Fiona Nash (NSW, National Party) Share this | Link to this | Hansard source

I present the report of the Rural and Regional Affairs and Transport References Committee on the fee rebate for the Australian Quarantine and Inspection Service export certification functions, together with the Hansard recording of proceedings and documents presented to the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

Certainly there is a very strong view across the committee that reform across the AQIS export certification functions is necessary. I think it is very important to make the point that, in terms of the reforms themselves, there was very strong support. However, the separate issue of removing the 40 per cent rebate for the industry is a different matter entirely, and it became very clear to the committee that the measure had taken a lot of the sectors of the industry by surprise. It obviously came out of the bill review, but it was very clear to the committee members throughout the inquiry that there was an expectation that the 40 per cent rebate would remain. We felt the very obvious nature of the government tying the delivery of the reform to government acceptance of removal of the 40 per cent rebate was not in the best interests of the industry. The obvious increase in charges for the industry as a result of the 40 per cent rebate being taken away meant that there were going to be some significant challenges right across the sectors. I think that came through clearly to the committee, particularly from the smaller parts of the industry—the sectors that have the least ability, if you like, to deal with a sudden increase in the charges. Interestingly, the red meat industry, which is responsible for 70 per cent of agricultural exports, was not asked for its opinion of the removal of the 40 per cent rebate throughout the bill review process. We thought that was indicative of the lack of effective consultation with many parts of the industry.

I move now to the issue of 100 per cent cost recovery. There was significant commentary to the committee about the very strong belief that there was a legitimate cost to government in lot of this business and that 100 per cent of the cost should not come back on to the industry itself. The point was made that many countries around the world see this activity as being for the public good and that in Australia we should be looking at it on the same basis. It clearly came through that the increased cost is certainly going to go to the heart of the competitiveness of lot of our industries, particularly with the smaller operators. We heard a very high degree of concern about the impact of jobs losses, particularly in regional areas; indeed, some industry sectors believed that they would disappear altogether.

We have recommended that the Senate move to disallow the removal of the 40 per cent rebate. We believe that the industry should have the benefit of that 40 per cent rebate remaining. Having said that, we are very supportive of the reform process; there is no doubt about that. We are very concerned that the government has chosen to tie, if you like, the forward progress of the reforms to industry accepting the removal of the 40 per cent rebate. We do not believe that is in the best interests of the industry, and I know that some of my colleagues in the chamber will make some further remarks about that.

I would particularly like to thank the secretariat, as a very tight time frame was involved with the turnaround of the report from this inquiry. I place on record the committee’s very sincere appreciation for the work that the secretariat did in preparing the report.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise to support the remarks of the chair of the Rural and Regional Affairs and Transport References Committee, Senator Nash, and note that since 2001 the government has provided a 40 per cent contribution towards the cost of providing export inspection and certification services to the meat, grain, fish, dairy, live animal and horticultural export industries. The cost of the services provided was met through a 60 per cent cost recovery from industry and a 40 per cent government contribution. That was in recognition of the fact that the process could have been done more efficiently and that our competitors in many of those export markets had their costs met by their respective governments.

That decision was renewed several years later, so many in those export sectors really did not believe that the government was going to change its position. There certainly was no consultative process with the export industries to make them understand that this was coming to an end, but they had a very clear understanding that reforms would be implemented so that the costs of the service would be significantly reduced. There was no evidence that reforms in AQIS in particular were reducing costs. If you talk to each of the industry sectors, they say that a lot was said about the potential for cost recovery, but not much was actually happening on the ground to demonstrate how those cost savings might be achieved and how we could be more competitive.

I feel very conflicted about this because it was the unanimous view of the committee that we need reform. Nobody is suggesting that the current way of AQIS conducting inspection and certification services cannot be improved. Everybody agrees that we can improve—that there have to be better ways of doing it, that the duplication of service by state and federal bodies must be overcome and that there must be ways of implementing reform. Certainly all of the agricultural sectors that we spoke to agreed that we must have reform.

I do not want anyone to be under any misapprehension here that the parliament does not support a reform agenda. We support a reform agenda. We want to see costs come down. We want to see these services delivered in the most efficient, most modern way we possibly can, and that includes implementation of information technology to better facilitate ways of dealing in a sector, higher skills training, better accreditation at industry level and so on. So that goes without saying. But it is a blunt instrument when an industry is held over a barrel, essentially. The government have come back and said to the industry, ‘We expect to go to 100 per cent cost recovery this year and in return we will put $30 million into delivering on the reforms.’ The industry quite rightly said, ‘Effectively, we are paying for our own reforms in terms of that cost recovery.’ The government have argued: ‘No, you’re not. We’re recovering the costs of what we do and we’re putting in this $30 million that you are paying in order to deliver reforms.’ Well, it is a bit of an academic argument because the upshot is that industry is going to be paying and the reforms will be implemented, but the industry has little confidence that the reforms will be implemented in the 12-month time frame. That is the next point: how quickly and efficiently can we get the reforms in place? We had quite a bit of evidence from people that there is no way they are going to get approval from some of their export markets to change the protocols, to accept the change processes, in the 12-month period.

