Farmer co-ops set to thrive on government driven reforms

Farmer co-ops set to thrive on government driven reforms


Politics
Suggested headline: Victorian Nationals Senator Bridget McKenzie (left). independent facilitator Greg Hammond and Treasurer Scott Morrison at the release today of the Hammond report recommending reforms to improve the standing and recognition of co-ops.

Suggested headline: Victorian Nationals Senator Bridget McKenzie (left). independent facilitator Greg Hammond and Treasurer Scott Morrison at the release today of the Hammond report recommending reforms to improve the standing and recognition of co-ops.

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COOPERATIVES including farmer-owned entities that drive agricultural production are set to benefit from upcoming reforms mooted by the federal government.

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COOPERATIVES including farmer-owned entities that drive agricultural production are set to benefit from upcoming reforms mooted by the federal government, with the prime measure being methods to enhance access to capital.

Treasurer Scott Morrison revealed today that the Coalition would accept all 11 recommendations from a recent inquiry into reforming cooperatives, mutuals and member-owned firms, conducted by independent facilitator Greg Hammond.

Mr Hammond was appointed by the Treasurer in March to consult on the 17 recommendations contained in the Senate Economic References Committee’s report into co-operatives, which resulted from an inquiry spearheaded by Victorian Nationals Senator Bridget McKenzie.

The government’s response to the Senate inquiry’s report - handed down in March 2016 - was also released today to coincide with the Hammond review’s findings being published.

But only two of its recommendations were accepted, with the remainder “noted”.

Recommendation 17 was accepted which said the Commonwealth government should examine proposals to amend the Corporations Act to provide co-operative and mutual enterprises with a mechanism to enable them access to a “broader range of capital raising and investment opportunities”.

Recommendation 4 in the Senate report was also accepted which said a mutual enterprise should be explicitly defined in the Corporations Act and its associated regulations.

The government said accepting the two recommendations from the Senate inquiry was measure consistent with the Hammond report’s findings.

The government only disagreed with recommendation 3 which said the establishment of new co-operatives and mutual enterprises should be encouraged.

“Any decision on the appropriate business structure is up to the individual or entity in question, upon consideration of their circumstances - the government should not advocate for or favour any business structures or entity type over another,” the Senate report said.

The Hammond report said cooperatives and mutuals contributed to almost every area of the Australian economy, including agriculture, banking and finance, housing, insurance and retail.

It said in 2016, there were an estimated 2000 co-op and mutual entities operating in Australia with an aggregate active membership of 29 million people.

“The top 100 enterprises had a combined turnover of $30.5 billion and combined assets of $143.7 billion - up by 8pc from the prior year,” it said.

Senator McKenzie said she pushed for the Senate inquiry as a whole range of government agencies at a state and federal level were “not actually treating cooperatives and mutuals the same way they treated any other business”.

“They weren’t seen as commercial entities when the facts are just not true,” she said.

“Cooperatives and their structures have really allowed our producers, right throughout our history as a nation to band together and to have some real market power when it comes to their product.

“Look at CBH, what a great story that is and just look across the ditch at Fonterra.

“If you want to know the power of a cooperative of member ownership within the agricultural sector this is the model that delivers for producers on the ground.

“I am incredibly proud to be part of a government that has delivered on that promise that seeks to open and make it clear that the cooperatives sector needs to be recognised in the Corporations Act and I am looking forward to bringing down those measures so that we can watch this sector grow and develop well into the future.”

The Hammond report also cited a submission from Australia’s largest cooperative – WA farmer owned bulk grain handler and grain marketing company CBH.

CBH keen on reforms but not impacted directly

CBH’s submission said co-operatives and mutuals benefitted the Australian economy and community and removing barriers which constrained their access to capital would “better allow them to fund their growth and development, to further increase their contribution”.

“Increased access to capital could provide the funding essential to develop new products and services and expand an organisation,” it said.

