THE Productivity Commission has recommended axing unjustifiable regulatory burdens that constipate agricultural profitability, like State based moratoriums on Genetically Modified (GM) crops and complex rules that hinder foreign investment.
A detailed inquiry into farm sector red and green tape was instigated by the Coalition government’s Agricultural White Paper and announced by Treasurer Scott Morrison and Agriculture Minister Barnaby Joyce last November.
The Commission’s draft report of Australian agricultural sector regulations was initially set to be released in May but delayed until today due to the recent federal election.
The 570-page document contains 32 recommendations and findings on government rules that lack sound policy justification and should be removed to improve productive efficiencies.
“Examples include restrictions on the use of land held under pastoral lease arrangements, State bans on cultivating GM crops, recent changes to tighten foreign investment review requirements for the agricultural sector, barriers to entry for foreign shipping providers, mandatory labelling of GM foods, and statutory marketing legislation relating to rice in NSW and sugar in Queensland,” the report said.
A recommendation set to cause significant political backlash demands the government increase the Foreign Investment Review Board’s (FIRB) screening threshold for testing agricultural land and agribusinesses investments to $252 million.
The Commission says that level of scrutiny by the FIRB should also be indexed annually and not be cumulative.
However, that proposition contradicts legislative changes made by the Coalition in the previous parliament - championed by Mr Joyce - which lowered the basic thresholds to $15m for land acquisitions and $55m for agribusinesses.
The report also demands the government set application fees for foreign investment proposals at a level that recovers costs incurred by the FIRB when reviewing them and to be monitored closely, to ensure no over or under-recovery of costs.
“The Australian government has stated publicly that it welcomes foreign investment because of the important and beneficial role it plays in the Australian economy,” the report said.
“However, it recently made changes to Australia’s foreign investment framework - in response to community concerns - that impose additional costs on foreign investors, create uncertainty and could discourage investment in the agricultural sector.
“Government policy on foreign investment has at times been dissonant.”
The report said some concerns about foreign investment, like fears it will reduce Australia’s food security, or result in a ‘land grab’ and loss of sovereign control over prime agricultural land, “appear misplaced”.
It said those concerns may have arisen in part because of a lack of information and informed debate about foreign investment in Australian agriculture.
“The register of foreign ownership of agricultural land should go some way towards increasing transparency and addressing public concerns about foreign investment in agriculture, although this will depend on the content of the Australian Tax Office reports derived from the register,” it said.
In recommending reforms to improve farmers’ access to GM crops, the report found there was no economic or health and safety justification for banning the product’s cultivation in Australia.
It said the Office of the Gene Technology Regulator (OGTR) and Food Standards Australia New Zealand (FSANZ) - both federal agencies - assessed GM organisms and foods for their effect on health, safety and the environment.
“Scientific evidence indicates that GM organisms and foods approved by the OGTR and FSANZ are no less safe than their non-GM counterparts,” the report said.
“The successful coexistence of GM and non-GM crops is possible and has been demonstrated both in Australia and overseas.
“This means that if there are any market access or trade benefits - including price premiums for non-GM products - they would be achieved regardless of whether GM crops are in the market.”
The Commission recommended the NSW, SA, WA, Tasmanian and ACT governments all remove moratoria or prohibitions on growing GM crops and repeal legislation, by 2018, that gives those jurisdictions powers to prevent the technology’s cultivation.
However, the Commission said scrapping that legislation should also be accompanied by the provision of accurate information about the technology’s risks and benefits to the Australian community.
The report said State and Territory governments, the OGTR and FSANZ should “actively coordinate the provision of this information”.
It also said FSANZ should remove the requirement in the Food Standards Code to label GM modified foods.
The Commission also requested information on whether the government’s new country-of-origin labelling system introduced would deliver higher net benefits to the community as a voluntary system, rather than mandatory.
Another recommendation called on the government to take responsibility for ensuring scientific principles guide the development of farm animal welfare standards.
To do this, the Commission said an independent body tasked with developing national standards and guidelines for farm animal welfare should be established.
