September 25th 2004

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Articles from this issue:

NATIONAL AFFAIRS: Latham's campaign dilemma

EDITORIAL: Jemaah Islamiah: the shocking evidence

ELECTION SPECIAL 1: The real issues facing Australia

ELECTION SPECIAL 2: Reversing the rural decline

ELECTION SPECIAL 3: Voters must challenge candidates on moral issues

The Greens' dangerous naïvete

Books promotion page

Reversing the rural decline

by Patrick J. Byrne

News Weekly, September 25, 2004
Because the largest part of Australia's manufacturing industry is the processing of food and fibre off the farm, a high priority of industry policy must be to secure rural and regional Australia.

Many Australian farmers have had negative incomes, or lived on barely subsistence incomes, for years. This will worsen because of the long-term downward trend in net farm incomes. The decline of agriculture is causing a serious decline in regional Australia. The continuing drought and the Australia-US Free Trade Agreement could hasten the rural sector's decline, Pat Byrne reports.

Farmers have been undermined by bad government policies for too long.

Take the dairy industry. Under Federal-State National Competition Policy, dairy farmers were told they would have to deregulate.

The newly elected Victorian Bracks Government gave the farmers a vote on deregulation, except that the ballot-paper effectively asked: do you want deregulation with a restructure package, or deregulation without a package? Never were they given the choice of saying "no" to deregulation.

In other words, the industry was deregulated against their wishes. Invariably, the major supermarkets, with their superior market power, then forced down the price of milk to farmers, leaving them to live on subsistence incomes.

Typically, after farmers have had their long-established industry structures deregulated, they turn to the government to ask for what becomes a series of short-term, quick-fix, rescue packages.

After several failed rescue handouts - which are no substitute for regulated industry structures - the government then says, "You're no longer viable, here is an exit package."

At this point, the government takes no responsibility for the fact that it was its own free-market, ideological policies that caused the collapse of farmers' incomes and their industry in the first place.

The same scenario describes the collapse of the sugar industry and many other rural industries. As farmers keep trying to tell governments, "rescue packages and exit packages are no substitute for a price for their product into the domestic market", i.e., for sound industry policies.

The sugar cane, fishing, dairy, fruit and vegetable, beef, egg and pork industries are desperate for sound policies to return their industries to profitability and to make regional towns and communities vibrant again.

Key policy initiatives

1. Domestic versus export market.

Australian agricultural policy should be based on the fact that the primary market for most agricultural products is the domestic market, not the export market.

Federal politicians continue to argue that Australia exports 80 per cent and consumes only 20 per cent of its product, long after Queensland University of Technology economist, Dr Mark McGovern, has shown that it's almost the opposite. He has definitively shown that governments have wrongly identified the export market as the primary market for most agricultural products.

In fact, the bulk of agricultural product is sold into the domestic market. Even for some of our big export industries - like beef and sugar - their biggest single market is the Australian domestic market.

On the false assumption that the export market was the most important, successive governments and many farm peak bodies have backed free-trade policies, including slashing of tariffs, and deregulation of rural industries. They argued that this would reduce the cost of imported farm inputs, drive competition between farmers, improve productivity, and so make farmers more competitive on export markets.

Instead, the main result has been that subsidised imports, from highly corrupt world agricultural markets, have flooded into Australia, eroding our farmers' all-important domestic food and fibre markets. Farmers only have to lose 10 per cent of the domestic market to imports and they have to boost exports by over 30 per cent to compensate. This is an impossible task.

This has affected both farmers and processors. While politicians argue in favour of more "downstream value-adding" (i.e., manufacturing), imports are eroding both agriculture and downstream processing industries.

2. Reforming trade policy

Australian governments have pursued free-trade policies, based on the false belief that the export market was the primary market for Australian agriculture.

Instead, two things should frame Australian trade policy:

(i) it must distinguish between the majority of Australian agricultural industries that depend primarily on the domestic market and those that depend on the export market; and

(ii) it must recognise that the European Union, Japan and US are going to continue using subsidies and other trade barriers to keep their domestic markets closed to Australian agricultural exports.

