Global growth Q&A
Time of questions. And good to see the house lights are up. If you could say who you are and
where you're from, our first question is right at the centre.
Mick Keough, Executive Director, Australian Farm Institute. My question is to all three
speakers. In looking at improving or enhancing the competitiveness or the value of Australian
agricultural exports, one of the questions that's asked is whether national reputation, national
brand, actually adds some value. So in other words, in the Netherlands, in the US, or Alan, from
your perspective, globally, do you think there's merit and value in having a national effort at
promoting credence characteristics or environmental characteristics, or those intrinsic quality
characteristics of products from a nation like Australia as part of positioning in some of those
emerging markets and differentiating from some of the competition that obviously can win on
price, but perhaps not on those other characteristics?
Thank you, Mick. Perhaps, Alan, would you like to start?
I'm tempted to say no. I have been involved with some programmes. Years ago, the government
funded a programme to promote Australian food in Taiwan, and it was a marketing exercise.
And I still remember the advertising man that was brought into it, when he did a promotion to
the agriculture department, had a song based on [INAUDIBLE], "I Love a Sunburnt Country."
And I said to him, why do you think that would make any difference in Taiwan? And he said, it
doesn't. But he said, the clients love it.
But the reality was that it was very difficult to conceive of a way in which you could actually
brand the product. Yes, definitely, we should let everybody know about our health standards, our
quarantine standards-- not necessarily using them as trade bearings-- but the level of safety in our
food, which is very high. But I think then to turn around and suggest, as some do, that we have a
brand-- I know that's talked about in some of the sectors, that some talk about, do we have a
brand for wheat? I think no. But certainly, the products have to be marketed in ways which meet
the consumer.
So in broad, yes, it's a big asset. But I think we need to be careful not to assume that putting a
brand on wheat saying it's Australian will actually mean it'll mean anything to the consumers, if
it's a bulk product.
Greg? What do you think?
They only thing I can think of as an example was when we-- this is 37 years ago-- Australian
wines, US wines, breaking into markets. Now there's a case where there was the dominance of
European, Old World wines. And I think it did make a difference. Not necessarily that it was
actively marketed by the government, but it was once the case was made that these had good
quality and good value, that shine stayed on a lot of products that I think had to mature and grow
from that point forward, but it certainly-- it's something in the United States that seemed to work,
even though clearly was a brand-by-brand type of activity. I think there is some merit, if you
look at it carefully, and it really does follow from identifying with market characteristics that the
consumers are looking for.
And Giles?
Yes, I think my answer would be yes, there is value. But you need to create that value on,
ultimately, what is then the differentiating factor of Australia? And I think, like Alan said, it is
probably to do with food safety, referring to the origin as being part of something that is
sometimes in short supply in Asia, which is indeed that food safety issue. And if you can create
that, it should help you in your exports.
There is a downside to it, which is that if you fail to deliver, you could also harm yourself. So
you need to get your controls up to a reasonable high standard to see that you actually deliver the
value that you propose to your customer.
Our next question is at the top, on my left.
Bruce Muirhead from the University of Waterloo in Canada. And I have a question for Mr.
Oxley. Where you mention that 15% of Australian farmland has been taken out of production
over the last 12 years, and you mentioned a number of reasons why. And I wonder if you have a
comment on the fact that it's roughly coincident with the time Australia launched itself on its
complete deregulation programme, with no support to farmers at all, if that has any impact in
terms of the decline in farmland. I've read a lot in the Australian and listened to ABC, as well,
about the difficulties, I guess, that farmers experience in today's Australia, as well. Thanks.
Not quite sure how to answer that. I don't know how you'd measure. There has been some
reduction of support. But by the same token, there's still quite a lot of support for farming
generated by government and so on. So that may have been a factor. Although when I think
back, we government spent $1 billion restructuring the dairy industry about a decade ago. So I
don't know if your assertion that there's been a drop of support actually stands.
In short, I think my answer is I think not. It hasn't actually affected some of the larger producers.
And I'm actually-- some more work need be done, is what explains this reduction. And what I
put up there were suggestions. I think we need some serious research to actually identify what
has driven it.
Question in the centre.
Eric Yu Sheng from ABARES. I have two questions, actually, for Greg. The first one is that you
mentioned that ERS has recently adjust down the projection of the medium-term food demand
from developing countries from the whole world. Actually, in addition to what you mentioned
about that increasing production capacity, is there any other concern which contribute to this
adjust down from the demand perspective?
The second question is that related to what you mentioned about structural change in the
agriculture industry. And you asked, in particular, that time maybe large farm becoming more
dominant in the sector. Now we, in Australia, we observe a similar phenomena.
