I have been asked to speak a little today about the LNP's approach to Northern Australia development. I will speak generally about that but given that this is a conference for beef I will also make some direct comments about how our northern agenda relates to the beef industry.
To prepare for the talk today I went through and read a lot of the more than 250 submissions made to the Joint Parliamentary Inquiry into Northern Australia. I especially read the submissions of the green groups. I like reading those because they always fire me up.
This was a particularly resonant part of the Wilderness Society's submission:
Northern Australia is not a wasteland waiting to be industrialised. It is home to a breathtaking mosaic of escarpment country, heathlands, tropical savannah, woodlands, rainforests, coastlines, wetlands, floodplains, mangroves and coral reefs.
Well, I want to say at the outset that I disagree with that view. I think many communities are waiting to be "industrialised" -- though we probably wouldn't call it that.
• When I talk to Fred Pascoe, the Mayor of Carpentaria shire, he is waiting for jobs for his people.
• When I talk to the Macnamaras, graziers from around Hughendon, they are waiting for development of their region so that they can have health, education and transport services.
• When I talk to John O'Kane, the Group Property Manager for Stanbroke, he is waiting for the day where he can part of not mustering cattle but growing cotton too.
It is exciting time to be in the north and I have no interest in joining those nihilistic and anti-development groups that would like to preserve the north as some kind of stagnant human, animal and plant zoo, for city people, from the south-east corner of Australia, to escape to during their cold winters.
So I reject the notion of the Wilderness society that we can't enjoy the benefits of the industrialisation in the north while maintaining a healthy environment.
That is not to say that we should be critical, even sceptical, of outlandish dreams for northern development. We need to think with a hard head, even while we act with a soft heart.
But before I get too far into this topic, I might just tell you a little about myself.
Eight months ago to the day was the Federal election. Fortunately for me, I got elected to represent Queensland on that day. Unfortunately for me, the Senate doesn't change over until July 1, so I had a 10 month wait from being elected to starting my new job.
My wife is pregnant at the moment and she will have a shorter wait for a new baby than I will to start my job in the Senate!
So I have had to find something else to do for 10 months to pay the bills. My background was economics and finance, but I wanted to try something different. Stanbroke offered me a job and I thought it was a great opportunity to learn about one of the most important Queensland industries.
Just before I started with Stanbroke I realised that I didn't know a lot about the beef industry so I decided to read some books about it. I found one, believe it or not, that was called "Running a cattle herd ... for Dummies!" It was actually very helpful.
But as Barnaby has said before reading a book is a lot difference from actually doing it. I've read the book about lovemaking but the actual practice is whole a lot different.
I have had exposure to all parts of Stanbroke's business including properties, feedlot, meatworks and sales and marketing.
Tony McCormack, who many of you know is very committed to supporting and implementing best practice research and he had me swot up on lots of the MLA research that was very informative.
And Just before I Easter I got back from China on a trip with Stanbroke, including time with the Australia Week in China events hosted by Andrew Robb.
There is enormous opportunity for Australian beef in China. As you would be aware our exports of beef to China have gone from about 5,000 tonnes 2 years ago to 150,000 tonnes last year.
In Chongqing, China's version of a country town of 30 million odd people, Australian beef is selling for $60 / kg. In Shanghai I ate am Australian steak that was $110 on the menu - fortunately I didn't pay that amount! The live weight price for cattle in China is about $4 to $4.50 a kilo - around double what it is here in Australia.
Cattle and meat prices are low here and high there. Trade can bring benefits to both Australia and China but we can't afford to be complacent.
Probably more so than us Chinese beef production has more scope to increase productivity. The average herd size is 5 cattle. Farmers have limited security over their land and the meatworks sector is riven with overcapacity, with some operations working just 3 days a week.
On the other hand Australian beef production is probably the most efficient at the world. When you are at the top you have to work much harder to stay there.
To get this demand to translate into better farm gate prices for Australian farmers we need the government to act on a few fronts.
First, we need to open and keep access for our beef to overseas markets. The Australian Government has already made agreements with Korea and Japan in its first 8 months. The Government could also not be doing any more to get an agreement with China.
Second, we need to get our costs of production in the processing sector down. It is 2 to 3 times more expensive to process cattle here than overseas. If that continues, more and more of the "value add" will go offshore. Farm supply chains will move towards what has happened to electronics. Wherever it is cheapest to do a job that's where the job will go.
If we are not careful we will just send quarter beef to China and other countries, for it to be then exported all over the world. I don't want that to happen so we need to get rid of things like the carbon tax and maintain the 457 visa program so that we can keep costs low.