Therefore, Australia must reform its trade policy to:

  • apply the World Trade Organisation "safeguard rules" to stop floods of imports destroying Australian farm industries;
  • strengthen its anti-dumping authority to prevent dumped imports undermining our domestic producers;
  • carefully and cautiously ensure that trade agreements are in the national interest - that is, that they provide Australian farmers with access to foreign markets without disadvantaging them in the domestic market (i.e., one industry must not be traded off against another in trade agreements); and
  • keep down the costs of imported farm inputs.

When the World Trade Organisation (WTO) was formed in 1994, the EU, Japan and US gave undertakings that they would reduce their agricultural trade barriers and domestic farm subsidies. Since then, EU and US farm subsidies have increased, not decreased.

These dominant agricultural trading nations wrote the WTO rules and left plenty of scope for providing subsidies and other trade protection measures to continue in the form of environmental grants, disaster insurance, restructuring grants, scientific assistance to farm industries, and even the classification of rural industries as strategic industries, which exempts those industries from many WTO rules.

For decades, not only have Australian politicians and bureaucrats wrongly identified the export market as the primary market for our farm product, but they have claimed that the US, EU and Japan were going to start reducing agricultural subsidies and trade barriers, facilitating a huge export boom for Australia.

This has never eventuated.

The failure of the recent WTO agricultural trade round indicates that these countries have no intention of making substantial changes in agricultural trade policies.

Some of these countries value food self-sufficiency, after suffering starvation in two world wars. Rural policy is just part of their valued social policy of decentralising their populations and keeping their cities smaller.

Rural life is integral to their cultures. In some cases, rural policy is part of their tourism policy. For example, France has over 70 million farm tourists a year, worth more than the subsidies paid to agriculture.

The value of farm subsides in the US and EU may seem huge by Australian standards, but they represent less than one per cent of GDP of these economies.

These big farm export nations are exporting and dumping their farm surplus products onto the world market, including Australia's market. ("Dumping" is where products, such as Danish and Canadian processed pork, are sold onto the Australian market for less than the selling price in their country of origin).

Australia is entitled under WTO rules to take anti-dumping actions. It hasn't, in most cases, because our politicians and bureaucrats argue that it's good for Australian consumers if taxpayers in other countries pay for subsidies and make products cheaper for Australian consumers. Never mind what this does to Australian producers.

For similar reasons, Australia has refused to apply the WTO "safeguard measures" to stop imports damaging domestic industries. WTO rules clearly state that " If ... any product is being imported ... in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers", then the affected country has the right to restrict imports.

The Australian pork industry is a classic case. This $1billion industry with 2,300 producers, and thousands more dependent on them, is in danger of becoming a cottage industry, supplying only fresh product to the Australian market.

Imported pig meat from countries that heavily subsidise their producers now accounts for 40 per cent of processed product in the Australian market.

Three reports since 1998 have identified the problem. Instead of acting on these reports, the Government, in the run-up to this election, has just announced yet another inquiry by the Productivity Commission into the pork industry.

The Australia-US Free Trade Agreement threatens to further cut farmer's incomes.

Under the terms of the Agreement, the US will maintain high levels of subsidies to American farmers and maintain most of their agricultural trade barriers, while Australia will unilaterally offer preferential access to US farm products. Worse still, US trade officials argue that the biggest gains to US farmers will be from Australia's lowered quarantine barriers.

3. Quarantine standards under threat

Australia's necessarily strong quarantine standards and food safety standards must be maintained and not compromised for trade reasons.

In particular, Biosecurity Australia should be removed from the trade section of the department of agriculture. The agriculture minister or the parliament which should take final responsibility for decisions on potentially dangerous imports, and quarantine should never be used as a bargaining chip in trade agreements, as it was in the Australia-US Free Trade Agreement.

Australia's high quarantine bar has been compromised by decisions on salmon, apple, grapes, pork, banana, and pineapple imports.

