THE National Farmers' Federation (NFF) has been quick to signal its wish list for the new Coalition government – a reduced regulatory burden. It’s a list I strongly support.
Although there is scope for considerable deregulation in agriculture, even without that there is plenty of room for the burden to be reduced.
The NFF describes it as excessive, overlapping and inconsistent regulation, unwieldy approval, licensing and reporting requirements, plus heavy-handed regulators.
The NFF estimated in 2007 that the cost of unnecessary regulation was $22,500 per farm, or 14 per cent of average net profit. Given the fondness of the Rudd/Gillard government for new regulation, that will inevitably be much higher now.
The NFF also points to figures from the World Economic Forum showing that in just two years, Australia has slipped 60 places and is now ranked in the bottom 20 countries.
In 2012, AgForce Queensland conducted a desktop analysis and found that just at a State level, Queensland farm businesses are regulated through over 55 Acts and Regulations covering over 9000 pages, in addition to local government by-laws, associated codes or federal legislation.
The reality is Australian agriculture is drowning in a rising sea of red and green tape.
And while some of our overseas competitors suffer from similar levels of regulation, they enjoy the benefits of significant corporate welfare. That is, their fellow citizens pay subsidies to offset the cost of compliance. Australian farmers, by contrast, receive comparatively little assistance from Australian taxpayers and bear the cost of regulation directly.
Excessive regulation afflicts industry generally, but agriculture is an area in which Australia enjoys a natural competitive advantage. The golden goose is being progressively strangled. As the NFF says, it is in no one’s interest to have consumers paying more, farmers making less and a growing part of the margin being tied up in regulatory burden.
There is no shortage of examples, with the environmental area being one of the worst.
The approval process involved when seeking to make changes to farms is a web of overlapping and conflicting rules. In addition to the myriad of local and State government environmental regulations, federal legislation requires farmers to gain Commonwealth approval where development will have a ‘significant impact’ on matters of national environmental significance. This includes operations on heritage listed sites, RAMSAR wetlands, nationally threatened animal and plant species and ecological communities.
On top of the Commonwealth approval process, farmers may also require State environmental approval for the same on-farm actions. Each State has a separate (and often overlapping) set of protected matters, guidelines, rules and requirements which just add complexity.
The same species or ecological community may be listed under both federal and State legislation but are likely to have different geographic coverage, different scientific descriptions, and different impact and threshold tests. This creates a minefield for anyone seeking to understand and comply with the relevant legislation.
Not surprisingly, many farmers are reluctant to go through the process of changing their existing land practices. Often, the opportunity for farmers to improve their profitability is forgone.
At times the burden is absurdly petty, such as when a farmer manages separate properties split by a public road and requires a permit each time he or she transports an unregistered harvester between properties. It is similar with the moving of farm machinery at night, despite new technologies allowing greater work during night hours.
One area of excessive and unnecessary regulation that I know fairly well relates to agricultural chemicals. Animal health and crop protection chemicals are vital ingredients in modern agriculture, controlling the pests and parasites that once used to decimate our crops and livestock. Yet Australia is saddled with an excessively cautious, inflexible and inward looking regulatory system that adds considerably to their cost.
This is aggravated by a cost-recovery funding approach which the Productivity Commission says has the potential to create perverse financial incentives such as to “encourage regulatory creep and cost padding by agencies”.
And sure enough, new legislation last year made the regulation of agricultural chemicals even worse with moves to impose additional controls on chemical use to which cost recovery will apply.
The Coalition government has promised it will tackle excess regulation. It is right to do so. Over-regulation is not merely an issue for business, but imposes costs on governments.
Reducing red tape stimulates economic activity and therefore boosts government revenues while avoiding the costs associated with administering and enforcing regulations.
If the NFF maintain a consistent policy of opposing unnecessary regulation, including additional restrictions on foreign investment, it is likely to be a key player in ensuring the government keeps its promise.
Australia’s farmers are among the best in the world; all they need is for governments to stop holding them back.
David Leyonhjelm has been an agribusiness consultant for 24 years. He was also elected to the Senate in the recent election. He may be contacted at email@example.com