Farmers don't need other people's money

THE taxes taken from wage earners, consumers and businesses and given to other businesses amounted to over $22 billion in the four year period of 1996/97 to 2010/2011, according to the Productivity Commission.

It was not described in those terms of course. It sounds far less alarming to call it industry assistance rather than giving away other people’s money. Yet that is what it is. Industry assistance is essentially corporate welfare, and comes from the same taxpayers who fund pensions and unemployment benefits. The government has no money of its own.

The automotive and TCF industries were the largest beneficiaries, accounting for 54 per cent of all assistance. But next in line was the rural sector with about $9 billion in assistance, not counting fishing or forestry. Moreover, in the 12 months prior to the May 2012 budget the government announced further assistance of $700 million, much of it directed at the forestry and rural industries.

The biggest rural recipient by far was the dairy industry, which received $1.7 billion to help it adjust to a de-regulated market. The sugar industry received $620 million for the same purpose. Drought assistance accounted for $5.5 billion with a further $452 million for the Rural Adjustment Scheme and $230 million for grants to irrigators in the Murray Darling Basin. Several other sectors received lesser amounts.

Non-budgetary assistance to industry is also provided though measures such as marketing arrangements, quarantine regulations, regulatory restrictions on competition, government purchasing arrangements and guarantees.

Fairly obviously, industry assistance benefits the sectors it is directed towards. However, it comes at a cost to other industries. The Productivity Commission found, for example, net assistance was negative for most service industries because the cost of tariffs on imported inputs exceeded the magnitude of budgetary assistance. The service industries, which include finance and retail, are our biggest employers.

Most of the direct cost of industry assistance is borne by taxpayers via consolidated revenue, but in some cases consumers pay directly: the sugar adjustment package was funded by a three cents per kilogram levy on domestic sugar sales for five years, and the dairy package was funded by an 11 cents a litre consumer levy for eight years.

The idea that agriculture should be assisted to remain competitive or deal with adversity was once unchallenged dogma in Australia and remains widely accepted around the world. Indeed, on a global basis agriculture is by far the largest recipient of other people’s money.

But times have changed in Australia and are slowly changing internationally. While some people still argue that because other countries subsidise their farmers, our farmers should also be subsidised to put them on the same footing, few now agree. A number of our competitors (including New Zealand) offer less assistance to agriculture than we do. In any case that argument is like claiming passing wind in a crowded room is OK because others are doing it.

Most of the assistance that agriculture now receives is justified on the basis of exceptional circumstances, such as adjusting to a new government policy (eg deregulation) or hardship such as drought.

But even then, as governments struggle to live within their means, corporate welfare must compete with other forms of welfare for the available dollars. A very compelling case is needed if it is not to be interpreted as simply another example of funding the idle and incompetent. For many, the most recent announcements of assistance to the car industry were not compelling enough.

Inevitably, future assistance will be presented as a special case. Already $26 million has been spent on the Climate Change Adaption Program (Australia’s Farming Future), which is supposedly intended to help farmers adapt and respond to climate change. As the carbon tax comes into effect, this will become a more common story.

There is an alternative. The assistance to industry that some countries’ governments provide is to simply getting out of the way. They have efficient public administrations that impose few barriers to business prosperity. Farms and other businesses are not subject to a myriad of taxes and regulations that reduce their competitiveness and increase their costs. Competitiveness is achieved without corporate welfare. Success depends on innovation and marketing and is not guaranteed.

Corporate welfare costs taxpayers a great deal of money. It inhibits productivity and innovation and, like unemployment benefits for the able-bodied, drags down the economy. Perhaps it’s time recipients were given a label equivalent to dole bludgers.

David Leyonhjelm is an agribusiness consultant with Baron Strategic Services. He may be contacted at reclaimfreedom@gmail.com

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READER COMMENTS

bazza
14/06/2012 1:54:06 PM

Not sure of your figures, 96/97 to 2010/2011 represents a fourteen year period not four years. I hope your research and assumptions are a little more accurate than your first paragraph.
E J
14/06/2012 7:03:28 PM

Note that most of this "assistance" is to help compensate for the effects of deregulation. Doesn't that tell you something? First they take away your livelyhood, then they make a great show of "assistance" to help you cope. Or they appoint "councellors" so that you don't feel too bad about it. When we finally import all our food, with no guarantee of safety, quality, or security of supply, some of these know-all economic rationalists may see that prevention is better than cure.
Bushie Bill
14/06/2012 7:19:15 PM

Well said, David; dole bludgers is a very good and very accurate word. Highly appropriate.
shaun
14/06/2012 7:37:00 PM

if producers were paid decent prices per kilo for what they produced they wouldnt need govt funding its the fact that farmers are treated like second class citizens peasants.what is the average age of australian farmers i bet it would be close to 60
Ted O'Brien
16/06/2012 7:41:59 AM

Meanwhile, David, the cost to the wool industry of the disastrous government mismanagement of the marketing from 1990 till 2008 was at least $150 billion n raw cash. And the cost to Australia's rural industries of the policy they call "unilateral trade reform" has over the last 25 years been about the same. The cost to export and import competing industries of the "dirty float" of our exchange rate has been incalculable. The rate has been inflated by artificially high interest rates.
THE FARMER
17/06/2012 4:59:01 PM

I don't need your money but i resent as a West Australian my G.S.T paving your streets with gold .No mention of W.A carrying you rust belters on our backs .How is the recession over there .If some one drops their guts near me i will sure as sh** do my best for payback .Better throw the poor , useless & toothless out of that cheap gov housing David they are wasting you money too .
CQ
21/06/2012 8:55:32 AM

Our farming & manufacturing woes all centre on the idealogical "level playing field" government want us to embrace. In the real world, we compete against countries like China where basics we take for granted such as, annual leave, sick leave, fire safety regs, OH&S, Workers Comp, superannuation & more don't exist, meaning our competitors don't have to factor in those costs in their products, giving them an unfair advantage. Until competitors have these costs, the fanciful "level playing field" mantra will slowly kill off industry. Mining exports are a misguided & unsustainable short term fix.
dunart
22/06/2012 9:11:31 AM

I total agree with David, no one should get any govt regulated money. To do this, not only do you have to support the stopping corporate welfare, but all sorts of welfare. This also includes the labour market etc, as this is a transfer of funds from a farmer to the labour market. I am not against labour market subsidies, but it is a responsibility of the govt, not a farmer on a ”world market income”
dunart
22/06/2012 9:12:08 AM

How in earth did we get a economic system where those on lower incomes (farmers) be required to subsidises those on higher incomes and who also get easy access to all the other welfare benefits(health , education etc)
Love the country
22/06/2012 5:22:13 PM

Yes I remember some years ago when they first started importing pig meat, the government offered pig producers $29 mil to leave the industry....it was a big story leading up to the then federal election..... Guess what, the gov destroyed the industry....they offered the money....but no one..no one qualified.... If you had assets over something like half a mil, you didn't qualify....the only ones who could, must have lived under a sheet of iron,leaning on a stump...anyway it was a great election ploy.!
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Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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