Third, we need to invest in the infrastructure to help the beef industry expand. That means more dams, better transport links, cheaper power, land reform, red tape reduction and taxation incentives.
That brings me to what we want to do in Northern Australia. There are no doubt challenges in the north. Costs are higher, the climate is different and some previous attempts have failed.
But just imagine if the British had taken that attitude 200 years ago. I am pretty sure the transport costs from Plymouth to Sydney cove would be more expensive than those from Townsville to Normanton. The challenges are not insurmountable. If we have vision, drive and resources we can do it. We can build a bigger, stronger and more prosperous northern Australia.
A lot of that will require private investment and there is an appetite there. The Queensland Government's tender for water licences on the Flinders and Gilbert rivers was over-subscribed last year and more water will be considered for tender later this year. A recent CSIRO report was positive about the potential to expand irrigation in these rivers.
There are lots of other opportunities to increase water use throughout the north. There are a lot of myths about water use in Australia. Most commonly it is thought that because we over-allocated water in some catchments of the Murray-Darling then this must be a national rather than a localised problem.
The truth is that Australia is a below average user of its water, compared to similar developed countries.
Australia uses less of its water than most other countries of the world and much lower levels than those used by comparable developed countries. Australia currently uses just 6 per cent of our available water compared to a world average of 9 per cent. If we increased our use to equal the world average (9 per cent, around the level of use in North America) Australia could feed almost 100 million people through our food production — even before accounting for any future increases in agricultural productivity.
Over time, investment in dams has not kept pace with the rising population. In 1980 Australian dams had could hold enough water to supply Australia’s water needs for almost seven years. Today, our dams can hold enough water to store less than six years of water supplies. If no new dams are built, Australia's storage capacity will fall to below four years’ of supply by 2050
That's why the Coalition is supporting of building more dams. In opposition we established a dams task group that travelled around Australia investigating the potential for new dams. We received more than 100 proposals. Some were well developed, others were just concepts and most of course will never be built.
In March this year, we announced a Ministerial Working Group to consider the construction of new dams.
Of course to use the water stored in dams we will also need power for irrigation. While diesel power is likely to be the only source of power available in the short term in many rural areas in the north, we have to think long-term at ways of providing reliable phase III power sources in new irrigation areas.
That's why I'm excited about the potential for shale gas resources around Burketown. I don't just want to see this gas exported overseas, however. We have to think of ways to make sure that we can use it here to power our industrial growth and new jobs in Australia.
At the moment, the biggest barrier to northern development is transport costs. Transport costs for cattle are often between $50 to more than $150 per head. 80 per cent of the cattle are born in the north but then they travel more than 1000 ams down to southern markets to be fattened and processed.
The north has a transport advantage. It has closer access to the emerging markets of Asia but at the moment transport links are poor compared to infrastructure in the south.
In the short term we must upgrade the existing road links to cut transport costs and make routes more reliable. One thing we must do is improve our inland freight routes. That can avoid the flooding on our coastal routes, and for the beef industry may reduce the need for tick clearing too. Investments in the Hann Highway, the Clermont to Roma link and the Savannah Way make sense. The Coalition has already announced major investments in the Outback Way and the Bruce Highway as well.
In the longer term we need to look at expanding direct ports in the north so we don't have to send everything south before it goes north. Karumba has great potential to be a bigger port, as does Weipa if we can ever get the bauxite projects going there.
It's not just about investment, however. We have to reduce the red and green tape that holds back projects in the north. one of the most frustrating things I have seen in politics over the past there years is the mismanagement of the South of Embley bauxite project.
That project was a proposed $1.4 billion by Rio Tinto in a bauxite mine near Weipa. It took 971 days for the Commonwealth Government to approve. We took almost 3 years to say yes to a $1.4 billion investment in a depressed, socially and economically disadvantaged part of our nation because the Wilderness Society wrote a letter to the Minister for the Environment about shipping in the Great Barrier Reef. The tragedy is that a lot has happened in 3 years and that project probably won't go ahead now.
We are committed to slashing regulations like these, and the Coalition has already approved over $400 billion of projects in its first 8 months on the job.
I think we also need to look at supporting new investments in the north through the tax system. The recent CSIRO report showed that cotton and sugar production can work in the north but the returns are going to be marginal. There is no easy money to be made out there.
