Towards a Blueprint for Revitalising Rural and Regional Australia

The Government has recently proposed a compensation package designed to facilitate the final stages of industry deregulation. Just the kind of package that is needed to encourage the industry to continue its drive for productivity growth and international competitiveness.

Deregulation of the domestic grain market has turned farmers from being agripoliticians into becoming shareholders. As shareholders they will drive the same creativity and commercial acumen that the shareholders in Wesfarmers have done for so long. And they will harvest the benefits, in the form of issued shares that reflect real value, and lower marketing costs.

Yet when it comes to export grain and sugar marketing, a line is drawn in the sand. It is true that in world markets it is sometimes possible to increase prices by having a single desk exporter, though I am not convinced that commercial arrangements could not be developed to get the same result. What we need to understand, however, is that for as long as statutory arrangements remain in place we will continue to deny ourselves the opportunity to develop one or more internationally competitive agribusiness companies.

The reason is that to prosper in today's world such companies need to become global multi-product businesses. Thus they must be free to merge with each other and to expand their operations in other countries. They will also have to endure the cold winds of competition, if they are to become truly efficient.

Strong Australian agribusinesses will help transform precision farming from a concept to a business reality, with all of the attendant benefits for reduced chemical, energy and water use and better soil management. But most importantly, as service industries they are labour-intensive, creating increased income and employment in rural areas.

The nature of the impediments to the development of private bioscience in Australia is a little more difficult to explain in a few sentences. Let me say that the rural R&D Corporations have my full support, as does continued government funding for rural research.

But I do believe that National Competition Policy should be carefully extended into these areas, in particular the principle of competitive neutrality. Service provision should be made contestable, so that private agribusiness can reach its full potential.

Attenuation of Property Rights

I am very strongly of the view that we in this country must do a great deal more to sustainably manage our land, water, vegetation, forest and fishery resources. At the same time I am deeply concerned at the manner in which we are tackling many of these problems.

Property rights are the bedrock on which market economies are built. Trust is the lubricant that keeps the wheels of market economies running smoothly. While property rights are certainly not inalienable, alienation without compensation can destroy the very trust that lubricates the business transactions on which economic development depends.

There are very complex issues in defining property rights to irrigation water or to rural land. Yet farmers have made past investment decisions on the basis of legitimate assumptions as to what those rights entailed. If it is necessary, for conservation purposes, to divert water to the wetland habitats of native birds, that is a decision governments are entitled to make. But not without compensating the farmers for the attenuation of their reasonably expected right to irrigation water!

In the forestry area, the issue is comparable. If land has been allocated for commercial logging and the Government wishes to convert that forest to conservation uses, it certainly has a right to do so. But if it does so without adequate long-term compensation, it makes resource allocation in forestry into a highly risky business.

Conservation must be achieved in many of these areas. It must be achieved in the community's interest; but rural Australians alone should not be left to carry the costs of measures judged to be in the whole community's interest. Of course compensation must be paid and, if we are to continue to have rapid economic growth, it must be paid without reducing government saving. This means higher taxes or reduced government spending elsewhere.