Chapter 4.2
Micro-economic reforms
4.33 Efforts by governments to bring about micro-economic reforms in
such areas as transport, communications, education and labour relations
can make significant contributions to creating a positive environment
in which value-adding enterprises are established and operate. [43]
It is unlikely that micro-economic reforms would specifically target value-adding
in agricultural production but would be aimed at supporting economic activities
generally.
4.34 In evidence to the inquiry calls were made for a variety of
micro-economic reforms to benefit value-adding, including:
- reform in the transport sector so as to improve its competitiveness
and efficiency; [44]
- the upgrading of South Australia's transport infrastructure, in particular
Adelaide International Airport and South Australia's rail network; [45] and
- reform of Australia's coastal shipping operations. [46]
4.35 Dr Ryan of the Australian Wheat Board told the Committee that if
Australia was going to export into the world market in competition with
other suppliers “we need to ensure that labour costs, transportation
costs, power costs et cetera are comparable to world standards.”
[47]
4.36 During its evidence to the inquiry the Murray Goulburn Cooperative
stated that “the one thing from an export side that we would like
to see is continued micro-economic reforms of the waterside.” [48]
4.37 Christopher Egan, Director of Vegco Limited of Bairnsdale, Victoria,
alleged that Australia's transport and distribution system was not efficient
compared to other places in the world. Mr Egan was particularly critical
of the fact that there was “no true cross docking in Australia at
the moment”. [49] Cross docking would mean products could
be moved from one dock to another for easy and quick transport without
the need to store the product. [50]
4.38 The Tasmanian Government told the inquiry that because fully laden
jumbo jets cannot take off from any Tasmanian airport meant that air fright
containers flown from Tasmania had to be repacked in international air
containers on mainland Australia before being flown overseas. The Tasmanian
Government also noted that the lack of frequent shipping services between
Tasmania and overseas, as well to Australian mainland ports presented
major problems for the export of processed agricultural products. However,
the Tasmanian Government pointed out that these shipping problems are
often related to the limited volumes of production being exported from
the island at particular times. [51]
4.39 Not everyone was critical of Australia's transport
infrastructure, the Australian Horticultural Corporation stated:
Transport in itself is not a problem, so long as people manage that
transport properly. One of the good things that we have got in Australia
is an excellent road network. [52]
Government supported research
4.40 Research is an essential element in the train of events leading
to new or improved value-added agriculturally based products. In Australia, Government
supported research and development activities have played a significant role in the
establishment and successful operation of value-adding industries
4.41 .The inquiry was told that Australian governments spend more on
research related to value-adding than most OECD countries. However, Australia
is behind countries such as Switzerland, Sweden and parts of the United
States “where companies make big investments in R&D for value
adding.” [53]
4.42 The Research and Development Corporations and Councils established
under enabling legislation, are the focus for the Commonwealth Government's
research and development strategy for Australia's primary industries.
The R&D Corporations and Councils set research priorities in partnership
with the various industry levy payers. The Corporations are managed by
Boards with expertise in all industry sectors. [54]
The Committee was told in October 1995 that with the exception of the
Fisheries and the Forests and Wood Products R&D Corporation, the agricultural
commodity R&D Corporations and Councils were funded by statutory industry
levies. The Commonwealth matched this funding on a dollar-for-dollar basis
up to a maximum of 0.5 per cent of the gross value of production of the
individual industry. [55]
4.43 The South Australian Government told the inquiry that “funds
available nationally for research and development in horticultural industries
have increased from a very low level in the 1990s to around $25 million
in 1995 due to the Commonwealth policy of matching industry levies.”
[56] The South Australian Government
believed that if the Commonwealth withdrew matching funding industry contributions
to research would be withdrawn. As a result of this view the South Australian
Government went on to state:
We therefore feel that it is important for the Commonwealth government
to maintain its policy of matching industry generated levies on a one-to-one
basis, and for the Commonwealth government to support schemes aimed
at encouraging innovation in primary industries and downstream processing
of marketing sectors. [57]
4.44 The West Australian Government supported the views of the South
Australian Government when it told the Committee “it is important
that this funding formula (for R&D) be retained if agricultural processing
industries are to compete efficiently for rapidly expanding markets in
Asia.” [58]
4.45 The Committee understands that until recently agricultural research
in Australia has concentrated on improving efficiencies of production.
