THE farm sector is bracing itself for a showdown with the federal government amid increasing speculation plans are afoot to extend the goods and services tax (GST) to include fresh food.
With the government under growing pressure to reform the tax system to help replenish its deficit-depleted coffers, the National Farmers' Federation (NFF) said it was receiving mixed messages in Canberra about a 10 per cent GST on all food.
The peak industry body was "seriously concerned" about recent public comments and back room talk.
"I don't think this topic is going to go away in 2015," said NFF chief executive officer Simon Talbot.
He warned a hike in family grocery costs could mean less fresh fruit, vegetables and protein consumption - and no perceivable gain for the national economy.
In fact, broadening the GST was likely to reduce overall sales of fresh, local produce and poorer health outcomes as consumers switched to eating more cheap processed products, including more imports.
"Apart from such a move having a negative impact on the welfare of Australian families, it's farmers who have the most to lose," he said.
"What sort of compensation is the government planning for the sector?
"We certainly need much better infrastructure and scale to access Asia properly, but I suspect they're primarily concerned with getting more money into treasury coffers.
"I don't believe the sort of off-the-cuff statements we're hearing suggest the implications of what's being talked about have been thought through."
Liberal Member for Wannon in Victoria's rural Western Districts Dan Tehan put his political credibility on the line this week calling for the GST to be applied to fresh food, education, health and financial services.
"We've got a half-baked GST that only accounts for about 46 per cent of our consumption which means it's not doing the job it should be doing properly," he said.
"The way we get it working properly is to broaden it to food, education, health and financial services.
"The $21.6 billion in extra revenue generated would enable serious tax relief, both for companies and individuals."
Prime Minister Tony Abbott is believed to be facing growing Liberal Party pressure to apply the GST tax to a broader range of items to repair the budget and provide an economic foundation for rebuilding voter support.
The government has already said it will consider the GST as part of its upcoming tax white paper.
After what Mr Abbott conceded was a "ragged" year in government, some Coalition MPs say serious tax reform must occur.
The 10pc GST was introduced in 2000 when the Howard government excluded fresh food to get the Australian Democrats on side.
Mr Tehan said it was time the Coalition to finish the job it started.
But Mr Talbot said the broader GST agenda, particularly extending it to fresh food, had suspiciously "popped up straight after Christmas and lacked any consultation" with key industries such as agriculture.
"Where's the modelling on what it will do to purchasing intentions?" he asked.
While the NFF recognised what a broad based consumption tax was meant to be all about, he doubted it would result in stimulus for the economy because the extra tax revenue would go straight to patching up the budget deficit.
"The NFF understands budget pressure. But we also understand the reality of family budgets," Mr Talbot said.
"Meanwhile retailers aren't going to forego any profit - farmers are likely to be forced to absorb the cost increases because they aren't able to pass on their costs.
"From our viewpoint, it makes no sense to increase the cost of fresh food. After all, Australians need greater incentives to eat healthily, not disincentives,"
"Unhealthy eating is the greatest factor affecting the burden of disease in Australia.
"Obesity, diabetes and nutritional deficiencies are all increasing problems; and they are costly ones."
A spokesman for the Australian Food and Grocery Council said that body had not yet done any specific research on the impact of an extended GST.
However, it strongly opposed any government consideration of fat or sugar taxes for specific processed foods as an option to help promote improved dietary habits.
"In our view making certain foods more expensive does not change dietary habits for the better," he said.