Christopher Back (WA, Liberal Party) Share this | Hansard source

I rise to speak to the Export Legislation Amendment Bill 2014. Whilst I concur with Senator Farrell on the areas that need to be addressed, I wish to raise a number of points and flag concerns that the industry has raised with me and raises with me on a frequent basis. This becomes a question of the competitiveness of our export charges vis-a-vis those countries with whom we compete around the world, and it is a highly competitive market.

People should be aware, of course, that Australia agriculturally survives on its exports. We export some two-thirds of our farm produce, three-quarters of our fish products and 60 per cent of our forest products. Agriculture was worth more than $40 billion in 2012-13 but, more importantly, it is growing and growing rapidly. As the mining boom comes off, as we price ourselves out of the market for new oil and gas development around Australia—and I need speak no further than Santos's decision the other day to abandon their plans in the Bonaparte Gulf—agriculture once again is going to return to its pre-eminent position, and agricultural exports will of course be part of it.

In my home state of Western Australia, as with South Australia, about 95 per cent of our grain is exported. So it is critically important that people understand the implications of the legislation and the amendments being undertaken. I voice these concerns because we are at risk of becoming totally uncompetitive and pricing ourselves out of these markets.

Let me give you a quick example. When I was in the United States in December last year I met for a couple of days United States Department of Agriculture personnel. They told me that all costs associated with inspections for export, or at least the vast majority, are in fact met by the American taxpayer. You might say: why is that relevant to us here in Australia? The answer is that we are in intense competition with the United States in markets such as South Korea and Japan, and I hope we will soon be more active in the Chinese market.

The situation as described to me by the Americans, the USDA, is one where the only thing of interest to the American Department of Agriculture is the requirements of the importing country. They confine themselves only to those areas required by the importing country. We in Australia have now gone well beyond that. We are at the stage where we are almost giving advice to importing countries: 'Are you sure you don't want such and such an inspection service undertaken?'

We have to take a very correct and quick look at this to see where we are and what our role is. As the Americans said to me and I absolutely endorse, our high standards of inspection services are critical. We know that the US market is very important to us in terms of exports of beef and, depending on whether you look at value or volume, we are the second or third largest exporter of beef in the world behind Brazil and competing with India and their very much lower value buffalo meat. I for one will always defend, stand up for and argue for the highest standards.

What I am here today to talk about are the cost-recovery circumstances we are facing. I was recently advised that research undertaken by the red meat sector to 2012 estimated that government influenced costs and charges in Australia account for almost 30 per cent of all costs incurred after the purchase of livestock and that did not take into account those incredibly increasing costs for the Exporter Supply Chain Assurance System. It is unsustainable that 30 per cent of all costs would be related to government. Furthermore, to give emphasis to this point, from 2005-06 to 2013-14, costs for example of export certification have increased by 122 per cent from $5 million to $10 million at a time when the number of livestock being exported has declined by one-third. How can we possibly sustain these improvements, these changes? The Public Service Commission, in a capability review released only two months ago, in March this year, stated:

It is notable that 60% of the department’s budget comes from cost-recovery operations. As part of these operations, DAFF manages many fees and charges and consults with well over 100 industry bodies …

This creates a level of inefficiency that would not be accepted in private industry and represents a major threat to the department’s future capability.

It went on to say that ultimately it will benefit both portfolio industries and the department if we achieve significant improvements. We have seen, for example, a 113 per cent increase in some charges in one year, in 2010-11. We have a circumstance in which industry currently pays all costs in live animal exports, including those not associated with export certification. As well as performing export certification services, the live animal exports group undertakes a range of activities such as answering parliamentary questions, briefing ministers, responding to correspondence, preparing financial reports, responding to FOI requests, public queries and supporting market access negotiations. Yet industry is paying for all of these costs under the industry recovery scheme. It simply cannot afford to do so.

