THE Productivity Commission’s draft report into agricultural regulation has delivered a blow to the Coalition’s push for tougher laws to try and prevent potential acts of market exploitation by large retailers like Coles and Woolworths.
The report said existing competition regulation and oversight is “adequate” for managing the risk of major supermarkets abusing market power when dealing with farm businesses and wholesale merchants.
“Suggestions to amend exemptions that allow collective bargaining under section 45 of the Competition and Consumer Act 2010 are unlikely to increase collective bargaining by farm businesses,” a report finding said.
The report also said introducing an ‘effects test’ to section 46 of the Act was “unlikely to shield farm businesses from intense competition in retail food markets”.
The Coalition has agreed to legislate for an ‘effects test’ in this new term of government which has been backed by the National Farmers’ Federation.
The NFF says that change to the Act - as recommended by the Harper competition review - will strengthen Australian competition law and rebalance power for primary producers across the agricultural supply chain.
The ‘effects test’ issue has also been the subject of conjecture and disagreement between the Liberals and Nationals, in government.
The Coalition agreement struck after Malcolm Turnbull became Prime Minister late last year stipulated federal cabinet must give proper consideration to amending the Act, to prevent market power abuse.
But the report’s Commissioner Paul Lindwall said the potential benefits to farm businesses of proposed changes to sections 45 and 46 of the Competition Act were overstated.
He said farmers were putting too much emphasis on how much these proposals may help them, in dealing with competition issues.
“Competition is important in the sector and some sort of collaborative work by farmers in terms of their dealings with major supermarkets such as Coles and Woolworths etc would probably have some benefit for them,” he said.
“But we’re not sure changes to sections 45 and 46 would actually make that much difference in practice.
“We may be wrong but these are our draft findings - and now we’re interested to hear back from the community whether they agree with that or not.”
In other areas of competition reform, the Commission’s draft report recommended the NSW government repeal the Rice Marketing Act 1983 and the Queensland government reverse legislative changes made last year to marketing arrangements in the State’s sugarcane industry.
The report said the NSW Rice Marketing Board was one of only two statutory marketing arrangements remaining in Australia with one of its objectives being to secure the best possible price for Australian rice in export markets.
However, the Commission said it was unclear whether Australian rice exporters actually received any price premium.
The draft report said repealing the Rice Marketing Act would create incentives for innovation and cost savings in rice marketing that could increase premiums “for some rice growers”.
The report said Queensland’s new sugar marketing regulation had the stated objective of allowing sugar cane growers to choose their marketing arrangements.
But it said evidence suggested the preferred choice of marketing arrangements was likely to reduce the industry’s productivity and profitability “by constraining investment and structural adjustment”.
“Reduced or degraded milling capacity is likely to reduce the productivity of the industry as well as incentives for structural adjustment in sugarcane growing - there will also be less competition if existing sugar millers decide to leave the industry,” it said.
The report also found that the statutory marketing of potatoes in WA had reduced consumer choice and increased potatoe prices and welcomed plans by the WA government to deregulate the industry.
It said it was illegal to sell fresh potatoes grown in WA for human consumption without a licence from the Potato Marketing Corporation with regulation of the state’s potato industry having its origins in concerns about reliable food supplies during World War II.
However, the Commission said those arrangements were now out-of-date and had resulted in less variety and higher potato prices for WA consumers.
“The Western Australian government’s plan to deregulate the industry will allow potato production in that state to respond to changing consumer preferences and reduce the cost of potatoes for consumers,” the draft report said.
In other core recommendations the Commission said the Australian Pesticides and Veterinary Medicines Authority should make greater use of international evidence when assessing ag-vet chemicals - including by placing greater reliance on assessments made by trusted comparable international regulators.
“Reforms currently underway in this area should be expedited,” the report said.
It also recommended State and Territory governments expedite the implementation of a national control-of-use regime for agricultural and veterinary chemicals - including increased harmonisation of off-label use provisions - by the end of 2018.
Controversial land use regulations imposed on farmers were also pinpointed by the Commission’s inquiry which recommended reform measures to remove restrictions on farm production.
The draft report found pastoral leases offered less security of tenure than freehold land which created uncertainty for leaseholders and investors and in general, converting pastoral leases to freehold “facilitates efficient land use”.
It called for land management objectives to be implemented directly through land use regulation, rather than through pastoral lease conditions and for State and Territory governments to pursue reforms that removed restrictions on land use from pastoral leases.
The report also found that regulation and policies aimed at preserving agricultural land “per se” can prevent that land from being put to its highest value use.
“A right of veto by agricultural landholders over resource development would arbitrarily transfer property rights from the community as a whole to individual landholders,” it said.
The report also said Australian State and Territory governments, in consultation with natural resource management organisations, should ensure native vegetation and biodiversity conservation regulations were risk based, “so landholders’ obligations are proportionate to the impacts of their proposed actions”.
It also said those governments should rely on assessments at the landscape scale, not just at the individual property scale and consistently consider and balance economic, social and environmental factors.
“The Australian, State and Territory governments should continue to develop market-based approaches to native vegetation and biodiversity conservation,” it said.
“Where the community is seeking particular environmental outcomes, governments could achieve them by buying environmental services - such as native vegetation retention and management - from existing landholders.
“The Australian, State and Territory governments should review the way they engage with landholders about environmental regulations and make necessary changes so that landholders are supported to understand the environmental regulations that affect them, and the actions required under those regulations.
“This would be facilitated by; recognising and recruiting the efforts and expertise of landholders and community-based natural resource management organisations; and building the capability of, and landholders’ trust in, environmental regulators.”
The report also found that complexity and ongoing changes in water regulation contributed to the “cumulative burden” of regulation on farm businesses.
But it said the diversity of Australia’s river catchments made streamlining and harmonising regulation difficult and more flexible governance arrangements may be needed to develop “locally appropriate” regulatory settings for accessing water.
It recommended the Australian Government implement the findings of the Interagency Working Group on Commonwealth Water Information Provision, to reduce duplicative and unnecessary water management information requirements imposed on farm businesses.
On transport regulations, the report found that despite the commencement of the Heavy Vehicle National Law and the establishment of the National Heavy Vehicle Regulator, significant variations and inefficiencies remained in heavy vehicle regulation, including delays in processing road access permits.
It recommended States and Territories participating in the Heavy Vehicle National Law should increase the number of routes gazetted for heavy vehicle access and permits should only be required in locations where significant risks exist to public safety or infrastructure, to be managed on a case-by-case basis.
It also said the Road Safety Remuneration Tribunal had imposed costs on businesses, including farm businesses, without commensurate safety benefits and its abolition - which occurred before the election - would reduce that burden.
The Commission also recommended the Australian government should amend coastal shipping laws by 2018 to substantially reduce barriers to entry for foreign vessels, to improve competition in coastal shipping services.
It also said arrangements to support the biofuel industry - including excise arrangements and ethanol mandates - delivered “negligible environmental benefits and impose unnecessary costs on farmers and the community”.
The report recommended the Australian, NSW and Queensland Governments should remove these arrangements by the end of 2018.