Herald and weekly timesQ&A with Tony BurkeMarch 19, 2010FEDERAL...

Herald and weekly times
Q&A with Tony Burke

March 19, 2010
FEDERAL Agriculture Minister Tony Burke, spoke to LESLIE WHITE about managed investment schemes and other challenges

WT: At the (ABARE) Outlook Conference last week there was a presentation on the level of subsidies given around the world. Australia was one of the lowest. Would we assume that's going to continue?

I would back an Australian farmer against a European subsidised farmer any day of the week. The countries that have gone down the subsidy path end up with farmers growing the wrong things in the wrong way and end up with massive inefficiencies. We're just smarter than that. And while when hardship hits people often say 'Maybe we should go down the subsidy path', just have a look at the track record of Europe and the US and we have a much more profitable farm sector because we've been willing to allow people to engage in the market.

WT: Isn't that what we're doing with managed investment schemes (MIS) though? Interfering with the market and therefore ending up with products in oversupply - wine grapes is a good example.

The challenge of wine grapes is not only MIS. There's a whole lot of issues that have gone to (the) oversupply. Also some of the serious corporate players who might have had the right quantity of wine grapes in the ground had the wrong varieties. MIS issues are certainly part of the equation, although MIS as a method of investment (post Timbercorp and Great Southern) is already less attractive to investors anyway. So part of that market correction has already happened.

WT: Isn't MIS, though, still an interference in the market which is what you were alluding to with subsidies?

It brings forward tax deductions that otherwise would be claimed later. The deductions you get through MIS are deductions that are brought forward; they're not deductions that otherwise would never occur.

WT: In the case of timber though where Timbercorp and Great Southern were charging (investors) $9000 a hectare it's reasonably well accepted that establishment costs are about $3000 a hectare. Obviously that's affected the market and we're in oversupply for woodchips now too.

That's true. And ... there's some examples of plantations where it was the wrong species put in the wrong place, similar to the wine argument.

WT: Isn't that because (MIS) is a market interference though? Because if it was a market-based plantation you'd do your research (on which varieties to plant where)?

One of the problems is the investors - even though they're called growers - really aren't. To unwind MIS altogether I think would cause a massive rift in the market. There's no doubt that changes needed to be made to it. The principle you need ... is to make sure what goes in the ground is being driven by future profits, not by immediate taxation benefits ... there's no doubt some of what's gone into the ground has gone into the ground because of the taxation rules.

WT: Labor obviously has no plan to wind back MIS in forestry in the next couple of years despite the extra pressure it puts on agricultural land?

Ah ... I'm confident there will be amendments around the MIS rules ... there's a lot of work being done and there was always going to be a government response following Timbercorp and Great Southern. I don't think there's any appetite to abolish MIS altogether.

WT: Is there any chance of the new organic standard becoming law?

At the moment I want to see how the standard goes and I've haven't pre-judged in any way whether or not to take the standard to the next step.

WT: Governments are traditionally reluctant to get voluntary standards into legislation though aren't they?

Usually. If you have a standard and it's being followed by industry then you don't need to add red tape around it. If you end up with problems with the standard being followed then you have to look at what other options you've got.

WT: We've done quite a few reports on producers being upset with the Australian Competition & Consumer Commission for not prosecuting fakes. Do you have a view on that?

Across the entire portfolio there are regular concerns raised about whether or not a small producer or a producer's complaint will ever meet the threshold to be able to gain the attention of the ACCC. It's one of the issues we've been trying to work through with the Horticulture Code of Conduct. It's not an easy one to work though.

WT: But you're looking at it?

We are