If this is allowed to continue, eventually Australia will find its quarantine bar lowered on imports of products like fresh beef, with the threat of foot and mouth disease entering Australia.

Until these recent decisions, Australia had maintained a consistent, strict, high quarantine bar, because this country has a wide range of unique animals and plants that need protection from foreign pests and diseases. Australia also is mercifully free of many serious and costly agricultural pests and diseases that are endemic in other countries.

Under WTO rules, a nation is entitled to have as high or as low a quarantine bar as it chooses, so long as the same standard is applied consistently to all imports.

Quarantine decisions have to have a scientific basis and cannot be used as a protective trade barrier to selectively exclude some food products and not others. It is up to each country to decide who makes final decisions on quarantine.

In most countries, final decisions are made by the government or a responsible minister. Very importantly, quarantine is not a trade issue.

Then, how is it that Australia's quarantine standards have been compromised?

Two decisions of the government have led to the role of Biosecurity Australia (BA) being confused and seriously compromised.

First, BA has been placed under the authority of the "trade" section of the Department of Agriculture, Fisheries and Forestry Australia (AFFA).

It is believed by farmer organisations that this sends the message to BA staff that decisions they make should take trade issues into consideration.

This belief was reinforced by the government's decision to allow quarantine to be included in trade negotiations, as part of the Australia-US Free Trade Agreement. However, quarantine is not a trade issue under WTO rules, and never should be confused with trade issues.

Second, instead of the agriculture minister or the parliament taking responsibility for final decisions on quarantine, the government has handed over all quarantine decision-making to BA, in effect abdicating its ultimate responsibility on quarantine.

Many in the rural sector believe these two errors of judgment and policy by the government have led to BA compromising its calculations on the scientific risk of potentially dangerous imports, because it is now supposed to consider the trade priorities of the government, as well as the risk of imports to agriculture and the environment.

In other words, farm groups accuse BA of fudging their calculations to satisfy real or perceived trade priorities of the government.

One consequence has been that farmer organisations have been forced to raise millions of dollars to hire scientists and law firms to scrutinise the compromised science of BA and stand up to BA, while the government stands by claiming it is not their responsibility.

In the case of BA's recent decision to allow unprocessed pork imports, for the first time an industry has been forced to take BA to the courts to defend their producers, and Australia's high quarantine bar.

BA will have the full financial backing of the Federal Government, while the farmers will have to pay for the costly defence of their industry, which is what the government and BA are supposed to be doing on their behalf!

Pork producers are afraid that allowing unprocessed pork into Australia will lead to the introduction of the deadly Post-weaning Multisystemic Wasting Syndrome.

The origin of this disease has not yet been identified. It has spread like wild fire from one country and one continent to another. It has cost the European Union $A1.5 billion so far in lost production and control measures. Yet, BA has deemed that bringing unprocessed pork from other counties won't pose a threat to Australian pork producers.

Apple producers are fearful that fundamental statistical errors in BA's calculations on the risk of importing New Zealand apples will lead to fire blight - the foot and mouth disease equivalent to the apple and pear industry - becoming established in Australia.

Bananas have virtually no genetic diversity, to allow cross breeding to produce plants resistant to diseases. Australia is free of a number of diseases that threaten to wipe out the commercial banana industry across the globe within a decade.

Yet BA has granted permission for importing Philippines bananas, where these diseases are endemic.

4. Testing of food imports for contaminants

Comprehensive food-testing of imported foods for chemical residues and heavy metals must be carried out to ensure that the same safety standards apply to imported foods as apply to Australian-produced foods.

Australia has strong phytosanitry rules aimed at providing Australians with high food-safety standards, and guarding against damaging pesticides, chemicals and heavy metals.

Australian farmers have to pass course accreditations to use pesticides and chemicals on their farms. Australian-produced fruit and vegetables are randomly tested for pesticide and chemical residues. This is done under an industry voluntary testing scheme.