“While CBH would not be impacted directly, its support for a change in capital raising options - for non-state registered co-operatives and mutuals - stems from a fundamental belief that co-operatives and mutuals are able to contribute in a different capacity, and in some cases a greater capacity, than corporate structures can.

“The ability to increase the size of this contribution is inarguably linked to their capacity to raise capital.”

Mr Morrison said mutuals, co-ops and member-owned firms contributed around 7 per cent of GDP in Australia had until now, been “under-appreciated” and ignored by federal laws, placing them at a disadvantage to their much bigger competitors.

He said today’s announcement was about recognising that these customer owned banking and member-owned organisations, “play a huge role in our economy, a huge role in communities and the Turnbull government wants to protect it, enshrine it, celebrate it and see it grow”.

“Why? Because it is good for the customer,” he said.

“It is good for competition; it is good for the people who own these organisations which is Australians; and it is good at the end of the day for our economy because it means there is more competition in banking.

“There is more competition in private health insurance.

“There is more competition in agricultural production and what occurs in that sector.

“This is an important and growing sector and I want to remove the shackles from its ability to grow and compete and to do that they need to be able to play on the same field that the big banks do and that other big companies do.

“That means that they can get access to capital.”

Mr Morrison said Mr Hammond had spoken to regulators, officials and those who work in the sector, during his inquiry, to identify “some of the key things that are holding this sector back and they are, their ability to access capital”.

“The mutuals sector has become an orphan effectively under our legislation, an orphan under the way that regulators operate - they are there but not seen, not heard - it is important that we change that,” he said.

“There is still a lot of work to go - there is legislation now to be consulted on and drafted…that needs to pass through the parliament.

“I would hope this is something that the parliament should embrace.

“We will consult extensively on that legislation and I would like to see it come to a place and come into effect if at all possible by the second half of next year.

“That would be great to see and I think that really does set the challenge for the parliament, as well as my team of officials at Treasury to get this done, to get it consulted and get it into the parliament and ensure that members, customers, businesses all of those who depend on this sector and thrive as a result of this sector will be able to do so more so into the future.”

Business Council of Co-operatives and Mutuals CEO Melina Morrison said the announcement was seen as the federal government “showing that it is committed to long termism, to social responsibility” and to businesses that are domestically owned and taxed domestically.

“This is a bulwark (defensive wall) against inequality because Australians, through these announced measures, will be able to invest in the long term in the businesses that are here for them in their communities,” she said.

“We see this as a step change and greatly welcomed and look forward to the soonest implementation so that on behalf of our customer owners, our member owners we can get in and start investing from the inside out in our economy and keep that economy growing within the Australian domestic scene.”

Mr Morrison said he expecting the mutuals and cooperatives sector to push forward with hthe reforms “and if that means the big banks push back, well, so be it”.

“But that's what competition is and what we’re seeking to do here is put more power in the arm of mutuals and cooperatives and customer-owned banks to be even more competitive in the sector,” he said.

“This is good, common-sense policy which is good for the economy, good particularly for regions of Australia where the meshing of cooperatives and mutuals into the fabric of those communities is incredibly strong.”

Mr Morrison said “We love our mutuals, co-ops, customer-owned organisations” which were a big part of Australia’s history actually and on latest figures, represented a combined membership, despite some double-up memberships, of some 29 million memberships throughout the country.

“The top 100 have some $30.5 billion in turnover and they have assets of around $144 billion,” he said.

“This is a big sector and importantly it is owned by you - it is owned by Australians.

“Out in rural and regional parts of the country…these are organisations that are part of the fabric of local communities, have been started by local communities and some have gone onto incredible scale.

“(But) one of the problems is in order to compete with the big boys, they often have to de-mutalise to get access to capital and to be able to provide the competition that they want to provide for their owners which are their members, which are ordinary, everyday mums and dads and Australians all around the country.”

The Coalition government’s Agricultural Competitiveness White Paper contained a $13.8 million Farm Co-operatives and Collaboration Pilot Program that’s being delivered by Southern Cross University in north-eastern NSW.

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