Australia's low cost level of production owes a great deal to this research
effort. However, over the past ten years there has been an increasing
emphasis on market driven agricultural research. [59]
4.46 On farm, or production related research, has been directed at adding
value to the primary product, for example through the development of new
varieties of crops in response to market demands and “developing
quality assurance programs to underpin premiums for specified brands,
and grades, and reducing agricultural chemical use to gain a premium for
low residue, clean produce”. [60]
4.47 Most of the research undertaken into the further processing of agricultural
production, or research aimed a improving handling and distribution processes
has been directed at adding value to agricultural production. Market research
is targeted at identifying new markets and identifying consumer needs
and “hence is directly related to value adding”. [61]
4.48 The Australian Dried Fruits Board drew the Committee's
attention to the importance of research and assistance provided by the Commonwealth
Scientific and Industrial Research Organisation (CSIRO) in supporting an Australian
industry involved in exporting a value-added product. Mr Allan Knights, General Manager of
the Australian Dried Fruits Board, told the Committee that the CSIRO had developed a
polythene packaging material for the dried fruits industry which prevented chemicals from
entering fruit from cardboard boxes and from the bottoms of containers during shipment. Mr
Knights advised that:
Without the sort of assistance that CSIRO gave us, we would not have
had an industry today. It is as important as that. [62]
4.49 The Department of Primary Industries and Energy argued that:
The R&D Corporations have played a major role in providing the
research and development to underpin the changing focus of agricultural
production from a focus on producing more product, more efficiently
to producing products in response to market demands and needs. Part
of this changing focus is reflected in the greater allocation of research
budgets to `off farm' research and in the increased focus of production
research. [63]
4.50 The Department of Primary Industries and Energy listed a number
of benefits to value-adding industries and the wider community flowing from research
activities, including:
- increased efficiencies of production, including increased innovations
that expand production volumes, reduce costs, or reduce production losses;
- development of new primary products;
- development of new processed products;
- identifying new markets for primary and processed agricultural
products;
- improved quality assurance; and [64]
- improved off farm distribution and storage processes. [65]
4.51 The Department pointed out that:
It is not possible to determine the proportion of R&D Corporation/Council
research that is directed to adding value to agricultural production
as opposed to increased production efficiency. Most `off farm' research,
such as processing, distribution, storage and marketing research, can
be considered as research into value adding to agricultural production.
[66]
4.52 In its submission the inquiry the Victorian Government stressed
that it has supported research in the area of value-adding. This research
can involve improvement in product specification and quality assurance
as a means of adding value to a product. Research has also assisted in
the development of new products in the dairy, meat, grains and horticultural
industries. [67]
4.53 During its evidence to the inquiry in April 1995 the Victorian Government
discussed the Australian Science Centre which was then in the process
of being established in Victoria. The Centre included, the Australian
Food Research Institute, CSIRO and several academic institutions. The
Victorian Government submitted that, although the Centre is located in
Victoria, it has a “national focus” to improve “research,
development, education and training in the agrifood industry.” [68]
4.54 Applied research in South Australia with the objective of increasing
the efficiency primary production and facilitating its incorporation into
value-adding processes are carried out by the South Australian Research
and Development Institute. [69]The South
Australian Government told the inquiry in May 1995 that during the previous
five years it had allocated “about $70 million of capital to improving
its agricultural research capability.” [70]
4.55 The Australian Bureau of Agricultural and Resource Economics (ABARE)
considered that the selection and development of new goods and services
and ultimately the development of new industries, was largely the responsibility
of the private sector. However, ABARE was also of the view that in some
circumstances, where there might be benefits to society as a whole from
government intervention in the development of new industries such intervention
maybe justified. In these circumstances the Bureau viewed public funding
of research as an acceptable form of government intervention in the development
of new industries. [71] ABARE stated:
Any decision to commit public funds to research and development, whether
it be directed at traditional, emerging, or yet to be established industries,
needs to be justified on the basis of adding to the total welfare of
Australian society as whole. [72]
4.56 In the view of ABARE public funding of research projects in
general should be undertaken only where:
- the benefits to society as whole are expected to be greater than the
cost; and
- the research would not be undertaken by private investors because
they cannot appropriate sufficient benefits to cover their research
costs. [73]
4.57 The Australian Bureau of Agricultural and Resource Economics considered
that for research to be profitable “the information generated by
the research must be used and must deliver returns which cover the cost
of the research”. [74] The Bureau
went on to stress that:
It is pointless to fund research into the development of a new industry
if there is no sound prospect that a profitable market can be developed
for the output of that industry. [75]
4.58 The view has been expressed that the level of research by governments
should not be so large as to deter the private sector from becoming involved
in research activities related to value-adding. Dr Alistair Watson argued
that “research policies have to be applied carefully by research
funding bodies so as not to `crowd out' the legitimate research and development
interest of the private sector”. [76]
However, some companies involved in value-adding consider that government
research has been most helpful to their enterprises. Mr Christopher Egan,
Director of Vegco Limited of Bairnsdale, Victoria considered that:
The area where governments can help most, futuristically, is the area
of research and development. There is a real need for research. [77]
4.59 Despite the importance of government supported research there
is evidence that non-government funding of research has increased in some area. The
Committee understands that when the Rural Industries Research and Development Corporation
(RIRDC) was established in 1990 most of the funds it managed for research were
Commonwealth funds. However, when giving evidence in October 1995 the RIRDC advised that
the situation had changed:
The balance has changed quite significantly, with more than 40 per
of the funds being industry funds in a budget to $21 million. While
the Commonwealth funds have remained static, the industry funds and
the industry involvement have been increasing every year. Our aim is
that it is an industry program, it has to be driven by industry and
it has to be market focused. [78]
Conclusions
4.60 The Committee is of the view that research is essential for the
future of value-adding to Australia's agricultural production. The Committee believes that
for research to be as beneficial as possible it should be closely related to particular
agricultural and related industries. As a result of this view the Committee welcomes the
increasing proportion of research being carried out by industries themselves as opposed to
government research, both Commonwealth and State.
