unshakable political allegiances and the risks involved in not acknowledging and adapting to that changing political dynamic.
In that speech I referenced the unexpected global election and referenda outcomes of the past couple of years and declining major-party vote here in Australia. In the 10 months since the NFF congress, political upheaval has continued unabated. Indeed if anything it has accelerated.
I returned from a holiday in Italy and France on Monday. Political revolution and the rising tide of protectionism were in the air everywhere I travelled.
Indeed a visit to Versailles seemed a timely reminder of the consequences of out-of-touch leadership. In the end, the elitist, arrogant and born-to-rule attitude of King Louis XVI and Marie Antoinette cost them their heads.
In a more recent but less dramatic uprising, the major parties failed to make the final cut in France’s Presidential election.
In recent contributions to political discussion I’ve suggested people need to think carefully about what the alternative might look like before pursuing radical political change. I stand by that view and time will tell whether our European and American friends should have thought harder.
But voters have few choices and when feeling disenchanted, voting for someone or something different can easily become their only option. By contrast, politicians have many choices and ignoring the feelings of their people is the dumb choice. That’s the message I heard in Europe and it’s the message I hear at home.
With real wages falling, prices rising and income inequality growing, too many people are feeling left behind. Equal opportunity for all is not possible in those circumstances.
Politicians have an obligation to lead and persuade; to make the right and tough decisions. But ultimately we are obliged to represent the will of the people and a business-as-usual scenario is not what they want. Not here, and not elsewhere.
Many European politicians have learned that the hard way. Not as harshly as King Louis and his wife, but dramatically and painfully just the same.
This is not an argument for policy capitulation or a swing to the left or the right.
Rather, it’s a call for more honest, empathetic and smarter policy thinking. It’s a call for real leadership.
I thought Labor Leader Bill Shorten made a very useful contribution in a speech two weeks ago when he focused on the challenges of inequality.
Inequality is not just a problem for those at the wrong end of it, it’s a problem for all of us because it impacts on productivity and it makes economic reform harder and fuels anti-immigration and protectionists sentiment.
Acknowledging a problem is the first step to fixing the problem and Bill Shorten is the first major party leader in Australia to do so on this issue.
Those who chose to sit back and argue that all the data suggests people have never had it so good do so at their peril. Like Marie Antoinette’s “let them eat cake” line, it can only end in tears.
Amongst the losers will be our entrepreneurs including our farmers, processors, traders and logistics operators. They need a government capable of managing the public mood, not one which misreads it or worse, ignores it.
The punters aren’t anti-business. They are not anti-profit. They are not dills; they understand the role entrepreneurship plays in driving economic growth, job creation and even wages growth. They know trade is important.
What they are against is unfairness. They are not anti-foreign worker as long as they are not displacing Aussie workers. They don’t mind paying taxes as long as everyone is paying their fair share. They’re not anti-banks, just anti-bad behaviour. They don’t understand why income taxes are growing for low income workers while our highest paid are receiving a tax cut. They’ve never heard of “trickledown economics” let alone believe in it!
They are all adults and don’t ask for much: a fair day’s pay for a fair day’s work; a roof over their heads; and equality of opportunity for their kids.
These aspirations are a continuum in our society. And while aspiration has rightly risen with economic wealth, the level of frustration and disillusionment in our communities has risen much more.
This is the new dynamic the current Government seems not to understand and that’s bad for our trading prospects and bad for the economy.
It is certainly something Barnaby Joyce doesn’t understand.
The Deputy Prime Minister’s first instinct has been an attempt to appeal to his base. There are two problems with this response.
First, his base is shrinking in number. On his watch, rural populations continue to decline and where they are steady or growing, traditional conservative voters are giving way to “sea-changers” and “tree-changers”.
Further, many farmers see through his false promises and spin. They know better when Barnaby Joyce claims credit for commodity price rises over which he has no control.
They also note the absence of any comment on falling commodity prices. And many see the impacts of a changing climate as the biggest challenge the land sector faces, yet Barnaby Joyce’s response is to ridicule meaningful action. Worse, he runs deceitful campaigns against carbon mitigation policies for his own political gain.
Second, Joyce’s responses are the antithesis to the siren call. Pork-barrelling, boondoggles and spin designed to culture false hope are amongst the very things people are rebelling against.
