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Sunday, 2 November 2014

Agribusiness+ ... where is Australia in the world's largest industry?

Answer, about 1% or thereabouts....and struggling?

Broadly speaking, Australian farmers are the most productive in the world. Collectively they are ‘world class’. Whilst each individual farmer may not be thinking globally, as an industry they are. However, it is difficult to say the same for Australian agribusinesses collectively. Despite a few individual exceptions, Australian agribusiness are not thinking and acting globally.

But... globally successful Australian agribusiness brands are hard to find.

The economic performance of Australia agribusiness has been dampened by the out-performance of the last Australian mining boom. This fact is recognised by the Productivity Commission with regard to its admission of the existence of economic condition called “Dutch Disease”. Whilst the Productivity Commission recognised the existence of “Dutch Disease”, it subsequently erred in not recommending an appropriate policy response.
In effect, the policy recommendation was ‘…do nothing’, and effectively, that dampened all subsequent efforts by the Australian Government to search for appropriate policy responses to address the adverse effects of the mining boom on the Australia Dollar, and thus to other major sector of the Australian economy such as agribusiness, tourism, education, and manufacturing.
Sadly, whilst the Productivity Commission acknowledged "Dutch Disease" enough recommending a policy response, it did not go on and do a further public service and provide a list of things a nation can do when faced with such economic conditions. In other words, what's in the tool kit that a country can use to cure the disease. Further, prevention is always better than cure, so what can be done to prevent it happening, if say, we move into a natural gas boom?
Lay economists will know that one plausible policy response would have been to develop a new national sovereign fund (similar to the Norwegian Sovereign Fund).
Sadly, the current Australian Sovereign Fund (the Future Fund) merely addresses past governance mistakes [being unfunded Commonwealth Public Sector Superannuation]. Australia does need a genuine national sovereign fund, and other measures anyway to help counter the continuing adverse effects of “Dutch Disease”.
The Agribusiness Council would propose a solution:
That Australia create a new national sovereign fund (along the lines of the Norwegian model) for two primary purposes:
1. To generate earnings to fund export-oriented agribusiness infrastructure (ports, road, rail, air, high speed broadband, and related logistics).
2. To exert a measure of desirable influence on the Australia Dollar for Australia’s export oriented industries, particularly for its largest manufacturing industry (being the food processing industry).





On the basis of simple, good national policy house-keeping, let's create one anyway? Even if we only put a million bucks in it a year, its a step in the right direction. Just start.



Let's put the challenge into context: the Australian food manufacturing industry was always about twice the size of its car industry, yet it received nowhere near the same level of government largesse in terms of industry support.
After the fact, we could argue that:
  • Various government(s) industry supports to the Australian car industry were ultimately wasted (because there will shortly be none).
  • The industry support given to the car industry was wholly or partially the wrong type of support.
  • That little or no support to the food manufacturing industry was actually more effective (because it continues on).
The problem now, is that the Australia food processing sector is struggling (whether that is locally-owned companies or Australia subsidiaries of multinational companies). Thus, there is a reasonable case to turn public policy attention to the food manufacturing sector in two ways: (1) it actually gets some policy attention, and (2) the lessons learnt from the car industry not be repeated and other policy supports be brought into the mix and actioned.
The Agribusiness Council has long argued that a suitable target starting place would be $5 billion over ten years. Again, something is better than nothing.
If the Government won't initiate something more to support its largest manufacturing sector, then the agribusiness industry will.
Discuss....?