Address to Farm Writers Association Post Budget Breakfast, Sydney

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13 MAY, 2015

2015 Federal budget, agriculture, small business


Thanks Paul, it's great to be here and to be here at such an exciting time for agriculture. Agriculture did well out of the budget last night, in fact I think it's been set out as one of the winners in the budget.

In the broader scheme of things when you look at what's happening around the globe at the moment I think it's quite an exciting time for agriculture. I've had the opportunity to see that personally a number of times in the last few months.

I was at the Australian Business Week in India with Andrew Robb in January and the interest in agriculture there and the opportunities there in agriculture for Australia were really interesting and there was a very different offering I think to what we are considering ourselves at the moment.

I don't think Australian agriculture really understands what it has to offer in the context of services and opportunities for development there and that also manifests out of some of the things that were in the budget last night.

I had the opportunity to travel to Japan and China recently and take a forestry delegation over there but also to do some other work around food while I was in those countries. I was at a breakfast in Beijing about three weeks ago to talk about the opportunities out of the China Australia Free Trade Agreement and they had to re-book the function centre four times to find a room big enough.

There is considerable interest from across the sector in China and from investors who are looking to invest in Australia for agriculture. But really interesting from my perspective was the presence of many large online retailers. I think that's something we need to be considering as part of our offering and opportunity into China into the future and it's a different supply chain than what we're currently considering.

When I went to Shanghai I ran into a couple of small Australian exporters; one was an apple farmer from Tasmania who has a unique variety that they were selling through an online website into Shanghai. The retailer that I spoke to had 5 million subscribers in 30 cities in China. So that's a small operator with a unique product badged and getting a pretty reasonable price - and he was pretty happy with what the opportunity was in that space.

Last week I was in Turkey at the G20 Ag Ministers Meeting and the conversations there around broader food security and what I had the opportunity to see while in Turkey were really quite interesting, particularly some things that we don't do here. I flew into a city called Antalya early in the week and as I came in looking out the window there was a sea of protected horticulture. If anyone wants to have a look at my Twitter site @richardmcolbeck there's a photo of the protected horticulture across the approaches to Antalya airport and its quite mind boggling.

Then of course discussions with agriculture ministers from the top 20 business nations in the world around food security, the food supply task and food waste.

So there are significant opportunities for agriculture globally and there is a lot for us to learn and a lot for us to offer. I also think there is a lot for us to understand about what we have to offer, particularly in the context of our skills, our business knowledge and our farming skills and particularly into some of the developing nations including India and China which are two that are growing at an enormous rate at the moment.

Talking to people from the FAO, the comment they made was how lucky we are to have such a strong private sector in this country which can actually drive innovation. It surprised me in a number of places that I went to how government were the ones who led the topics and the areas for innovation. Including in places like Turkey where their R&D is managed by government and it's the government who decides the priorities for R&D in that country.

In India I was talking to some vets and they asked who controls the genetics in our country and I said well of course the farmers do. They were a bit put out because that was their job. So the things that we do every day in agriculture in this country and the skills that we have in our agriculture sector I think can form an offering in a service sense for this country going out and developing relationships. Particularly in developing countries like India which can then go out and flow on to be part of a produce based offering.

India's dairy industry produces 5 litres of milk per cow per day and Australia produces 25 litres. They are looking to increase their capacity considerably because they are a country that's already got a dairy consumer economy. They are also the largest producers of dairy in the world and the largest consumers. But they've got to lift their productivity and they're looking for genetics, they're looking for farm management skills, they're looking for pasture management, they're looking for a whole range of things. It's not just one of those things that will help them lift their industry. We'll get a visit I think from the National Dairy Development Board later this year off the back of a visit that we made in January, so there are some real opportunities to build on trade.

So coming to the budget and what that provided last night. Barnaby and I sat down yesterday afternoon to go through what was in the budget and how we would look at the opportunities that came from it. Barnaby said to me, think of your home state Richard and think of a farm there and what opportunities the budget might bring for them. So in the context of somewhere in the Northern Midlands for example, where we've just spent throughout the state in Tassie about half a billion dollars on putting in infrastructure to deliver water around the state, I can see a real rush for people wanting to put in that on-farm irrigation infrastructure to actually apply the water in an efficient way and they can get a tax deduction for that up front. I see that as being a good opportunity. That sort of thing, that distribution of water, that water infrastructure that we know is so important for agriculture nationally, I can see people applying the new rates on that quite quickly.

We then talked about the opportunities to restructure the farm set up and at home in the Northern Midlands a lot of those farmers wouldn't have been doing dairy for example. So if they want to do a dairy conversion the fencing that goes with that is now tax deductable now instead of being tax deductible over a longer period of time. Of course then the infrastructure to store your fodder, particularly grain or something like that that has improved tax deductibility status as well.

