Government approved levy despite advice it would be passed on to consumers

Along with a Senate select committee inquiry into supermarket pricing currently underway, Labor recently launched the Emerson Food and Grocery Code review and directed the Australian Competition and Consumer Commission to conduct an inquiry into supermarket pricing practices and the relationship between wholesale, including farmgate, and retail prices.

Labor Ministers have also been on the front foot in recent months to reinforce that the government's "number one focus" is fighting the national cost-of-living crisis.

However, a departmental report included in Office of Impact Analysis documents published in May last year recommended that the proposed new tax would not impact producers as "some of the biosecurity protection levy cost applied to producers would be passed through the domestic supply chain to consumers."

It also said that it was not anticipated that individuals would bear any regulatory cost burden associated with the introduction of the levy, "with impact limited to costs passed on to consumers."

It is within the Senate committee's terms of reference to look into any matters relating to supermarket price practices.

The BPL was first announced in the 2023 Federal Budget as part of a new $1 billion sustainable biosecurity funding model scheduled to begin on July 1.

About $48 million a year will be collected from producers and funnelled into consolidated revenue.

National Farmers Federation chief executive Tony Mahar said the Department of Agriculture, Fisheries and Forestry report displayed "a lack of understanding" of how agricultural supply chains work "to believe that producers could simply pass this cost onto consumers."

"There is no reason at all to expect the BPL will be treated in any different manner to existing levies whereby they are borne by the producer," he said.

"We've consistently said the BPL's design is flawed and the OIA's assessment pointed out the Government's planning process before the levy's budget announcement failed to be considered 'good practice'.

"As the Government themselves have consistently said, this is a contribution from producers to fund the Department's activities. This assessment by the OIA was the first in a growing list of independent bodies flagging how poorly designed this proposed levy is."

The Office of Impact Analysis sits within the Department of Prime Minister and Cabinet, working with other departments to produce evidence-based assessments of how policy proposals could operate in practice. Its reports are frequently tabled in Cabinet policy discussions.

However, a spokesperson said the government did not reveal what was discussed in federal Cabinet.

Levy modelling was recently rejigged by government to be based on the gross value of production for each commodity "to ensure it's more equitable and more transparent."

Prime Minister Anthony Albanese said on Friday that he believed the supermarket duopoly of Coles and Woolworths did have excessive market power and that, while he hoped for increased competition through new market entrants, the government would also consider mandating a code of behaviour. However, he rejected divestiture powers being used to forcibly break up Coles and Woolworths, saying that Australia is "not a Soviet country".

"We know that when farmers are saying they're getting less for their products, that hasn't necessarily translated through to cheaper prices at the checkout. And it should," he told the ABC.

"If farmers are getting less, and we're not necessarily arguing for that, of course, farmers should get a fair price for their product, but when you have that disconnect between the prices being paid by supermarkets and then the prices being paid by consumers, then something's going wrong.

"What you're already seeing with greater transparency and focus on supermarkets, I think you are seeing some changes in behaviour already as a result of the focus that's on that.

"And that, of course, because supermarkets rely upon people to support them, then you are seeing some change, not enough, but you are seeing some change flow through."

Queensland Fruit and Vegetable Growers chief executive Rachel Chambers said the organisation would mention the report in a letter to all Federal Labor MPs that will "implore" the government to pause the levy.

"It's not that growers don't want to be a part of biosecurity solutions - in fact, they already are in a big way," the letter says.

"(But) the levy has had teething issues - obvious by the 100 per cent of feedback from industry still opposing it entirely.

"The government's own impact analysis report suggested the costs would be 'passed through the domestic supply chain to consumers', in a time when governments are advocating for lower costs to consumers is not a good look.

"Suppliers have been alerting the government for some time now, to the fact that we don't have the ability to demand price rises from our buyers.

"Whilst we all investigate the issues contained within the pricing to growers, a government adding to this burden of increased costs is not a good look."

Meanwhile, 50 agricultural representative groups, including livestock, grains, dairy, forestry and horticulture, recently wrote to Prime Minister Anthony Albanese, Treasurer Jim Chalmers and Agriculture Minister Murray Watt asking that the levy be scrapped.

AUSVEG public affairs and communications general manager Lucy Gregg said the peak body, along with the wider horticulture and agriculture sector, was continuing to engage with government to seek further details on the specific financial impacts and mechanics of the new model of collecting the biosecurity protection levy, "and to raise vegetable growers' concerns at what is effectively another tax."

"AUSVEG is strongly supportive of an effective biosecurity system that benefits all Australians and protects the supply of locally-produced food and fibre," Ms Gregg said.

"However, such a system needs to take into account the significant biosecurity investments growers are already making via levies, and also ensure all who benefit from the system are contributing equitably - particularly those sectors which generate the most biosecurity risk.

"At a time when Australian vegetable growing businesses are experiencing extreme margin squeeze that is threatening the viability of many, and contributing to rock bottom sentiment, we caution against the imposition of another cost that growers will disproportionately have to absorb.

As the recent heightened publicity on cost-of-living and the issue of supplier relationships with retailers has repeatedly illustrated, it will be virtually impossible for vegetable growers to pass on any additional costs associated with the levy to retailers at a time when they are under sustained pressure to accept lower and lower farm-gate prices for their produce."

A Productivity Commission report released late last year highlighted flaws with the levy in a paper arguing that the government was using the "creeping growth of levies" as a mechanism for funding government activities.

Nationals leader David Littleproud said the levy was "just another tax on farmers, which will inevitably be passed onto consumers."

"The tax will force Australian farmers to pay for the biosecurity costs of international importers, pushing up Australian grown produce prices," he said.

"It is the last thing both families and farmers need during a cost-of-living crisis."