Footnotes
[43] C. E. Noble, Australian Economic
Terms, 4th edition, Melbourne, 1991, pp. 140, 147. For comment on suggested
macro-economic strategies see: Evidence, DPIE, p. 884; Submission,
Queensland Fruit and Vegetable Growers, p. 4.
[44] Submission, Queensland Fruit
and Vegetable Growers, p. 4.
[45] Evidence, South Australian
Government, p. 550.
[46] Evidence, South Australian
Government, p. 552.
[47] Evidence, AWB, p. 80.
[48] Evidence, Murray Goulburn
Cooperative Company Limited, p. 251.
[49] Evidence, Vegco Limited, p.
266.
[50] For more information on this issue
see Evidence, Vegco Limited, pp. 271-272.
[51] Evidence, Tasmanian
Government, p. 820. For the views of United Milk Tasmania concerning freight problems
faced by milk producers in Tasmania see Evidence, UMT, p. 855.
[52] Evidence, Australian
Horticultural Corporation, p. 376.
[53] Evidence, RIRDC, p. 1005.
[54] Evidence, DPIE, p. 889. For
more detailed information on research and development see Evidence, DPIE, pp.
909-915.
[55] Evidence, DPIE, pp. 909-915.
[56] Evidence, South Australian
Government, p. 577.
[57] Evidence, South Australian
Government, p. 577.
[58] Evidence, West Australian
Government, pp. 693, 719.
[59] Evidence, DPIE, pp. 910-911.
[60] Evidence, DPIE, p. 911.
[61] Evidence, DPIE, p. 911.
[62] Evidence, Australian Dried
Fruits Board, p. 243
[63] Evidence, DPIE, p. 913.
[64] The South Australian Government
considered that improving the quality of produce at the farmgate is the first step in
value-adding. The SA Government stated:
“Increasing the quality of raw produce is value-adding in
itself, but more importantly feeds into a capacity for enhanced value-adding in downstream
processing.” Evidence, South Australian Government, p. 544.
[65] Evidence, DPIE, p. 889.
[66] Evidence, DPIE, p. 889.
[67] Evidence, Victorian
Government, p. 28.
[68] Evidence, Victorian
Government, p. 47.
[69] Evidence, South Australian
Government, p. 554.
[70] Evidence, South Australian
Government, p. 575.
[71] Mr B. Curran and others, Selecting
New Rural Enterprises for Investigation and Development, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, p. 43.
[72] Mr B. Curran and others, Selecting
New Rural Enterprises for Investigation and Development, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, p. 53.
[73] Mr B. Curran and others, Selecting
New Rural Enterprises for Investigation and Development, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, p. 46.
[74] Mr B. Curran and others, Selecting
New Rural Enterprises for Investigation and Development, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, p. 49.
[75] Mr B. Curran and others, Selecting
New Rural Enterprises for Investigation and Development, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, p. 53.
[76] Dr Alistair Watson, Further
Processing of Agricultural Productions in Australia: Some Economic Issues, Research
Paper Number 5, 14 December, 1993, Parliamentary Research Service , Department of the
Parliamentary Library, p. 19.
[77] Evidence, Vegco Limited, p.
256
[78] Evidence, RIRDC, p. 1004.