The other point to make is that we are in the middle of a global financial crisis. Our rural communities are also struggling in those export markets in the face of a higher Australian dollar. We are talking about giving massive support across the car industry and in all sorts of areas of the economy, but we are saying to the farmers at this time, even with the high Australian dollar and the global economic crisis: ‘We are going to go to 100 per cent cost recovery and, what’s more, we are even going to introduce new fees.’ The government argue they are not new fees, but they are. If someone paid zero last year and they are paying $50,000 this year for the registration fee for an abattoir, that is a new fee, as far as they are concerned. I have had a letter from an abattoir in Western Australia which will effectively be paying an additional $109,000 this year. That is a lot of money for a business.

The point here is that the parliament wants the government to invest in the reform process but we also recognise that farmers are very nervous about whether or not these reforms can be implemented in the 12-month time frame, as is being suggested. So what the government needs to do is commit to the reform process and also commit to providing the rebate for the 12 months in order that the reform process can be delivered. All the evidence that came before the committee was that there is no dissent out there in rural Australia: they want reform. We want reform. But we are also mindful of what this 40 per cent cost recovery will do in the country in the next 12 months—that is, it will send a lot of businesses close to the wall, if not beyond it.

Richard Colbeck (Tasmania, Liberal Party, Shadow Parliamentary Secretary for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

I would like to make my contribution on the tabling of this report by the Senate Rural and Regional Affairs and Transport References Committee on the AQIS fee rebate. As other members of the committee have said, it is with no real joy that we make the recommendation that we do on this particular issue. I said in this place last week, when debating the withdrawal of the submission from Austrade, that if this reform process ran into trouble or if the withdrawal of the 40 per cent AQIS rebate went ahead it would be the fault only of the minister. It is quite clear that the process the minister has put in place to deal with this is flawed. In fact I said to his office two months ago, when we first moved the disallowance motion that will come up tomorrow, that this process was not sufficiently resourced, that it was at least $25 million or $30 million short of the mark. Industry have quite clearly said to us, and this has already been expressed by other speakers, that they want to see the reforms go ahead, as do members of the committee. I do not think it could be any clearer: we all would like to see this process reformed, but it needs to be properly resourced.

You cannot just come along and put a gun to industry’s head and say, ‘Here is your option: reform or rebate.’ That is what the government has done here. It said in the budget that it would remove the 40 per cent rebate on AQIS export fees and charges. Then, after it got into a bit of strife and got some criticism from industry, it came up with $40 million to fund the reform process. It is now saying to industry: ‘It’s the reform or it’s the rebate.’ That should not be the option, and the opposition said that to the government two months ago. We gave them the time to deal with this. We actually took what I think is the responsible way of dealing with this. We moved the disallowance motion for the new fees and charges. We then postponed it. We started getting mixed messages from industry, so we thought the best way to sort this out was to allow industry the opportunity to put their views on the public record. That is what we did last Thursday and Friday, and they were unequivocal: they want the reform, as the committee does, but they do not want to have to effectively pay for the reform. They do not want to have to pay for government to reform itself; the government should be doing that process. The government should put enough money on the table to reform the way that AQIS charges, and then properly fund a continual reform process.

The only thing that has come out of this whole debacle is that it has focused industry’s attention on the reform process. That is about the only positive that I think you could take out of this debacle: that industry are fully and firmly focused on what is going on. Two of the sectors have reform plans drafted; the other four are working on it. But there were even flaws in that process. What I do say is that the opposition gave the government a fair go on this. We gave them a real opportunity to get this right, but they have basically sat back and said, ‘Well, it’s our way or the highway: reform or rebate—they’re the two options.’

What really disappoints me is that the government have put billions and billions of dollars of stimulus into the economy—$42 billion has been put into stimulating the economy—and yet about $30 million would have effectively funded this. It just seems crazy to me that the one sector—agriculture—that provided the stimulus in the economy in that one quarter when we could have slipped into recession is getting nothing out of this. Of the $42 billion in stimulus, the agriculture sector gets absolutely nothing. It cannot even get $30 million to reform the way that it exports. I take Senator Milne’s comment: we are in a recession and the government have said they need to spend money on stimulus. I made a comment in my contribution to that debate that it was poorly focused—and here is yet another example. They could have put $30 million or $40 million into funding the reform of the way AQIS operates and yet what have they done? They have stripped an enormous amount of money from the Department of Agriculture, Fisheries and Forestry, but they have not officially funded the process of reforming the AQIS fees and charges.

