On 3 July 2015, the Coalition Government’s delivered on a pre-election promise with the long awaited release of the Agricultural Competitiveness White Paper. These wide-ranging investments in the agricultural sector are the product of nearly 18 months of consultation with farmers, business leaders, academics and consumers. The 152-page document defines the Coalition’s strategy for a “stronger, more productive, more profitable and more sustainable Australian agricultural sector.”

In this Alert, Senior Associate Ryan White and Law Clerk Emily Pendlebury summarise the key outcomes of the White Paper. A full copy of the White Paper is available here

Megatrends

The White Paper has identified 5 ‘megatrends’ that will have profound implications for the agricultural industry:

  • A hungrier world: population growth means increased global demand for food;
  • A wealthier world: the emergence of a new middle class in developing economies means increased food consumption;
  • Choosy customers: information empowered consumers demand particular ethics, provenance, sustainability or health attributes;
  • Transformative technologies: advances in food and fibre production and transportation; and
  • A bumpier ride: globalisation and climate change causing uncertainty.

In formulating the Government’s long-term plan for agriculture, five key policy areas have been identified:

1. A “fairer go” for farm businesses

  • Competition: As a result of the Competition Policy Review Report (released 31 March 2015), a new commissioner responsible for agriculture will be appointed to the ACCC. $114 million has been devoted to strengthening competition through fair trading investigations and enforcement actions. Competition in supply chain businesses is aided by the Food and Grocery Store Code of Conduct, the Mandatory Port Access Code of Conduct for grain export terminals, and a proposed review of the Mandatory Horticulture Code of Conduct.
  • Foreign Investment: Refined settings for assessment of foreign investment in agriculture will provide greater transparency and confidence for investors and businesses. The screening threshold for foreign investment in agricultural land has been reduced to a cumulative total of $15 million, and a $55 million screening threshold for agribusiness (excluding certain FTA agreements) has been introduced. All direct investment by foreign government investors will continue to be screened. Additionally, a register of foreign ownership of agricultural land will be established.
  • Alternative investment options: A two-year pilot program (2015-2016) providing educational courses on cooperatives and other potential business structures to help farmers better engage through the supply chain and attract investment.
  • Reduced red tape: As part of the Government’s broader removal of red tape policy, a Productivity Commission Inquiry will be held on ways to reduce unnecessary regulatory costs in Australian agriculture. Another separate inquiry into regulations affecting marine fisheries and aquaculture industries will be conducted. The approval process for agricultural and veterinary chemicals will be streamlined to reduce user and industry costs. Additionally, reform of Australia’s country of origin labelling is being considered.
  • Tax benefits: The Growing Jobs in Small Business package announced in the 2015-2016 Budget will benefit 97% of farmers (turnover less than $2 million p.a.). From 12 May 2015 to 30 June 2017, farmers will be eligible for immediate tax deductions for assets costing less than $20,000. Additionally, unincorporated small businesses will receive a 5% tax discount, with small incorporated businesses receiving a 1.5% reduction in company tax rates from 1 July 2015.
  • Long-term Financial security: Effective 1 July 2016, the deposit limits for Farm Management Deposits (FMD’s) will be increased to $800,000 to facilitate farmers setting money aside during profitable years for years of lower production. This will be coupled with the removal of restrictions placed on financial institutions which prevented FMD accounts being used as a loan offset. Primary producers who have opted out of the Income Tax Averaging Scheme will be eligible for re-admittance 10 years after exiting, recognising that businesses’ circumstances change over time.