By contrast, imported foods are not regularly tested for pesticide and chemical residues, either in their country of origin or in Australia. These foods include fruit and vegetables, seafoods, rice and a host of other products from Third World and East Asian nations.

With rising food imports, the failure to test these foods poses a risk to public health. There are major issues with food safety from imported foods.

In many less developed and emerging economies:

  • There are no laws governing the use of pesticides and chemicals.

  • There is no training and accreditation of farmers in the use of pesticides and chemicals.

  • Many farmers are illiterate and have little or no knowledge of how to use pesticides and chemicals.

  • There is frequent overuse of chemicals and pesticides, some of which are banned in Australia, leading to dangerous residue levels in food.

  • Heavy metals contaminate farm lands and foods, and this is a widespread problem in East Asia, including China.

  • There are few, and often no, food-testing facilities in these countries, hence Australian importers and consumers can have no indication of pesticide, chemical and heavy-metal contaminants in imported foods, unless these foods are comprehensively tested by Australian authorities.

There are issues with food imports, even from developed nations like the USA. Some chemicals and pesticides used in these countries are banned from use in Australia. For some foods, phytosanitry rules permit chemical, pesticide and heavy-metal residues at levels that are not permitted under Australian phytosanitry rules.

5. Stop National Competition Policy

National Competition Policy (NCP) must be halted. Deregulation of rural industries has left farmers, who are price-takers not price-makers, to be exploited by processors and large retailers.

Deregulation of the small business retail and some professional groups is leading to small businesses being driven out of business by large retailers, not because the large retailers are more efficient, but because their dominant market power allows them to use unfair predatory practices to eliminate competition from small business.

The deregulation process has taken place under National Competition Policy, where the States are offered financial carrots to deregulate industries, and are financially penalised if they refuse to deregulate.

Australian industries facing deregulation are: energy, water, health, government business, transport, primary industries, financial services, legal, planning and construction, retail, social regulation, communications, and education.

Primary industries facing deregulation include: AgVet Chemicals, bulk-handling (single selling-desks for wheat, barley and sugar), dairy, fisheries, food regulation, forestry, grains, horticulture, mining, potatoes, poultry, quarantine, rice, sugar and veterinary services.

Many rural industries and small business retail and professional groups have been regulated in order to stop them from being exploited by processors, or large corporate retailers.

The issue of imbalance in market power has been ignored by National Competition Policy. So serious is the crisis that the South Australian Farmers' Federation has begun a national campaign to stop National Competition Policy.

Supposedly, competition was to make our farmers more efficient so as to boost exports, but in reality it has left farmers at the mercy of two dominant supermarkets.

Sugar industry

One of the worst examples relates to the sugar industry. When the industry was partially deregulated in 1997, in a bizarre twist of competition policy, the price of sugar into the domestic market was not deregulated. Instead, it was regulated. It was fixed at the corrupt world price, which is roughly half the world average cost of production. This very low selling-price reflects the heavy subsidies paid by governments to farmers in the main sugar-exporting countries.

The problem is that farmers are price-takers, not price-makers. Deregulation leaves them open to exploitation. In the face of deregulation and falling prices, the natural reaction of farmers is to produce more. But producing more only floods the market and forces down prices.

This is precisely what happened after the dairy industry was deregulated in 2000.

Deregulation gave supermarkets effective duopoly influence over the price of milk to processors and hence to farmers. While the farm-gate price for milk in each state fell sharply, on average across Australia the supermarket price of milk rose at a faster rate than in the years leading up to deregulation.

This year, over 70 per cent of the nation's dairy farmers are in negative income, and the rest are not receiving a return on investment. Over 3,000 have left the industry since deregulation.

The Coalition has refused to entertain the re-regulation of the dairy industry. Labor has offered to consider strengthening dairy farmers' collective bargaining power through amendments to the Trade Practices Act.

While Labor has at least recognised that there is a major crisis now in the dairy industry, their solution cannot work as it is based on the trade union, industrial model of achieving a wage increase.

