Address to Council of Economic Development Australia, Melbourne



11 NOVEMBER, 2014


Thanks very much, it's great to be here. Peter (Peter Gooday, Assistant Secretary ABARES), can I thank you for using most of my speech notes in your presentation earlier. And David (David Farley, Executive Chairman Matrix Commodities) I think your presentation provided a lot to think about in the context of agriculture and your challenge to government about wanting bipartisan based policy is effectively what the White Paper process is all about, so that we can provide a solid platform for what we regard as one of the five pillars of the Australian economy.

Agriculture is an important industry; it was the sector that kept us out of recession during the global financial crisis, it was our exports out of agriculture that provided that return to the Australian community. It is a fundamental part of the economy, even though I don't think it's probably recognised in the way that it could be by the broader Australian community. I think that the perspective of agriculture from a very urbanised community, is something like 94-95 per cent of the Australian community like to think they have an affiliation with agriculture, and a lot of them drive a four-wheel drive to prove it, but that's about as close as it gets.

In respect of the topic today, the growth of agriculture in this country has really depended on innovation. As Peter said, we have a unique system of agricultural R&D in Australia and there's been a lot of focus of that over the last couple of years. We've had the Productivity Commission review in 2011 and we've seen over recent months a lot of focus around how we manage our rural R&D in Canberra, particularly with some new players in the Senate and their philosophical views around compulsion in agricultural levies. I don't think they actually really understand what we're dealing with here or the importance of it. But I know from a government and particularly an opposition perspective, its pleasing to see that there is strong bipartisan support for the system of agricultural R&D that we have in Australia.

The way that we perceive agriculture is largely portrayed by the way the agriculture industry expresses itself and I think we need to do some work in turning that around. We too often see a disaster story about how difficult it is and it actually hides some of the really positive things that exist around agriculture in our country. I'll take issue with you David in respect of youth in agriculture; it's very easy to take a look at the numbers and see the average age of farmers in this country getting older, because that's what the numbers say. But if you actually look deeper into the numbers what you'll see is that there are a lot of young people coming through in agriculture. They are bringing through that next wave of innovation, they are managing larger properties using more technology, less people, and driving down the cost of inputs.

There is still a strong demand for employment and opportunities for people in agriculture, but I think the way that we express it needs to change. Fundamentally the capacity to make a dollar at the front gate is going to be one of the key drivers of getting people into agriculture. That's what people want these days, they want to be able to go into something that provides a lifestyle but they also need to be able to make a dollar out of it. That's why the focus of the Government's additional expenditure into R&D is very much around the capacity to make a dollar the farm gate, that's why Barnaby (Barnaby Joyce, Minister for Agriculture) talks so often about the profitability of farmers at the farm gate.

It's not so much the proportion of the retail dollar that the farmer might get for the product, its whether or not they can make a dollar out of it inside the farm gate, that's the important measure for agriculture in this country. That's the key priority for government in the expenditure of the additional $100 million in R&D that we put on the table at the last election and that we opened up for opportunities recently. We're talking about increased profitability and productivity, the value of primary products, strengthening the ability for adaption to deal with things like the variable climate in this country, and also strengthening on-farm adoption and improving information flows.

Extension is one of the real challenges; I can recall back in 2005-06 having conversations with the R&D corporations about their collaboration and about working together and getting information out to their constituents which are the farming community of Australia. We are still having that conversation and that concerns me. But we're still trying to convince the R&D corporations that collaboration across these portfolios that they look after is important, and that's another element in the accessibility of the additional $100 million that we've put on the table.

The other thing is actually getting farmers to take up the R&D. I think the information age is an opportunity and I hope the R&D corporations might look at some across R&D organisation innovation around the delivery of the results of their R&D out in the farming sector.

We've seen the states step back from the traditional role that they had in delivering extension, but we've got the increase of availability of information technology systems that I think might be able to provide that out into the community. One of the next stages and the next steps in the uptake in innovation in this country is going to be the use of data and data management. We're seen work being done in Tasmania, and David talked about it in his operations in Queensland just monitoring water and water supplies. So the University of Tasmania with their Sense-T project is looking at data and data management and I think there's enormous opportunity for the farming sector and the private sector to utilise the data sets that are there and aren't being utilised.

