Status quo can't remain: Xenophon

07 Feb, 2014 03:00 AM
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DLP Senator John Madigan and Independent Senator Nick Xenophon.
Conventional sources of finance don’t suit the rural sector
DLP Senator John Madigan and Independent Senator Nick Xenophon.

INDEPENDENT Senator Nick Xenophon says market failure is driving the need to implement an Australian Reconstruction and Development Board (ARDB) that can provide finance and certainty for struggling farmers, on a commercial basis.

Senator Xenophon and Democratic Labor Party Senator John Madigan introduced legislation last December to establish the ARDB.

The proposed Bill was referred to the Senate Economics Legislation Committee for an inquiry that’s due to report on March 26, with a public submissions deadline of February 10.

Queensland Independent MP Bob Katter pushed similar legislation in backing farm representatives from Australian agricultural sectors hit hardest by diminished viability and growing debt.

Last June, about 20 representatives from the northern beef cattle industry, Victorian dairy, Western Australian grains and NSW and Victorian horticultural industries met in Canberra to support Mr Katter’s bid to establish the ARDB.

Their efforts raised little fanfare at the time, but comments from federal Agriculture Minister Barnaby Joyce - following his weekend visit to drought ravaged regions in southern Queensland and north-western NSW - have attracted the national spotlight.

Struggling farmers in those areas are calling for varying degrees of government support and assistance, with the ARDB a key demand stemming from the Minister’s drought tour.

Mr Joyce acknowledged farmers and rural associated businesses were suffering compound impacts from prolonged drought and other contributing factors.

“Once the drought goes beyond a certain period of time, you can’t plan for it; it becomes a crisis,” he said on Monday.

“For so long we’ve just hoped and prayed for rain, but the rain hasn’t happened, so now we have to be logical about what we do next.”

Mr Joyce has indicated he supports the ARDB concept in principle and has urged stakeholders to express their views via his ongoing Agricultural White Paper process.

But his challenge will be to convince his cabinet colleagues that more specific assistance is needed at a time when government finances appear to be tight and taxpayer funded bailouts have become politically unsavoury.

Senator Xenophon said the Minister’s weekend drought tour showed why an urgent and effective government response was needed, but stressed the issue wasn’t about giving government handouts to farmers.

He said the ARDB would acknowledge that agriculture was unlike other businesses and “cyclical nature”, which must be taken into account when considering support.

“There has been a market failure effectively because conventional sources of finance don’t suit the rural sector,” he said.

“That’s why in 1983 it was a backward step to get rid of the Commonwealth Development Bank.

“What we need to do is revive that support mechanism and sophisticate it in a way that suits Australian agriculture in the 21st century and rural communities.”

With rural debt reportedly approaching $70 billion nationally, Senator Xenophon said there was an acknowledgement that the status quo can’t remain and “what we’re doing now isn’t working”.

“The fact that there’s so much foreign investment in this sector indicates the rest of the world can see value in Australian agriculture and we don’t,” he said.

“But this Reconstruction Board would acknowledge that (value) and provide a very effective mechanism to provide finance and certainty on a commercial basis.”

His legislation proposes the Board sits under the Reserve Bank of Australia and be tasked with implementing rural reconstruction and development policy.

“It provides a framework that I think will at least give certainty and real hope for the rural sector,” he said.

“I think what Barnaby Joyce heard at the weekend indicates how desperate things are.

“We can’t keep doing what we’re doing if we expect our farmers to stay on the land.

“If we value our farmers, this Board sets up a framework for success in the future.”

With only seven submissions received by Tuesday, Senator Xenophon said he’d be writing to peak farm and industry groups urging them to contribute to the Senate inquiry.

National Farmers Federation (NFF) president Brent Finlay said he’d recently spoken to the Rural Finance Roundtable Working Group, chaired by Queensland grazier and Maranoa Katter Party candidate Rowell Walton, that’s proposing the ARDB.

Mr Finlay said he’d urged Mr Walton’s group to provide more “factual data” to identify what’s really happening with rural debt to further discussions.

He said NFF wanted to “understand where we are right now factually” with the debt’s location, property values, the view of banks and other key factors.

Mr Walton said his Roundtable was involved in generating last April’s announcement by the former Labor government of the $420 million Farm Finance package, to support farmers struggling with viability issues.

But he believes more government support is needed to and the ARDB can help address the longer term issues with growing farm debt and future viability.

Federal Treasurer Joe Hockey said he was unable to commit to the ARDB as he’d not yet seen the details.

He said, “You never rule anything in or out, until you have actually seen the details of what is proposed”.

“We always look at these things but I want to emphasise… the answer to the problem of debt is not to have more debt,” he said.

“If people are having problems coping with interest rates now, then there is a bigger systemic issue at play, because interest rates now are at an all-time low.”

