As a relatively small, open and developed economy operating in a globalised world, Australia's tax system must be geared towards international competitiveness - that includes supporting the international competitiveness of our farm businesses.
Australian farmers export two-thirds of what they produce. Without the kinds of subsidies farmers in Europe, the United States, China, India and elsewhere enjoy, Australian farmers rely on exports to maintain prices and ensure a decent income. And as the sector most subject to variability in terms of climate, pest and disease risk, and international market changes, exports help farmers manage risk. The only bright spot in the current drought is that prices for many commodities have held up in large part because of international demand.
While farmers rely on exports, our deep engagement with international markets also makes us vulnerable.
To benefit from international demand for our agricultural exports, farmers must be finely attuned to the demands and shifts in international markets. We must innovate and adapt as the demands of our international customers change. We must stay abreast of our competition and out-market them or lose sales. It's really that simple.
Remaining competitive relies critically on lowering costs.
Our competition includes many agricultural producers that are not required to maintain even basic environmental, animal welfare, herbicide, traceability or other production standards, let alone the often world-class standards Australian producers pride themselves on bettering. And our labour costs, when you can secure farm workers, are some of the highest in the world. On top of these costs, our ability to compete is fundamentally impacted by tax policy.
FMDs and Trusts
If we value food and fibre production in this country, tax policy needs to support our farming families, not strangle them.
To remain internationally competitive, Australia farmers need business and personal taxes to be reduced. They need tax policies that recognise the extreme variability farmers manage each day. These include policies such as income averaging and Farm Management Deposits. And to ensure the long-term viability of the business services on which farmers rely, we need income averaging to be extended to those workers and associated businesses whose income is determined by farm production cycles. When drought deprives a farmer of income, it also deprives the local store of income.
Trusts are a critical tool farmers use to manage their finances. We're not talking the high end of town here. Farming businesses, 98 per cent of which are family-run operations, often involve multiple generations. Trusts are the common sense tools for managing farm business succession and seasonal volatility. Any attempt to dismantle trusts reduces the ability of your every-day farmer to manage downturns and risk.
While it's all well and good to say we need to increase taxes to provide services, regional services don't count for much if you've lost your farm because you can't compete. And the additional revenue from increased exports will grow the tax pie and the government's ability to increase services with it.
Whoever takes the reins of government post 18 May - tax policies that build competitiveness must be central to its vision for our country. The future viability of Australian agriculture depends on it.
During the next five weeks, on behalf of all Australian farmers, the National Farmers' Federation will hold the major parties, minor parties and aspiring independents to account on their response to agriculture's election priorities.
The NFF's 2019 Federal Election Priorities are outlined in the Agriculture: Growing Australia document which can be found at farmers.org.au and which reflects the NFF-led vision for agriculture to achieve $100 billion in farm gate output by 2030.
Tony Mahar is the Chief Executive Officer of the National Farmers' Federation