2. Building 21st Century water, transport and communication

  • Road and rail infrastructure: $50 billion will be invested in road and rail improvements nationwide. This includes a $5 billion Northern Australia Infrastructure Facility, with $100 million devoted to the Northern Australia Beef Roads Fund to improve northern cattle supply chains. An additional $600 million is dedicated to projects on priority roads identified by Infrastructure Australia’s audit of Northern Australia.
  • Water Infrastructure: $500 million additional investment in water infrastructure through the establishment of the ‘National Water Infrastructure Development Fund’ including $50 million to undertake detailed planning to inform future water infrastructure investment decisions.
  • Transport: $1 million expansion of CSIRO’s Transport Network Strategic Investment Tool to enable better targeting of future transport investment to assist the agricultural sector.
  • Communication: The Government’s Equity contribution of $29.5 billion towards construction of the NBN will improve rural businesses access to online markets and resources. $100 million has been committed to addressing mobile coverage issues in rural areas, and $60 million will be spent on the Mobile Black Spot Program.

3. Strengthening the approach to drought and risk management

  • Drought and risk management package: Approximately $3 billion will be committed to provide farm businesses, farming families and rural communities’ certainty about how and when the Commonwealth will help farmers during a drought. $29.9 million will go towards providing insurance advice and assessment grants to farmers in order to facilitate the uptake of crop insurance and other risk management strategies. As of 12 May 2015, farmers who build on-site fodder or water storage are eligible for accelerated depreciation as tax deductions from the first year. $20 million has been committed to enhancing the Bureau of Meteorology’s seasonal forecasting models in order to provide more accurate local climate information from early 2017.
  • Social and business support: With a focus on community mental health and family support, additional rural financial counsellors will be appointed to drought affected areas. Up to $250 million per year over 11 years will be available through drought concessional loans for farm business, as well as assistance from the ATO for businesses struggling to meet their tax obligations. $35 million will be committed to shovel-ready local projects that create employment in drought affected areas.   

4. Smarter approach to farming

  • Research and development: An additional $100 million over four years (to 2017-2018) will be provided for the Rural Research and Development for Profit Program (RRDPP) funding collaborative research projects to deliver cutting edge technologies, applied research and on-farm adaptation. The program will be extended to 2021-2022 with a further $100 million investment. The RRDPP priorities will be updated to deliver more efficient, targeted and transparent research and development outcomes for rural industries. $1.2 million over 4 years will also be provided to assist in the provision of research and development for small agricultural industries. 
  • Education: The $664.1 million Industry Skills Fund will support up to 250,000 training places, including in the agricultural sector.
  • Employment: The seasonal worker program will be expanded by removing the cap on the number of participants. Changes to the Working Holiday Visa (417) and the Work and Holiday Visa (462) for Northern Australia will provide additional employment for Northern Australia’s seasonal agricultural sector. A new Ministerial Advisory Council on skilled migration will review the list of occupations available for sponsorship under 457 Visas.
  • Conservation: The Government has committed $1 billion to the National Landcare Program, and a further $700 million to the Department of the Environment’s Green Army Initiative. Additionally, $100 million will be invested to help farmers manage pest animals and weeds and for the provision of emergency action against exotic pests and disease incursions.

5. Access to premium markets

  • FTA’s: Recent Free trade agreements with China, Japan and the Republic of Korea will increase market access. The Government is in ongoing negotiations with India.
  • Technical Barriers to trade: $30.8 million over 4 years will be invested to reduce technical barriers to trade in key agricultural markets. 5 agricultural counsellors will work with DFAT and Austrade in Northern Asia, South Asia and the Middle East in order to facilitate free trade.
  • Biosecurity: $200 million will be invested in biosecurity surveillance and analysis to protect plant and animal health status. An additional $12.4 million will enhance existing traceability arrangements for Australian exports.

The details of the White Paper have been received with mixed reviews, especially as the recent downturn in the resources sector highlights the need for industry diversification in Australia.

In 2012, an ANZ report estimated that the Australian agricultural sector will require $600 billion in capital investment to achieve adequate productivity growth by 2050, and an additional $400 billon for the new generation of farmers to buy out retiring farmers. Despite the seemingly large financial commitments contained in the report, it represents new spending of $1.2 billion over the next four years, with many of the figures being previously announced Budget initiatives. Together the measures indicate serious support for the future success of the nation’s agricultural industry; time will tell if the White Paper delivers.