We now for example, have a ports code that covers almost no-one, and a sugar code which is doing harm to that sector’s key players. The relocation of the APVMA is a disaster yet the Minister continues to pursue it despite all of our warnings and opposition.
But Exhibit A is the agriculture white paper. A pot pourri of thought bubbles; some already failed, some yet to happen and some which will never happen. Some based on nostalgia, others without any excuse or explanation.
Barnaby Joyce is fond of the phrase “we have money on the table”. But no one is picking that money up and sadly I believe that is part of the plan. In other words the initiatives are designed to fail, but not until after the next election, of course.
When last in office Labor built many water projects, Tasmania’s Midlands project the finest example. Only last month, Bill Shorten promised another in South Australia. And it’s one that is ready to go.
But in contrast and despite his constant dams rhetoric, Barnaby Joyce has not built any water projects in four years. And not one is in prospect.
The Abbott Government was quick to take credit for the China, South Korea and Japan preferential trade deals which were all but complete when we left office. But progress on the many protocols necessary to make them meaningful has been at snail’s pace.
The Government has also displayed a lack of urgency over further prospective bi-laterals; Indonesia I know is of particular interest to the grains sector.
But my key point is that the elites in Government are telling the farmers that thanks to the FTAs they’ve never had it so good. But it’s not what the majority of growers and producers are feeling; not in grains and certainly not in dairy. No wonder so many have their pitch-forks out.
Part of addressing inequality and key to managing the new political dynamic is fair and prudent Budget management.
In the fiscal environment we face money will be tight for some time. Beware those who make big spending promises in the absence of new savings or revenue measures.
And beware those who are making promises “off Budget” and before the economic analysis is done.
In recent months Labor has proposed some very bold but prudent revenue measures: changes to negative gearing arrangements; capital gains tax rules; and, more recently, the tax treatment of trusts.
These proposals are all about making the tax system fair for all, and providing the revenue required to invest in the productive capacity of the economy. They are about creating jobs.
Labor will place Infrastructure Australia back at the heart of infrastructure investment decision making, ensuring that money is being directed to the projects which deliver the highest economic return for the nation.
For the past four years agriculture productivity has remained flat and our farmers continue to lose global market share. This has to change and making the right decisions on rail, road, grain port and telecommunications infrastructure is the key to both higher productivity and improving our international competiveness.
Of course public sector investment is only part of the equation; we desperately need more private sector investment including foreign exchange. Unlike the current Government, Labor will not play politics with foreign investment.
Also critical to our productivity efforts and our competitiveness are research and development, extension, and innovation.
We are all fond of claiming Australia’s R&D model is the best in the world and that may be true. Labor certainly likes to thinks so, we designed and built it. But to say that thirty years on it could not be improved would be a mistake.
Innovation will always be a key focus for me, as will biosecurity where funding-certainty and continuity is desperately needed. That’s why Labor took a promise to the last election to establish a Biosecurity Institute.
Many express concern to me about our ageing farm workforce. They ask me how we get our children coming back to the farm again. My answer is always a simple one: they’ll start coming back when they believe they can earn as much or more than they can in other career pursuits.
Happily, some are already coming back to the farm and they’re bringing new and fresh ideas. They also bring a different approach to natural research management; a key interest for me. But I believe we need to further “main stream” or “normalise” farming.
In life, the problem with constantly claiming you’re special is that you end up being treated differently. In the long run, that special treatment can become a curse, breeding false hope, complacency, resource misallocation and less than optimal outcomes.
The agriculture sector often faces extraordinary variabilities which are beyond its control; the weather being the most obvious. That’s why Labor carved the sector out of the recent trust decision. But recognising special challenges is a different thing than accommodating special interests.
I want young Australians to look at agriculture and see a modern, innovative wealth-creating sector which is focused on sustainable profitability and key premium markets. Not a sector which needs to be treated preferentially to survive.
Achieving that outcome will require strong industry leadership and thoughtful strategic guidance from government. Working together we can ensure investment returns are sustainably high and all points along the supply chain are efficient, competitive and profitable
I know that in the grains sector that’s what you aspire to and you are certainly making your contribution, including here in Melbourne this week.
I wish you all the best for a successful conference.