However, yesterday, when Peter making his presentation, talking about in terms of number of
farms, and we found actually the polarisation effect, which is I mean, larger farms' number
becomes larger and larger, while smallest farms, actually, in terms of number, has been
increasing, while in the middle, the medium-sized farms are actually decreasing. I would like to
have your comments on whether the similar phenomena has also been observed in the US. Thank
you.
I'll take the second one first, and the answer is yes. The middle has been squeezed. We've seen it
in dairy. We've seen it on just about every type of farming in the United States. And it's primarily
the case-- and our data support it, and I think we heard about it, as well, for Australia-- off-farm
income is what keeps some of these farmers, smaller farmers, on that space. And so the larger
farms, they still have some off-farm income. Certainly for issues like insurance and so forth, it's
nice to have somebody in manufacturing, where they can get that insurance for the family. But
the driving force has been this consolidation for those areas where there has been technological
gain from scale.
The second part, or the first question, on this issue of-- let me go back to-- about looking at
what's kind of drawn away from, or concerns about the demand. Macroeconomic growth is
certainly one of those first characteristics that jumps out. Any country that's in transition, which
would be any country that's developing in particular, it's got to find that next stone in the stream
to get to as it progresses.
And to the extent that that's difficult, to the extent that there's a hitch in that planning-- and
certainly we've seen that. Any time, certainly on the centrally-planned economies, where it
stands out, very much so, in terms of government policy, where there's a misstep, we see that
oftentimes, there is some withdrawal or some slowing down of the economy. And that, in turn,
plays out in terms of demand down the road. I can look at a number of factors. But I would say
that macroeconomic growth and certainly growth in those economies would be my main concern
about changing those projections.
Next question.
Holger Meinke, University of Tasmania, as well as Wageningen University. So my question is to
Gilles about the comparison between our two systems. You mentioned Wageningen several
times in your talk. I'm wondering if you could reflect on the importance of the private/public
partnerships and how the private sector actually interacts with its university in the Netherlands,
and what Australia might be able to learn from it.
I think the Wageningen University, on one hand, it's indeed a university that is a strong
educational hub for the higher-end side. But is also involved in the various research groups that
do both research in the public domain, but also as private enterprises, or at least with private
contractors. And it's been a part where they've been clustering a lot of the food companies around
our university to also see that even up to-- well, not even. But there's Chinese dairy companies
that want to set up a research space in Wageningen, to see to it that they are close to a global
centre of research.
So actually, what you do, you have on one hand, you have your university, that you attract by
clustering food companies and their own research, you actually cluster a bigger group. And that
actually creates a bigger and a bigger-- what would you say? A bigger-- well, a bigger
combination of all efforts. And that is very helpful.
Thank you, Gilles. Alan, at the end of your presentation, you left me hanging there a little bit. I
was keen to hear a little bit more. You were talking about the reduction in the national farmland
estate. The policy changes there have-- some have been subtle, some have been more significant,
but they've been sustained over a period of time. Do you think that most of us realise how
significant some of those changes are, and what potentially they mean going forward?
There's a dimension here which I think is characteristic, and to a large degree, I think this is a
consequence of the impact in public thinking of environment policy. And I think what's
happened is that environmental groups have argued for excision of land for various purposes. It's
one of the most common positions that they take. And what, on both sides of politics in this
country, has failed to happen is to actually articulate exactly what that conservation objective is.
And simply, it's been now generally asserted that it's a very good idea to just conserve more land,
without actually thinking about which particular spaces, which landscape, you're dealing with.
It's interesting that one of the areas where-- oh, I left out one of those factors, actually, which is
forestry. We've really ruined our forest industry in Australia by not pursuing what were
extremely rational environmental policies developed way back in the '80s, where government
and industry and environmentals came together, the entire forest estate was assessed, the
environmental areas were identified, the biomes were identified, and the whole country was
mapped out, saying, we will preserve these types of species and growth areas in these areas, at
this amount. We'll then look at what land is after that, the land was used sustainable forestries
marked out. And then the land for conservation was marked out. That was world's best practise.
From the moment that was implemented, the environmental groups just maintained a campaign
to continue to shrink the farmland. And they, for example, in Victoria, the land which had been
identified for sustainable forestry, in the end was reduced by half.
Now, to a degree, what's happened-- the fault for this lies on the other side of the public policy
fence, where I think governments haven't actually sat down and articulated well enough what to
do. I think the farm estate, I think there's a fairly clear strategy that could be applied. But all
that's actually basically occurred by incrementalism and, I think, inadequate consideration of
environmental issues in the public policy by the mainstream parties.
Thank you, Alan. I'll draw a clause there. I know that the minister has just joined us. We will
take a very brief break, less than two minutes, just to do some seat-changing. But our panel this
morning has been Alan Oxley, Greg Pompelli, and Gilles Boumeester. Could you please thank
them?
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