Employees are able to use a range of industrial tactics - like strike action or overtime bans - that are capable of driving employers to the collective-bargaining table. Dairy farmers do not have the equivalent of a workers "right to strike"; they don't have the capacity to withhold their milk from a processor and consumers.

Dairy deregulation

In the 1980s, when Victorian dairy farmers tried to withhold their milk from processors in order to bargain for a higher farm-gate price, Premier John Cain invoked the Essential Services Act to force farmers to continue supplying. He claimed that milk was an essential service to consumers. Further, as milk is a perishable product, if farmers were to withhold supply, they would have to dump millions of litres of milk at huge cost, and risk being prosecuted under state environmental laws.

Due to the nature of dairying, the only way farmers can receive a fair price for their product is to have a legislated process for determining a regulated price at the farm gate.

The sugar industry has a similar problem. Sugar cane is bulky and has to be processed within a day of harvesting. The cost of transport and the need to quickly process cane means that farmers have to supply a local mill, giving millers virtual monopoly control over farm suppliers.

Early last century, the unregulated sugar industry saw farmers exploited by mills. Eventually, a regulated process was put in place, compulsorily requiring the mills to bargain a price collectively with farmers in the mill-supply area. Compulsory arbitration applied if an agreement could not be reached.

This entire process has been abolished under National Competition Policy, following a memorandum of understanding signed between the Federal Agriculture Minister and the Queensland government.

Supposedly, deregulation of sectors like liquor, newsagents, and pharmacies is supposed to make the retail sector more efficient; but in fact their deregulation will only benefit the major supermarkets.

Consider the plight of independent liquor stores. Following full deregulation of the Victorian packaged liquor industry in January 2006, Ernst and Young have estimated that 40-50 per cent of independent liquor outlets could be out of business in a short time.

This will have major implications for the wineries. Independent liquor stores carry a wide variety of wines, giving boutique wineries a market for their product.

In contrast, the major supermarket chains are primarily interested in dealing with major supplies, like Southcorp, BRL Hardy, and Beringer Blass. Hence the big wineries are likely to control the bulk of the supermarket-owned liquor stores' shelf-space. Many of Australia's small wineries, boasting an extraordinary range of world-class wines, are facing a grim future as the number of independent liquor outlets shrinks.

Further, independent retailers are more efficient than supermarkets. The cost of doing business of the typical independent liquor store is 14-15 per cent of gross sales. For the major supermarkets, it is 23-25 per cent of gross sales.

In fact, major supermarkets make minimal profits out of retailing. The overwhelming bulk of their return to shareholders comes from supplier rebates and discounts.

Suppliers are required to pay rebates to the supermarkets to get shelf-space, favoured aisle positioning, refrigeration, etc. For some industries like dairying, rebates cost suppliers tens of millions of dollars per year.

Independent liquor stores have accused the major supermarkets of predatory pricing - that is, using their enormous market power to sell their product below cost and drive small retailers out of business.

For these reasons, National Competition Policy (NCP) should be halted, or at least dramatically reformed, to take into account differences in market power at different stages in the production and distribution chain.

Further, where deregulation has disadvantaged farmers and regions, States should be encouraged to pursue appropriate regulation policies to restore a measure of market power to rural industries so that they can obtain a fair price for the product in their domestic market.

6. Strengthening the ACCC

The Australian Competition and Consumer Commission (ACCC) must be urgently strengthened to curb the excessive power of the major supermarkets. A Mandatory Grocery Code of Conduct must be introduced to give clarity and transparency in the grocery supply chain.

The Australian Competition and Consumer Commission administers the Trade Practices Act and is supposed to ensure fair trading practices in the market place.

Unfortunately, it has failed to curb the excessive power of the two major supermarkets, which control over 75 per cent of the retail grocery market. This has left these large retailers with the power to bargain down prices to deregulated farm industries, and undercut smaller competitors.

Consider the problems of the Queensland fruit and vegetable industry, which has up to 1000 wholesalers in the central markets, whereas only two supermarkets dominate the retail market.