“The body should be responsible for determining if new standards are required and, if so, for managing the regulatory impact assessment process for the proposed standards,” the report said.
“It should include an animal science and community ethics advisory committee to provide independent evidence on animal welfare science and research on community values.”
The Commission requested information on the most effective governance structure for an independent body tasked with assessing and developing standards and guidelines for farm animal welfare, what its responsibilities should include and how to fund it.
The report said State and Territory governments should consider recognising industry quality assurance schemes as a means of achieving compliance with farm animal welfare standards “where the scheme seeks to ensure compliance (at a minimum) with standards in law, and involves independent and transparent auditing arrangements”.
The report said animal welfare regulation objectives were unclear because they were tied to community expectations that are “not well understood or articulated - nor are the welfare implications of various farming practices well understood by the community”.
“The lack of understanding and agreement about what community expectations are, has also contributed to conflicts in the development of animal welfare standards and guidelines, particularly between industry and animal welfare groups,” it said.
The report’s Commissioner Paul Lindwall said the government’s recent tightening of the national foreign investment regime for agriculture lacked sound policy justification.
“These regulations are not in the public interest and should be unwound,” he said.
Mr Lindwall said the Commission believed there was public misunderstanding about the benefits of foreign investment which was “critical” for a functioning Australian economy and agriculture sector.
He said for example, ANZ bank estimated that by 2050 the shortfall between agriculture’s capital investment requirements and the available domestic capital could reach $850 billion.
“Capital from foreign investors has been crucial to the agricultural sector’s development as well as other parts of the economy,” he said.
“The additional costs to lowering the thresholds as currently implemented to $15m for agricultural land and $55m for agribusinesses increases both the cost and complexity of investing and in our view risks deterring needed foreign investment and that’s at a cost to the community.
“That’s why we think it would be better to return to the previous thresholds.”
Mr Lindwall said FIRB looked at each application to ensure wasn’t against the national interest but stressed investors still needed to go through an application process.
He said the application fee was small and the process also involved a time period that could frustrate potential investors.
“If the capital is mobile with investment options they (foreign investors) may decide to invest elsewhere, if Australia makes it more difficult to invest in something,” he said.
“In 2013, 99pc of agricultural businesses and 88pc of agricultural land was Australian owned, so we need to put it into perspective.
“In 2014-15, the FIRB received 77 proposals for investment in agriculture, forestry and fisheries and all were approved which was 3pc of total approved foreign investments so effectively we’re adding grit to the cost of foreign investment.
“Overall, we’re saying that foreign investment has been very good to the agricultural sector and we don’t see a case for the reduction in the thresholds that were agreed to in 2015.”
Mr Lindwall declined to speculate on what recommendations or findings may be in the Commission’s final report or what the government may say in response.
“This is a draft report - we’ll hear back from stakeholders and they may convince us that our draft recommendations need to change,” he said.
“The Commission likes to be swayed by evidence.
“If there’s strong evidence that we were wrong in our assertions or our findings here we want to hear about it but this is what we think at the moment.”
Farm stakeholders and others can respond to the report’s draft recommendations in writing by August 18 or at public hearings scheduled to be held throughout the nation during that same month, ahead of a final report being released mid-November.
Mr Lindwall said those stakeholders unable to attend public hearings in person may be able to contribute through tele-conference.
The Productivity Commission with take stakeholder feedback into consideration for a final report to be delivered to the Australian Government which must then be tabled within 25 sitting days of parliament.
The federal government is required to make a formal response to the Commission’s final recommendations and findings.
The final report was originally due to be handed to the government in August but extended to later in the year, due to the recent election.
Public hearing dates and venues
Perth August 16 - Mantra on Murray
Melbourne August 17 - Productivity Commission
Wagga Wagga August 18 – Mercure Wagga Wagga
Sydney August 19 - Adina Apartment Hotel
Canberra August 22 - Productivity Commission
Toowoomba August 23 - Burke & Wills Hotel
Brisbane August 24 - Rendezvous Hotel Brisbane on George
Townsville August 25 - Rydges Southbank Townsville