I think these are all things that are really important and they also form part of the basis that we're looking to do for agriculture nationally in applying the ability for farmers to look out for the climate variability that we know is a significant part of agriculture. To set themselves up so that when the tougher times come the infrastructure is there to support them, whether it's distribution of water and application of water in an efficient way, or whether it's being able to store fodder and have that storage capacity on farm.

But then when you also look at some of the other initiatives coming through from a small business perspective, including the opportunities there for deductibility of any purchase up to $20,000 and the change in those rules and it's not just for the farm. If you're a small farm service business there is the opportunity to have those items tax deductible. There is the opportunity for a business that turns over less than $2 million to get a lower tax rate at 28.5 per cent, a reduction of 1.5 per cent.

Or, if you're not an incorporated business as many small businesses aren't, including farm businesses because they're family businesses, you can get a 5 per cent reduction in your taxation up to $1,000.

All of these things really start to add up for the rural sector and for rural communities importantly. Because it's not just about the on the farm, it's also about those small businesses that serve our rural sector, the service based businesses that get that opportunity too.

The change in FBT requirements around IT is basically bringing our settings in that space to where people are in the operation of their IT requirements. I think all of those things are really quite exciting when you start to add them all up.

Then you can look at the other side of it and the work that Andrew Robb's done in the context of opening up new markets in Korea, Japan and China. As I said right at the outset I think it's a really very exciting time to be involved in primary industries in this country and I've seen that interest.

As I said, the breakfast in Beijing moved locations four times to find a venue big enough and the interest that was coming for our product through that and also discussions in Japan about our product. There is recognition in all of those countries that not only do we have a clean product but we have a safe product and the systems that support that are also very important and can also become part of the service offering.

So from a small business perspective if you're looking to get into the service industry, whether it's providing dairy services, whether it's providing farm advice, or whether it's providing advice around quality and food safety systems, I see the opportunities to build significant export markets in those opportunities that are a part of what we do here. We've got good systems in place and we understand things the core skills, those are the sorts of skills that are being sought in some of those countries where there's opportunity for further development.

I see this as quite an exciting time for agriculture more broadly. It's a really good opportunity for agricultural businesses to take advantage of all of those settings and it comes back fundamentally to the broader economy. We're trying to get the budget back under control and we know how difficult that is. I think Barnaby has done a brilliant job in trying to sustain and retain the level of expenditure throughout the portfolio because I can tell you it's seriously tough. The pressures that come on for cost savings from our good friends in the Expenditure Review Committee are really tight.

Of course what we still have to come is our Agricultural White Paper and there are further initiatives in that. We've got our Northern Australia Development Paper and for agriculture that's quite exciting. You'll see the $5 billion infrastructure development funding for that and that's going to be absolutely vital for development of the north and we've also got announcements yet to come on water infrastructure.

So there's an enormous amount of work yet to come in the agriculture portfolio at the moment. It reaches across the budget and I think that's demonstrated by how many different places I had to look last night to see the different initiatives supporting this sector. Small business, obviously the agriculture portfolio and some work coming through Ian MacFarlane's portfolio to some of the R&D initiatives.

Obviously we're still working on some of our major policy platforms in agriculture and forestry, with two major pieces of discussion papers out in the market at the moment. But all of that adds up to a situation where I think that the opportunity to grow this sector is really positive.

I said at the breakfast in China that if we double our agricultural production by 2050 we'll feed Australia plus 1.3 per cent of all of Asia. We're not going to be anybody's food bowl but we can provide a really high quality offering into those markets. But the projections are that we could potentially double it by 2030. So there's an enormous amount to be done.

What I see is that the work we're doing at the moment is to set this country up in the agriculture and primary industries space for the future. That's the objective of the work that we're doing through the White Paper, it's about providing that vision for the next 10, 20, 30 years because that's what we're going to need to do if we're going to achieve the targets that we're setting for ourselves and to put in place the settings to allow industry to facilitate them.

Of course the response that the Prime Minister, Deputy Prime Minister and Barnaby made last week in respect of some of the immediate programmes around the drought and the issues that we're trying to deal with right now with our agriculture sector, particularly in the areas that are badly affected by those traumatic circumstances are also very important.

But then laying the foundations so that the rural sector can as much as possible on their own manage that agricultural risk that we all know so well and let government step back to a certain extent to let them get on with meeting the targets and setting this country up for what I think is a very bright future in agriculture.

Well I might call it quits now and take questions so you can hear what you want to hear rather than what I want to tell you.

Thank you.

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