Tuesday, 15 January 2013

Stop milking our dairy farmers

Just because people get used to paying more taxes doesn't mean they should have to, writes Peter Reith. Dairy farmers should be given a chance to compete.

As our televisions have been saturated with stories of fire and the tireless work of volunteer firefighters, many Australians would be thinking about the 'mateship' that is such an important part of the Australian identity.

One element of mateship is unquestionably the willingness of Australians to rely on their own initiative and not wait until being told what to do and when.

In fact, fire authorities have been making the point that residents in fire prone areas need to have their own fire plan including when and how they will leave their properties in the event of a likely fire. This self-reliance is a feature of a free people making decisions for themselves and their families.

The Country Fire Authority in Victoria has tremendous public support because the concept of local people managing their own affairs is recognised by the public as embodying the right values of 'mateship' as well as being the most sensible and efficient method of getting the job done. Some would call this 'ideology' but I would call it 'practicality'.

The concept of self-help and personal responsibility is very obvious in the agricultural sector. The South West region of Victoria is a vital part of the national agricultural economy but currently the dairy farmers are having a pretty tough time.

The basic problem is that the price of dairy produce is marginally below the price in the international market. In international markets, Australia is a 'price taker' not a 'price maker'. Of course, we can improve the quality of our products, we can be innovative etc, but the reality is that the local farmer is not able to control his or her costs.

Governments control many of the costs of a dairy producer and regularly dump costs on the industry. The last government to significantly reduce costs was the Howard government when it introduced the GST and abolished the hidden wholesale sales tax that was paid by farmers. The Howard government also cleaned up the wharves which improved productivity and reliability which in turn improved the supply chain for dairy farmers.

Last night, an expected more than 500 dairy farmers held a public meeting to discuss the plight of their industry. Many of these farmers will have been fighting fires over recent weeks. Some will be demanding an increase in dairy prices. I understand why but it's not going to happen. The price is set by events overseas, not in Australia.

The only prospect of relief for their industry is a radical plan to cut costs. My plan is radical in the sense that I doubt any government is going to do much for the farmers, but it is not radical because my plan could easily be done if only governments were prepared to get off the backs of business and give them a better chance to compete.

This is a classic case of knowing what needs to be done but no-one being prepared to do it.

My simple and practical six-point plan to reduce costs is:

   Cut municipal rates; councils have been increasing expenditure above inflation. This needs to stop.

   Abolish payroll tax including on all dairy processing plants. Most of Australia's competitors do not have payroll tax so this tax especially imposes costs on Australian producers.

   Reduce energy prices by abolishing the carbon tax and remove impediments to other initiatives like gas, including coal seam methane. An increased gas supply in the US has been a boon to US manufacturing.
   Reform labour market policies introduced by Labor for the benefit of the unions. Penalty rates are a huge problem and a new flexibility is urgently required. Labor's policy to require a minimum of three hours work is nonsense for milkers, unfair dismissal is a problem for small business, and militancy in construction for dairy industry infrastructure is another problem that needs to be fixed.

   Slash government waste, cut wasteful expenditure, and stop the boats to cut costs.

   Slash the petrol tax to lower business costs. Improvements to transport should be a much higher priority to support the agricultural sector including for the South West in Victoria (but also elsewhere around the country) an upgrade for the road from Winchelsea to Warrnambool. These projects can be assessed for economic benefit and should have priority over the NBN which has never had a cost-benefit analysis and which should be undertaken by private enterprise.

Many of these issues are not top of mind issues for the public. People get used to the taxes and other imposts they have to pay. To me, it is no surprise that public angst with the carbon tax has lessened with the passage of time. People running their own business are too busy trying to survive.

As The Australian reported, the number of complaints about the carbon tax has dropped. But so what? There are limits on how long the public will maintain their rage. The debate over the Mabo decision of the High Court followed a similar pattern. There was a lot of angst about the High Court's decision to recognise native title. The debate raged for months and many said the issue would be central to the next election, but the issue cooled and was never a big election issue.

The carbon tax will not be as big an issue in 2013 as it was in 2011 and 2012. But that does not mean the Coalition should reconsider its position. Nor do I think that Tony Abbott will amend his position. He is right to fight the issue as hard as he can. He has said he will abolish the carbon tax and he will call a double dissolution election if the Senate tries to block his 2013 election mandate.

The carbon tax is an impost that can't be justified while Australia is out of step with the rest of the world. It makes Australia less competitive and we can't afford to undermine the Australian economy. My plan is practical; it's aimed at making agricultural businesses more competitive and lifting living standards for all Australians.

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