I am flagging this today, as I have with the minister, as I have with the secretary of the Department of Agriculture and as I will go on doing. Let me give you an illustration. Remember, we are one of 109 countries involved in exports. We have by far and away the highest costs associated with the exercise. Our hourly rate is absolutely unacceptable and I come back to producers because at the end of the day all costs end up at the farm gate. We have circumstances now where the return to a producer in the USA is double that of the return to a producer in Australia. We know from the current grass-fed beef inquiry that the return to the producer today per kilogram is no different from what it was 20 years ago. Yet the domestic consumption of beef has gone down and retail prices have gone through the roof. When you look at abattoir processing costs in our country, they are infinitely higher than the next highest and that is the United States of America.

When one has a look at the costs imposed on industry by the Department of Agriculture—I am now referring to the draft Cost Recovery Impact Statement for 2014—one sees that these are costs associated with document processing and administration. These are the anomalies that our industry representatives are coming to me on a continuing basis to ask how can they be reconciled. Those are costs of document processing for a companion animal, $381 per hour; for a horse, $508 an hour; for reproductive material, be they embryos, semen or whatever, $405 an hour. But for livestock export that figure jumps to $671.80 per hour. These costs are absolutely unsustainable. As I said to the secretary during Senate estimates, we know that veterinarians and others in the Department of Agriculture are not being paid $625,781.70 per annum. If they were, I might consider applying for a job as a veterinarian in the Department of Agriculture.

How is it that these costs are so high? We have a circumstance where small exporters are being priced out of the market. In one circumstance put to me the gross return for a small export was going to be $1,000 and the cost of processing the documentation to actually give effect to that export was $1,000, 100 per cent of the actual return to the producer. So you say to yourself, 'What happens in other countries?' Senator Colbeck, Senator Sterle and then Senator Kerry O'Brien and I were in New Zealand two years ago, through you, Deputy President, to Senator Colbeck. In that country they have outsourced much of the export inspection services for a range of animal species and indeed for costs associated with laboratory testing et cetera. We in Australia have not done that. Here in Australia the Department of Agriculture sets the rules, licenses the exporters, attends to the inspection and then acts as the appeals board should there be any complaints or disagreements with those fees and charges. That is exactly where we are at the moment. You bet that industry is complaining bitterly when it is looking at proposals of $671 an hour, when it is looking at an increase from 65c per kilometre, which is reasonable, in industry up to $1 per kilometre with no explanation being given, and the other attendant charges of this cost-recovery about which I spoke in the last few minutes.

I have presented to relevant parties a circumstance which is occurring at the moment in terms of live export charges. These are those associated with documentation et cetera. We have the anomalous situation in which the hourly rate for these inspection services changed dramatically and I want to explain how they do. There are three classes of cattle getting exported: those for breeding purposes, those which are known as feeder cattle and they will go into feedlots, and others that will go directly for meat processing. The price per animal for feedlot cattle is called tier 2 and this is $3.90 per beast. You say to yourself, 'Well, $3.90 per beast, if that is what the fee is, it is going to go back to the producer eventually but we can wear that.' But as I presented tax invoices the other day the circumstance exists at the moment where that $3.90 per beast is for the first 22 hours of an inspection service. In industry we would think, if you have a look at any aspect of industry, be it professional services, be it trades or whatever, the larger the number of animals or the larger the number of units, the larger the number of electric light bulbs that an electrician might be replacing, the actual unit cost would go down. But that is not the case under this new cost-recovery scheme. After 22 hours, and that is a very small number of hours for the complexity of the work being undertaken, and I am going to come to ESCAS in a moment, after 22 hours that figure changes dramatically in what is referred to in the tax invoices as a penalty fee. That penalty fee for the invoice I have in front of me jumped from $3.90 per beast to $70.50—yes, $70.50—per animal.