As most growers are a considerable distance from the market, they rely on the integrity of all those on the supply chain, to handle their produce with care and also to sell it for a fair and reasonable price, in line with market prices and the quality of their produce. As growers/suppliers can have little impact on demand, and as fruits such as mangoes deteriorate rapidly if stored in inappropriate conditions or for too long, growers are not in a position to bargain once the produce is in the market system.

While each market contains a range of businesses classed as "wholesalers" the manner in which these wholesalers conduct business, and the transparency of each of the transactions where produce is bought and sold has been a source of concern for growers and/or suppliers for a time.

The Buck Report, an independent review into the conduct of the grocery industry, recommended a mandated Grocery Code of Conduct to give clarity and transparency in the supply chain.

Independent liquor stores and other suppliers to the supermarkets are also demanding a mandatory code.

The Coalition has refused to implement a mandatory code, while Labor has promised to mandate a strengthened code.

7. Protecting farmers' water rights

Farmers' water rights must be defined and protected. The cost of water to farmers should be based on water delivery costs, not on market forces. Management of catchments should be by community cooperative sustainable self-management systems.

Water-trading must be limited to sub-catchments, limited to water-users, and allocations to agriculture be guaranteed, lest competition force up the price of water and seriously affect farmers' input costs, domestic food supplies, and Australia's ability to maintain exports.

No water should be taken from farmers for environmental flows down rivers until community-agreed science examines all 22 issues involving river health, and then shows that more environmental flows will actually improve river health.

Where increased water supplies are needed for cities and industries, or where sound science shows it is needed for environmental flows, then savings should be sought that do not reduce farmers' irrigation rights and new sources of water should be sought.

Farmers' water rights are under threat from:

  • Proposals to increase environmental flows down rivers by reducing farmers' water entitlements, which would put farmers into "permanent drought".

  • Proposals for a national water-trading system that threatens to create a water market where water barons could buy and sell water, forcing up the price of irrigation water.

  • Some states wanting to regularly review farmers' water rights.

There are three key means to solving the problems of farmers' water rights: getting the scientific and management process right; limiting water-trading; and bringing into use some of Australia's large, untapped water supplies.

First, it is important in the Murray-Darling Basin to introduce community cooperative sustainable self-management systems to manage the new icon sites that the Federal Government has set aside to be restored to pristine environmental areas.

A successful model can be found in the process adopted for the flood management of the Barmah-Millewa Forest, an important wetland and forest on the Murray River between Cobram and Echuca.

In the early 1990s, a meeting between the Murray-Darling Basin Commission (MDBC) and local communities brought together a balance of farm irrigators, representatives of the departments of water resources, environmental groups, local councils, river recreational users' groups, the aboriginal community and local councils, with recognition for the financial contributions towards the management of the system.

Nobody believed the process could work, because of the antipathy between the many and diverse groups forming the committee. But after an intense and difficult three-year process, a watering regime was agreed to. It aimed to maximise the environmental benefits, while minimising the costs of the watering regime.

The agreement was to periodically add 50 gigalitres of water to the flood flows through the region when the Ovens River system floods came through this reach of the Murray. It would require the building of several regulators so that different areas of the forest were flooded in different years. River gums need periodic, but not annual, floods for regeneration.

The reason the process worked was because the community co-operative sustainable self-management system process led to even the most diametrically opposed groups coming to understand each other's concerns and the science of the issues of the region.

Further, once the process started, no one group could make outlandish, overstated claims for their pet issues, without losing credibility in the committee process.

This is a far better way to solve contentious environmental problems than having cumbersome government departments and statutory authorities trying to determine outcomes between competing local interests, especially as policy decisions require a large amount of detailed science and comprehensive local historical knowledge.


Second, water-trading, as proposed by the Council of Australian Governments' (COAG) National Water Initiative is fundamentally flawed. COAG has announced that it wants to allow water to be traded from low-value to high-value crops.