I can recall a couple of years ago we were looking at issues around spray management, there was a whole heap of information sitting on farm in spray diaries. Utilising that data in conjunction with R&D corporations and some of the companies that manufacture agricultural chemicals, there is an opportunity to utilise that real time data set, but it's not accessed and it's not utilised. The formulation and development of tools to actually harvest it and harness it and then utilise it is absolutely enormous, yet we haven't really started to do that yet. I see that as a challenge to the agricultural sector and the suppliers and the providers of those services to start looking at direction, to bring forward those innovations in agriculture.

The other thing we really have to do is be prepared to utilise some of the technologies in R&D. For me, one of the huge frustrations is the debate that we have around GM. We live in a society that basically gets fed on almost hocus pocus. Its basic methodology, and yet when you look at the utilisation of GM over the period of time that it's been actively been used, and we're talking about 15 to 20 years now where there has been a solid base of GM utilisation. I was only reading yesterday a piece of research that talked about 69 per cent increase in profitability inside farm gate by utilising the technology of GM. We often hear the disaster stories or that it doesn't make too much difference, there's not too much difference in yield, there's not too much difference in global price so why bother doing it. But the measure the farmer looks to is the profitability inside the farm gate.

David and I were talking earlier about the capacity of farmers to manage agricultural risk and the declining terms of trade over the last 15 or 20 years has severely diminished farmers capacity to manage agricultural risk. So when we have an adverse weather event and drought comes along or cyclone of some other event, they don't have as much in reserve to be able to manage that. So the focus on returns inside farm gate has to be one of the important factors that we look at in the context of agricultural R&D and innovation. It's got to be the key driver, because if our farmers are going to manage that agricultural risk they need to have the reserves to be able to do it and we need to be able to put in place the polices that assist them to do that. I don't think we're actually there yet and that's been one of the real challenges for governments of all persuasions over recent years, how we actually reform the measures that assist farmers deal with that agricultural risk.

Is it possible to start turning some of these things around? Do I have confidence that we'll see growth in productivity and growth in innovation? The answer to that is absolutely yes. I was talking to a dairy farmer just yesterday and he's looking at putting in an automated dairy. He started talking about the things that might come along with that and as soon as he started talking about an automated dairy and the fact that a cow has a collar on and that measures when a cow comes and goes, and lets them in or doesn't let them in the automated dairy, the concept of being able to manage dairy cows using that collar around their neck with virtual fencing came straight to mind. I'm a cured dairy farmer and escaped when I was about 18. I know that cows are very much a creature of habit and so being able to train them to use that technology was a realistic concept to me. There are real opportunists I think for the growth of agriculture.

Another thing we've also discussed today is innovation in markets. David quite rightly talked about logistics, the cost of getting product to market as a key element in the future of agriculture. I think we really do need to start looking at some more innovation in that. When the cost of moving product around the Australian coast line is more than 60 per cent more expensive than moving it internationally per tonne, that's just an absurdity. We need to do something about the cost of our logistics and transport services around the country. When a company in Tasmania tells me that they can provide an equivalent product that is produced in New Zealand into every port in Australia, except Melbourne, for cheaper than they can provide it from Tasmania that's an absurdity. Our land transport is also absolutely vital, because when it comes down to it the things that are good for agriculture will flow through the rest of the economy.

Our industrial relations, our logistics, cost of energy, all those inputs which Peter talked about as being the things that are part of the productivity growth for agriculture in Australia, are absolutely vital for us to deal with. Making sure our cost of government to business isn't out of proportion, particularly to our trading partners. As a government we don't often look at ourselves as being part of the market and yet we are. If you look at New Zealand for example and the provision of biosecurity services, and they have a very similar system to us, the cost of us providing that service compared to the cost of them providing that service can actually move the market if our costs are too high. We have to think of that service in that context because it's really important that we do.

So all of those measures across government are going to be extremely important in making sure that our industries prosper into the future. The work that our R&D corporations do with continued investment from government and hopefully some leveraged investment from industry, is going to be an absolutely vital part of that.

As I said at the outset, the model that we have in Australia is unique globally, it is envied by many other countries because it has provided results and quite frankly it needs to continue to provide results for industry in the future. We need to ensure we have that strong level of collaborations across our R&D corporations so that we can make sure that the dollar we spend goes as far as it possibly can and that we can ensure a positive return for our farmers in the future.

Yes, it's important that we continue to widen our new markets because in the context of farmers being able to get a better return at the farm gate, alternative markets are very important part of the equation. We need to make sure that inside the farm gate the costs that are provided through the supply chain don't get out of hand and we need to make sure that government imposed costs are as low as possible.

It's really good to be here, thankyou for having me.

111114 CEDA - Colbeck
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