Agri success without handouts

Australian farmers are among the least subsidised in the world, while government support has shifted from manufacturing into the services industry in recent years, according to two new reports.

Research by the Australian Bureau of Agricultural and Resource Economics and Sciences research said Australian farmers were among the least subsidised in the world, the second lowest level among developed nations.

Only 2 per cent of farm revenue was generated by government support, ABARES said.

The data showed the value of agricultural exports had risen in real terms in the past three decades as subsidies had dropped.

“Globally, Norway (61 per cent), Iceland (59 per cent) and Switzerland (55 per cent) in Europe, and Korea (52 per cent) and Japan (46 per cent) in Asia, provide the highest levels of agricultural subsidies,” the report said.

ABARES also estimated that trade barriers and subsidies in other jurisdictions could be costing Australian agriculture up to $10 billion in annual exports.

“High support levels change what gets produced and increases the cost of food for consumers,” the report said. 

“Generally high support levels mean producers in a country produce more of certain products compared to what they otherwise would and the prices consumers pay for food are also higher.

“In the longer term, high levels of support reduce sector growth and productivity.” 

Federal Agriculture Minister David Littleproud said the government would support farmers when times were tough but subsidies could hold the industry back.

“Recent OECD research also points to the fact that countries that have lower subsidies have agricultural sectors that perform better, with their farm incomes growing faster than heavily subsidised ones,” Mr Littleproud said.

“But the Australian government recognises that investing in agricultural innovation and biosecurity, incentivising biodiversity efforts and opening up trade opportunities are the keys to unlocking growth.

“This report supports our view that removing subsidies actually spurs overall sector growth, increases participation in global markets and the contribution agriculture makes to the economy.”

In April, the Productivity Commission released its latest trade and assistance review, which reports on government support for industries across the economy.

That rose from $9.1 billion in net terms in the 2016 financial year to be $12.1 billion in the year to June 2019, in part because of lower tariffs which penalise industries using imported products as inputs.

Support for primary producers increased by $153 million to be $1.7 billion, with aquaculture and non-grain crops having the biggest jumps.

Manufacturing support fell from $6.2 billion to $2.5 billion.

The big increase was in service sector support, partly because of higher tax concessions and partly because of the lower level of input tariffs.

The sector now receives about $3.8 billion in tax concessions and budget outlays, mostly for financial services, professional services and arts and recreation.

Research and development and the small business capital gains tax scheme were the most notable support programs for the services industry, the Productivity Commission said.