This thinking has been in part formed by groups like the Wentworth Group that has claimed benefits of hundreds of millions of dollars to the Murray-Darling Basin from open water-trading. Their "guesstimates" are based on the assumption that the value of farm production for high-valued crops will increase in the same proportion as the additional water allocated to those crops.

Hence, political decision-makers have become mesmerised by the idea of high farm-gate returns per megalitre, instead of looking at net farm profits from different uses of water.

Farmers understand what many environmentalists clearly don't understand - rural industries are prone to booms and busts. Shifting water to high-value crops can lead to over-production, causing prices to collapse. Only 10 per cent of irrigation water goes to high-value crops, mainly horticulture. If that rose to 15 per cent, today's high-value horticulture would be tomorrow's lower-value agriculture.

In reality, there is no need to shift water around the Murray-Darling basin. By and large, soils almost anywhere in the Basin will produce either low-valued crops or high-valued crops. Rather, shifting water from one region to another, it is far more practical to shift crops between regions.

Thirdly, as the House of Representatives Standing Committee on Agriculture, Fisheries and Forestry recently recommended, there is a need for a national water audit to determine the extent of Australia's vast untapped water supplies, and to develop a long-term strategy for the use of some of these waters for agriculture, industry and cities.

8. Curbing excessive farm environmental controls

Curbs must be placed on excessive environmental regulations that are strangling many primary producers, threatening the viability of their industries. Community cooperative sustainable self-management systems should be put in place to manage sensitive environmental areas.

Consider the issues involved in the management of the Great Barrier Reef fisheries. Excessive environmental controls are threatening the commercial and recreational fishing industries, the coastal towns that depend on these industries, and even the tourist industry.

These controls have seen a huge cutback in allowable fishing areas, unworkable "quotas" and other restrictions on commercial fishing catches. These restrictions will force Australia to rely more on imported fish, putting more pressure on the fish stocks and reefs of other Pacific countries. Unlike Australia, many of these countries have no fisheries management in place to protect their stocks and reefs.

Figure 1 clearly shows that Pacific reef fisheries are very heavily fished, while the fish take from the Great Barrier Reef is very small. The fish catch from the Great Barrier Reef is so small - only 17 kg/sq km - it doesn't even register on the bar graph!
Figure 1 : Fish catch for Pacific islands and Great Barrier Reef
Our government departments have applied the "precautionary principle" in the extreme, in restricting fishing. It is approaching the point where there will be no commercial or recreational fishing allowed on the reef.

This extreme measure will contribute little if anything to the health of the reef, but will contribute to the destruction of unmanaged reefs in the Pacific region.

Management of the Great Barrier Reef and fisheries needs to be carried out by the sort of community cooperative proposed for managing the environmental and industry issues in the Murray-Darling Basin.

Needed is an industry-appointed board of managers including, but not limited to, commercial fishing, recreational fishing, tourism industry and regional communities. This board should be modelled on the highly successful South Australian Cray-fishing management process.

Such a management group should be responsible for the management of the combined industry operations in the Great Barrier Reef area, including the designation of zones, fisheries and for the implementation of recommendations from the independent review panel.

9. Developing regional infrastructure

Key principles must govern Federal and State regional development:

  • Infrastructure expenditure in the regions should be in proportion to the contribution (and potential contribution) of regional Australia to the national economy;

  • To ensure equitable access to infrastructure, regional power, water, transport and communications (e.g., Telstra) must remain in public hands;

  • Regional areas deserve the same quality of health, education and other social services as provided in the major cities.

Successive governments have cut services to regional areas in violation of these basic principles.

Governments should realise the many advantages of decentralisation policies. For example, the concentration of the Australian population in huge cities has raised the cost of providing infrastructure and the cost of housing, particularly to young families. These problems could be mitigated by concerted policies to decentralise the population into medium-sized towns in the arable areas of the continent.

Further, governments need to realise that their role in regional development becomes all the more important as corporations close their branch officers in the regions, and as major retail chains and franchises drain profits out of the regions.

The creation of a new development bank is important to building regional infrastructure and industry, and so put finance back into regional areas.