Mr Hockey said reports on Monday that Mr Joyce was urging cabinet to approve a $7 billion drought assistance package were untrue.

“The fact is that there is a new drought package-farm assistance package that is starting on 1 July 2014.”

Mr Hockey said struggling farmers should “speak to the people that they owe the money to as a starting point”.

The Treasurer also said he and the Prime Minister were “all very aware of what is happening in regional and rural Australia”.

“There are swings and roundabouts in agriculture, all the time,” he said.

“I think it is hugely important that people understand that you've got to try to smooth out the swings and roundabouts but you just can't look at the problems when things are tough, because they can be good.

“If we are going to make Australia sustainable as an agriculture food bowl for Asia and particularly in a market that is changing enormously in relation to agriculture, then we've got to look at medium and long-term challenges as well.”

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Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
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READER COMMENTS

Susan
7/02/2014 4:44:55 AM

Will the trans pacific partnership affect Australian Farmers? Have your say@marchinmarch. Marchinmarch.org
Bushfire Blonde
7/02/2014 8:04:55 AM

Mr Hockey, a good start in any assistance package would be to pay all Australian Beef Producers full compensation for the millions (or billions?) of dollars of income lost due to the cattle market slump brought on by the Federal Gov's ban of the Live Export trade. If the truth is known, it probably still hasn't recovered properly.
enough
7/02/2014 8:41:38 AM

Yes, Joe there is a bigger systemic issue at play- it's called Free Trade. When our farmers are competing against virtually every other exporting nation in the world employing farmer subsidies and tariffs (covert or not) and trying to survive on commodity prices virtually the same in dollar terms as they were 30-40 years ago then there is a systemic issue! Economic rationalists evoke the evolutionary "survival of the fittest" descriptive as a virtue in effect, but in truth if there isn't enough to eat then even the fittest starve- and that's called extinction.
Bushfire Blonde
7/02/2014 8:56:04 AM

Lets not forget the principle that in the long term, it is best to fix the cause and not treat the effect. The cause is the Banks are on easy street because of insufficient competition, and the Meat works are in the same boat. Both the Banking sector and the Retail Beef sector are very profitable so the only problem is that the Producers can't get a reasonable slice of the cake so that he/she can cope with operating in what is now becoming increasingly recognize as the dearest country in the world to operate a business.
Bushie Bill
7/02/2014 10:06:06 AM

ARDB is just a fancy name for another handout. Claims are RARA is drowning in debt, so these two intellectual midgets propose that the solution to too much debt is, in fact, more debt, but this time, financed by the taxpayers of Australia. When are we going to learn that agriculture is just a business, exactly like every other business? When are we going to learn that we are not wealthy enough to be able to finance every rural redneck who dreams of being a farmer because he can do nothing else has no tight to expect Australian taxpayers to finance his lifestyle dream?
Archibald
7/02/2014 11:04:46 AM

Since when is government interference in agriculture, regulation, legislation, red tape, high interest rates and high Australian dollar, banning live export, and along with natural drought, a market failure. Other than the drought it looks more like poor government on all sides.
Archibald
7/02/2014 11:32:35 AM

Oh I forgot, bad free trade deals signed by Australian governments are also market failures!!
PAYG
7/02/2014 12:28:31 PM

If administered and commercially operated through the ‘Reserve Bank’ with the only tax-payer liability being simply a Government Guarantee on the Reserve Bank’s financial determinations, not necessarily unlike the recent Guarantee on bank deposits thru the GFC, then the ARDB idea is certainly a step in the right direction. It is interesting that Xenophon hasn’t joined the dots that the only “market failure” occurring has been thru costly regulatory Government intervention.
john from tamworth
7/02/2014 12:35:06 PM

You are right ENOUGH there is a systemic problem but this problem has existed for 50 years and cannot be solved.The major powers will never stop subsidising their farmers.If you decide to farm in Australia you must accept this as a given.The fact that subsidies were not touched during the GFC just shows how wedded the US,Europe and Japan are to farmer support despite their crumbling fiscal positions.All this silly Reconstruction Bank will do is bail out the banks that made the imprudent loans to nonviable farmers in the first place.It will do nothing to solve the problem of overcapacity.
bg
7/02/2014 1:41:08 PM

Correct Enought and JFT. But even if those subsidies were removed, there is a bigger problem. Deregulation of markets empowers corporations, disempowers individuals. Farmers are having done to them what masters did to slaves. Corporations now control governments. Great if you are Rupert Murdoch, disastrous for most of us. But then we are so easily split to fight among ourselves rather than unite and face up to the real problem. Imagine how much easier that will get if Rupert gets to own the ABC. BTW if Tony doesn't give Rupe what he wants, Shorten will be next PM.
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