Article by Eli Greenblat courtesy of The Australian Business Network.
Australia’s $150bn food and agriculture sector faces a crisis as it battles rising regulation, surging energy costs and tax imposts with executives across the sector, from supermarkets and horticulture to cattle graziers and seafood producers, demanding a national plan to fix industry problems.
Former Victorian premier Jeff Kennett addressed The Australian’s Global Food Forum in Brisbane and warned of a growing complacency that had taken hold made worse by government regulations strangling innovation, industry growth and employment.
“Governments are screwing the private sector,” an agitated Mr Kennett told the forum.
Mr Kennett, who was Victorian premier from 1992 to 1999 and has built a new career as company director, said Australia was a complacent nation despite having much going for it, particularly in the agriculture sector.
“It is a sign of complacency,” he said. “We are such a complacent nation, we have so much going for us. And I do worry about what the opportunities are for my children and grandchildren. My greatest regret is that we have not put into place a water policy that captures water and it moves around the country so we’ve got water supply, and that we’ve never given agriculture the opportunity to have a reputation like New Zealand and Israel … of being a better supplier of quality food.”
The high cost of manufacturing and production was also a major concern.
“I’m seeing, as part of the food industry, huge costs, and it worries me tremendously. There’s a lot of those who are in the smaller end of manufacturing and are not going to get through this period, the costs are too great.
“And when we hear (government) ministers and others talk about what supermarkets shouldn’t be doing, they could make a big change. Some of the supermarkets are paying more in taxes and charges when they’re making profit. So, if governments are serious, address some things that they can add rather than set themselves as private enterprise arbiters. It doesn’t work and never has.”
Ritchies supermarkets boss Fred Harrison, whose stores are one of the largest grouping of independent supermarkets in Australia, also hit out at high costs eroding his profits and ability to reinvest in his business and staff.
“On the first of July last year the (Victorian) state government introduced a mental health levy tax on any company who had a Victorian payroll of more than $100m, and we fell into that. So we had to add a 1 per cent mental health cost to our business, or around $1.5m, plus payroll tax went up a further 1 per cent, that was another $1.5m.
“The Victorian WorkCover bill went up $1m.
“So we were up on the first day of July, the new financial year, $4m in additional costs and that was just from the Victorian state government – and don’t even worry about the power or the wages cost – that was already $4m in additional costs on day one.”
Earlier in the day Coles chief commercial officer Anna Croft cautioned the heavy hand of regulation highlighted by mooted divestiture laws backed by the Greens, some academics and federal Opposition Leader Peter Dutton could actually extinguish investment and lead to higher prices on the supermarket shelf.
“We run 850 supermarkets across the whole national footprint and we have a very high fixed-cost base, be that through our distribution network or tracking network, or our buying teams working with suppliers.
“Now, if we had 750 supermarkets it actually wouldn’t make a meaningful difference to our fixed-cost base and therefore it would really impede our ability to fractionalise those costs across our business and to drive greater efficiency. And therefore as a result of that it may lead to higher prices for customers.”
SPC, the company behind Goulburn Valley fruit, told the food forum it was under pressure on costs, saying Australian manufacturers were grappling with a cost of production crisis.
“Energy, water, utilities and labour costs are all an issue,” SPC chief executive Neil Brimacombe said.
“When I chat to the Canadians as one of my key export customers and ask them how far are we out, they essay about 15 per cent, and that’s our challenge. So we need to be 15 per cent cheaper with our finished goods to be competitive with China.”
Reg Weine, chief executive of infant formula exporter Bubs Australia, said he was also anxious over the issue.
“I’m not sure I can make a business case today for an energy-intensive facility located in Australia,” Mr Weine said.
Meanwhile, Queensland’s land tax on foreign investors has forced specialist agricultural fund manager Laguna Bay to move spending out of the state as it baulks at the slug imposed on the industry, and was a key issue raised at the food forum that further highlighted the damage done by taxes and regulation to the agricultural sector.
The Queensland government has introduced an extra 3 per cent surcharge on land valued over $350,000, hitting foreign investors who own property in the state.