10. Developing cooperative principles

Policy recognition should be given to the need for cooperative principles to be applied to many rural organisations and regional communities, rather than free-market competitive principles. These principles also recognise the importance of the family farm as economically sustainable, the most environmentally-friendly form of agriculture, and as an ideal way to raise families.

Cooperative principles are essential to farm communities. They are being rapidly eroded because of the free-market ideas that have hit the farming community from many different directions.

As one farmer put it, 20 years ago if a neighbour was in trouble, locals would chip in and help. But today, if a fellow farmer is in trouble, the neighbours sit back and wait for him to go under so that others can cash on the spoils - his equipment, land, water, stock. The result has been a loss of values, family disintegration and a breakdown in community.

In some cases, farmers have been manipulated by processors and suppliers to make them compete against each other to the point where it disadvantages farmers, rather than helping them.

This competition can be in the form of misleading market information (i.e., farmers misleading their neighbours about real market situations); private access roads being blocked off to neighbours; building flood and levy banks regardless of the flooding it causes on neighbours' land, or the denial of water to other neighbours; and many other destructive activities.

11. Democratising rural peak bodies.

Democratising key rural peak bodies to which farmers pay compulsory levies is necessary to give farmers proper representation in government. Beef producers pay over $70 million to their peak body, and dairy farmers pay over $50 million to Dairy Australia. Yet neither of these organisations is elected on the basis of one vote per farmer.

Many farmers have accused these bodies of being unrepresentative of their industries. They are demanding the boards of their peak bodies be elected democratically by those who pay the compulsory levies.

12. Innovation and down-stream processing

For some industries, there is a profitable future with new products and technological innovations. However, in many cases, government regulations and incentives will be required.

For example, the sugar industry would have a guaranteed profitable future if the Federal Government mandated ethanol in petrol. There is an urgent need for an Australian strategic, security energy policy, given the nation's growing dependence on imported oil.

This would create a new, high value-added, downstream processing industry for sugar cane. It would set the stage of a major new export industry to Japan and East Asia, where governments are looking for alternatives to Middle East oil and for ways to minimise the hazardous city pollution.

Even the ardently free-market magazine, the London Economist, has indicated that ethanol production will be important as an alternative to fossil-fuel energy in the not too distant future. It even suggested that government "subsidies and regulations may be the main driving force" behind development of such bio-industrial products (The Economist, April 7, 2004).

Also, Australia must develop high-tech, high-end manufacturing if it wishes to remain a first-world economy.

The Federal Government could give a huge boost to this if it did what other nations do, and that is give preferential government contracts to Australian industries for the supplying of government equipment, particularly new defence equipment.


Australia is running out of time to get its house in order, as indicated last week by former Labor Federal Cabinet Minister, John Button.

Writing in the Melbourne Age (September 15), he said, "With the exception of a handful of economic commentators (such as The Age's Tim Colebatch) and the occasional editorial, there seems to be a conspiracy to ignore some of the hard issues that will ultimately determine the future lifestyles of Australians. We have had in the past few years an appalling record in export performance for an economy of our size.

"Largely as a result, the current account deficit is at record levels and foreign debt has doubled since 1996. The savings ratio is negative, personal debt levels are alarming.

"Somebody should wheel out the 'debt truck', much talked about by Peter Costello in 1996. Someone should ask what sectors of the Australian economy the exports, which might reduce some of the underlying problems, might come from. It would be interesting to know where future jobs will be in an economy that is unlikely to sustain the present level of growth for much longer.

"These are questions that might test whether we have statesmen or politicians, and perhaps make the next month more interesting, and more relevant," he concluded.

Economic rationalism has been in vogue for almost 20 years, but has run its course. Now there is a policy vacuum.

News Weekly has outlined new policy solutions to serious economic problems facing the nation, and aims to sell its policies to all sides of politics.

Now is the time to shift centre of gravity and set a new policy agenda for Australia.

  • Patrick J. Byrne is national vice-president of the National Civic Council.

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