The basic maths on cotton is that it costs around $10,000 per hectare to develop an irrigation projects. We would hope for around 10 bales per hectare at say $500 per bale. That's $5,000 in revenue per hectare per year. To pay back your initial $10,000 per hectare in say 10 years, you need to make $1,000 a year, or a 20% margin on your annual revenue.
That's not completely unrealistic but it is tough to do especially given the lack of affordable power and transport in the north right now.
Therefore, I think it would make sense to provide those that are the first movers in the north, those that take the greatest risks, with tax relief of some kind. Perhaps accelerated depreciation on investments like we used to have irrigation infrastructure.
We already have tax incentives in the north. There is a zone tax rebate for anyone living in the northern part of Australia. The problem is that its current rate is just $58 per year for most and it has not been changed since 1992. No one is moving to northern Australia for a carton of beer a year.
All of this investment in the north will require money, and as you will all see next Tuesday we don't have much in the piggybank.
If you want to start your weekend off in a bad way, go to aofm.gov.au on a Friday night. That website will tell you how much money you owe because of the Australian Government's spending. Last Friday, it was sitting at $319.564 billion. It had gone up $4 billion in 1 week.
Six years ago that debt figure sat at just $56 billion, and we actually a net positive position after the Future Fund was taken into account. We were running budget surpluses of about $20 billion a year. Now we have deficits of around $30 to $40 billion a year, and if we do nothing we will have a deficits for the next 10 years even if we maintain positive levels of economic growth.
Our budget is a mess and we have no option but to tighten the belt. We are not going to be very popular next week when the Budget comes out but then we have no choice.
We do have a choice about what we cut, however, and we need to make sure we cut the "consumption" parts of government not the "investment" parts of government expenditure. Spending on welfare and benefits to those that could otherwise afford to pay for themselves, doesn't deliver long-term benefits. But spending on infrastructure and research and development provide a pay off in terms of higher economic growth in the future.
You don't pay off your credit card by taking your kids out of a good school, and we shouldn't seek to balance the budget by ignoring good investments that will make us better off in the future.
I want to give an example of how important continuing to invest is. Our productivity performance has been poor over the past 12 years. Productivity has fallen by an average of 1.2 per cent every year. That is well below the world's average growth in productivity over this period of 0.6 per cent per year.
If we could increase our Labor productivity growth back up to the long term average then we could add about 0.7 percentage points to economic growth every year. That might not sound like much but it has a big effect over 10 years.
If we achieve the higher productivity growth rate after 10 years:
- each Australian will receive almost $6,000 per year more income on average
- instead of our spending to GDP ratio growing to 26.5 per cent, it would reach just 24.8 per cent almost at its long-term average.
Just to emphasise this point. If we did nothing to the budget. Kept all the welfare payments, kept the pension, no new taxes we could completely repair the budget just by producing a labor productivity growth rate equal to the historical average.
That's how important it is to keep investing in things that deliver productivity. To invest in infrastructure and to invest in research and development. And it is also why we should invest in the north.
It is also why one of the areas that won't be cut in the next week's budget is spending on agricultural R&D. We made a commitment at the last election to increase spending on agricultural R&D by $100 million and that commitment will be met in the budget.
We understand deeply why we must do that because investment in R&D is how we keep productivity growth strong in Australian agriculture. And strong productivity growth is the key reason why the Australian agriculture industry has been able to survive in a tough domestic and global environment.
The MLA's Northern Beef Situation Analysis made for sobering reading the other week. One of the most striking graphs in the report was that showing that the prices received by cattle producers has fallen by 60 per cent since 1950, while costs have risen by 20 per cent, in real terms. The only reason we still grow cattle in this country is because we have become more productive over that time.
So the challenge for NABRC and for the industry generally is to think hard about how we can best spend that additional $100 million that the Australian Government is investing. I think it is exciting that we have a government ready to invest more in agricultural R&D after years of cuts but we have to think of better ways to spend it.
One thing that comes to my mind is the need for research to be focused not just on one industry. I agree with the former Agriculture Minister John Kerin that we can't afford to have R&D to operate in industry-based silos, and that is particularly true of the north.
There will lots of opportunities created for the beef industry if cotton and sugar production increases in the north. Byproducts from both industries can be used for feed and that could help create a more intensive beef industry in northern Australia and underpin the economics of more meatworks in the north.
But I don't want to tell you how to do your jobs. It has been a great privilege to be hear today to listen to what you all have to say about the beef industry. I am not an expert on beef but as a Senator I will be an advocate for your industry and I will always be listening to ways that we can help build a stronger beef industry in Queensland.