Any of us who have been involved in business, anybody who has been involved in the provision of services, whether professional services, trades or labour related services, would know that you factor in your costs before you present them to a potential client. So, if $3.90 per animal is the fee, you have factored in the associated costs—your head office costs, your costs per diem if the person has to travel. You take all those into account and the figure is, in this case, $3.90 per animal. There can be no circumstance in which that fee jumps up to $70.50 per beast to be processed.

I do not care how people try to defend that to me. I cannot understand it if they come to me and say, 'We think this is associated with factoring in all of the costs.' My answer to them is that the $3.90 should factor in all the costs. Furthermore, I say again: when there are more animals, more electric light bulbs or more hours of consultation that a legal firm may give a client, one would expect the unit cost to come down, not to go from $4 per animal to $70 per animal. This is totally and utterly unacceptable and without exception.

As industry says to me, there is no cost pressure. There is no cost competitiveness. I understand that the officials of the Department of Agriculture are very diligent, but if you know very well that for the first 22 hours you are going to get $3.90 per beast and after that you are going to get a very much higher figure—and in the case I quoted it is $70.50—where is the incentive to get the work done more efficiently, in a shorter amount of time? More particularly, if it is the statement of our government—and it is—that we are trying to reduce red tape, that we are open for business, then it is incumbent on us to be driving these prices down, to be improving efficiency.

I come to the question of risk—and this is the mechanism, in my view, by which this can be done. Obviously, if we are to retain the status that we enjoy internationally in terms of the quality of the product that we export, the standards of inspection that we enjoy, the return to producers and others in the chain, then of course it is absolutely critical that we are able to go to the international markets and assure them of our ongoing and continued commitment in this area.

But I ask this question. If, for example, live animals are exported from the same farms, using the same transporters, using the same feedlots, using the same ships, into the same importers' facilities, into the same abattoirs for 40 years, with obviously high trust by the purchaser in the quality of our product and the price at which we are able to put it into the market, where is the justification, from a risk analysis point of view, for spending exactly the same amount of time reviewing that export and a new request for export to that market when we know that there is no change in all of that supply chain?

The point I want to make is that in a risk analysis process what we must do, of course, is to have a look at the risk. If it is a new exporter, if it is a new importer, if it is a new participant in the supply chain, if it is a new market or if it is a new product, then we should devote all of that time and attention to satisfying ourselves here in Australia and to satisfying the end customer that we can in fact preserve the integrity of our product. That is where the money should be spent.

At the moment, where is the incentive, I ask, for an excellent exporter, controlling the supply chain in an efficient way, to continue their level of excellence? Where is the reward from the regulator which says to that exporter: 'You are performing at or above industry, international and national expectations, so we will lower the level of audit upon you. We will charge you a lower figure. We will continue to keep an eye on you, of course, and should there be any problems we'll come down on you like a tonne of hot bricks'?

But where is the incentive for that exporter to maintain their excellence when in fact they are going to be the subject of the same levels of this $671 an hour, for example, or the ridiculous figure of 22 hours at $3.90, jumping up to $70.50? There is no logic in this particular exercise.

I say again that we are operating in a highly competitive market. Following my visits to the USDA in Washington, I met with participants of the cattle industry, the export industry, the Texas Department of Agriculture in Austin Texas, the Texas A&M University and producers and exporters. Their continuing question was: 'Senator Back, why are importing countries who you have long supplied with product here in the United States of America trying to source supply from us when we know very well that the quality of your product has stood up over 40 years? We know you lead the world in transportation. We know you lead the world in animal welfare standards. Why are they?' I could name them for you. They asked me, 'Why are they here in the United States trying to source product?' The answer, regrettably, is that we are at risk of not continuing that high level of reliability for which we have earned an enviable reputation in live animal exports, beef, sheep meat and associated products.

I support this legislation, but I put out a call very strongly on behalf of industry that what we are moving towards is unsustainable. We cannot sustain it, the producers of Australia cannot handle the added costs upon them, and I urge government and the department to address this. (Time expired)