I repeat, as have others, that I support the reform process. Industry came and told us that they support the reform process, but what they do not want is a cost shift. They do not want AQIS to be able to give the appearance that they are charging lower fees, but then to have to do the work themselves. They know that they will do it more efficiently and they might pick up something from that, but, quite frankly, this needs to be a genuine process with all parties being brought along. One of the real issues that was brought to the table by industry as part of the discussions last week was the time frame. AQIS told us with great confidence on Thursday night that they thought they could meet the 12-month deadline that they had set. They said with great confidence that all of the six programs could be completed within 12 months. We found out on Friday that two of them had stopped because there was still concern about whether or not this disallowance motion would go through. So they have basically pulled up stumps and stopped the process. But they are still taking the hard line: reform or rebate. We have heard that there are still four plans to be developed.

People in the beef industry told us that it would take a minimum of two years, out to five years, to conduct the reform process that needs to take place. The grains industry said the same thing—at least two years. We heard from the horticulture sector that sometimes it takes 18 years to get into a market! And they are expecting industry to turn around not only their own processes within the country but also international acceptance of our processes within 12 months. There is very little confidence that this will be done inside the 12-month time frame that the government have set. I do not mind setting time frames. I think it is reasonable to set time frames. They set up consultative groups to discuss the options with industry, but then they did not take notice of what industry was telling them. They came back at the end of the day and said, ‘We still think we’ll meet the time frames,’ even though all those industry sectors had been before us during the day. Grain, the first cab off the rank, said it would take at least two years to sort this out. The meat industry representatives were quite unequivocal. They know their business. They said it is going to take a minimum of two years for the majority of it, but some of it will take up to five years.

It is really disappointing that we have had to come to the point where we recommend that the new AQIS fees and charges be disallowed. It is a great disappointment to the committee, and the committee members have discussed it at length. This is a situation where a political time frame has been set that is not achievable—and we have seen that with many of the government’s measures. It is a situation where they have put a gun to the head of industry and said, ‘It’s this way or that way.’ Industry came out with letters of support when the initial disallowance motion was moved, but we found out during the hearing on Friday that they were not freely given by industry; they were solicited. A strategy was set up in the minister’s office and in the department to look at how to get a demonstration of industry support. They set up a strategy group to do that. They went out to industry and said, ‘We need you to give us a letter of support for this.’ Industry came to the committee and said, ‘This is how it is.’ It is a really disappointing outcome. After we have given the government every single chance on this, we recommend that we move the disallowance motion—but we do stress that industry reform should go ahead.

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

I rise also to speak to the matter and to support the motion that the Senate take note of the report by the Rural and Regional Affairs and Transport References Committee. It is important to understand that agriculture is an industry of some $40 billion of value to the Australian economy. It employs almost 300,000 people, nearly all of whom are in rural Australia. We have been invited to talk about rebate and reform. I suggest that we also need to rethink. Yes, as previous speakers have said, the industry and AQIS, government and us, are very much in favour of the need to reform. What has been put to industry is that it is essential that the 40 per cent rebate be dropped in advance of reform. We have heard very clearly in the last few months, and particularly in the last few days in the committee hearings, that the industry wants to see reform take place before the rebate is dropped. That is not unreasonable. This is a very, very significant industry. I urge the minister and the government, faced with the size of this industry and the risks to it, to find the sum of $20 million, up to $25 million, so that we can progress. Then we can do what AQIS and the industry are calling for—that is, to set the reform path but to do so in advance of the 40 per cent rebate being withdrawn.

It was of particular concern to me to learn that the Beale report author, Mr Roger Beale, upon whose recommendations most of this decision was based, had not in fact undertaken an economic survey to determine what the impact would be on the industry and on rural communities in the event that this 40 per cent rebate was lifted. I have been endeavouring to find out whether the government itself actually undertook such an economic impact statement. It is of enormous concern that our producers would be faced with the removal of the 40 per cent rebate—which many of our competitors do not have to pay—when nobody seems to understand what the economic impact would be on the industry sectors and on the communities they serve. I believe such an impact statement needs to be done. Again, I urge the minister and those responsible to reconsider this quickly so that we do not interrupt that process.

There is no doubt at all that hard work has gone in—it has gone in from senior AQIS personnel and it has gone in from industry personnel—and we learned of genuine goodwill. But, as Senator Colbeck has said, to think that this can be undertaken in this financial year is also an unrealistic time frame. It is also unrealistic to think that industries can absorb this loss of 40 per cent. Industry have said to us continually, particularly the meat industry that accounts for some 70 per cent of all export certification and inspection costs, that they are quite happy to pay their share of the costs that can be apportioned by AQIS to those services that they perform. But, not unreasonably, they have also said that they do not see why—bearing in mind again that they are 70 per cent of the size of the cake—they should be bearing the costs of head office and other related costs. I cannot see why either. The point was made, for example, that the car industry, a smaller industry than the meat industry with fewer employees and a much lower export income—in fact, only a quarter of the income earned by the meat industry—has received very significant support from government. The point it would make is that it also would be keen to see that continued level of support whilst the reform process is worked out so that it can move on.

When I speak of the meat industry, it is important to understand the impact. For example, in Western Australia we have only one export abattoir responsible for cattle slaughtering, and that is down in Harvey in the south-west. In the event that that export abattoir did not exist, you would have to go up the north coast and across the north of Australia to Townsville before you found another abattoir able to do that work. Our beef producers would be faced with the prospect of trucking cattle to South Australia or to Townsville. That is unacceptable, and I do not think that anybody would want to see that occur. My final point before passing over to a colleague who I know wishes to speak on this is the question of redundancies. Incorporated in the figure that is currently on the table is the funding of redundancies. It really is unreasonable that industry would be expected to fund the redundancies of a government agency.

In conclusion, I also congratulate the committee on the work that they did and on the quality of the report. I congratulate my Senate colleagues and those who appeared on the way in which it was conducted. But I say again: the opportunity is there for the government to examine this in the coming days and to put the extra sum of money onto the table so that this whole process can indeed continue.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

The Australian government’s management of the removal of the 40 per cent fee rebate for the Australian Quarantine and Inspection Service export certification functions is in real disarray. We have heard through the inquiry and through the Management of the removal of the rebate for AQIS export certification functions report of the Senate Rural and Regional Affairs and Transport References Committee that a common theme in submissions was that the removal of the 40 per cent rebate should not have been completed ahead of the implementation of reform. What that means is that the industry would be supportive only of the extra costs for the AQIS services that they would be liable for provided that the reform put through AQIS itself lowered the overall costs. So, as the cost came down and as the industry paid more of the costs themselves, they would level each other out and there would not be more cost to the industry.

The real problem—and I think it comes into the conclusions of this report, and this is the crux of the matter—is that the removal of the 40 per cent fee rebate for the AQIS export certification functions increases costs for Australian exporters, which could adversely affect the competitiveness of many Australian exporters and, ultimately, impact trade growth in established markets as well as new market opportunities. At a time when, as the government would say, we have a global financial crisis here, is the government whacking Australian industry with higher costs? This is the wrong time to be doing it, and it was argued by some that this should be phased in rather than it all being done at one time.

Let us look at some of the comments that were made during the inquiry. The Sheepmeat Council of Australia and the Cattle Council of Australia told the committee that the removal of the subsidy would provide ‘an incentive to progress badly needed reform within AQIS’. However, the submission by the two councils went on to state:

... if the 40 per cent fee rebate is removed without the necessary reforms being successfully implemented, Australia’s red meat producers would be forced to shoulder the full cost of inefficiencies within Australia’s monopoly export certification body. This outcome is unacceptable to red meat producers as it places Australian producers at a comparative disadvantage to our competitors in international markets who receive taxpayer funded certification services.

What does the government say? Basically, it says: ‘So what? Just pay the extra costs. Trust us—we’ll make sure that costs come down.’ They have not and they will not. The Horticulture Australia Council told the committee:

Horticulture is vehemently opposed, as we put in our submission, to the removal of the 40 per cent rebate in advance of the promised reforms. We think that is poor policy and poor timing, particularly in relation to some of the points that the other agricultural industries have been making here today.

Those are just a couple of industries that are absolutely up in arms about having to pay higher costs. The government should have been more focused on reducing those costs by getting efficiency gains rather than putting the cart before the horse and hitting our export industries at a time when they can least afford it. It is an absolute joke that the government would do this. I see that the committee’s report reaches the following conclusion:

The committee recommends that the government continues the current regulatory reform process, and commits sufficient public funds to it, until such time as all reform initiatives identified by each of the ministerial task forces have been successfully implemented.

But the first recommendation is:

...  the Senate move to disallow the Export Control (Fees) Amendment Orders 2009 (No. 1).

We had a chance previously to disallow this and to hold the government to account, and the coalition went soft. Let us hope that the coalition do not go soft the second time around and, instead, really hold this government to account so that reforms are put in place to make sure that there is not an extra cost burden put on industries that can least afford it in these tough economic times. Let us make sure that the government does the hard work—with AQIS, to start with—to get the costs down so that our industries which are exposed to international markets are not slugged unfairly.

Question agreed to.