PC News - November 2016
Reducing the regulatory burden on Australian agriculture
A Commission draft report released in July makes recommendations on ways to reduce unnecessary regulatory burdens on farm businesses.
Farm businesses in Australia are subject to a vast and complex array of regulations. At each stage of the agricultural supply chain there are regulations in place, including for land acquisition and preparation, capital and labour use, transport of inputs and outputs, marketing and product sales (figure 1).
The number and complexity of regulations affecting farm businesses means that the cumulative burden of regulation on farmers is substantial. One of Australia’s largest beef producers, for example, estimated that it complies with, or is affected by, over 300 Acts, regulations and codes.
Farmers acknowledged the benefits, not just the costs, of regulation.
The need for regulation is not disputed by farm businesses. In fact, some regulations, such as biosecurity and food safety regulations, were highlighted by participants in the Commission’s inquiry as providing clear benefits to Australian farmers. Rather, Australian farmers want ‘better’ (or less burdensome) regulation.
Figure 1: Farm businesses face regulations at every stage of the supply chain
Why regulatory burden matters
Regulatory burden matters because it can weigh heavily on farm businesses and the agricultural sector’s productivity and competitiveness. For farm businesses, reducing the regulatory burden can mean less time spent dealing with regulation and more time spent on productivity-enhancing activities. For the community, it can mean lower prices (because farmers face lower costs) and fewer taxpayer dollars spent on regulation.
Improving the efficiency and effectiveness of the regulatory environment is important for all sectors of the Australian economy, but particularly for the agriculture sector given its high dependence on international markets – about two-thirds of Australia’s agricultural production is exported. Also, most Australian farms are small businesses, and regulatory burdens can have a significant and disproportionate impact on small businesses.
The Commission’s approach
To identify regulations that impose unnecessary burdens on the agriculture sector, the Commission asked four questions:
- What are the objectives of the regulation?
- Are the objectives of the regulation clear and relevant (that is, do the objectives address an economic, social or environmental problem)?
- Does the regulation achieve these objectives (is it effective)?
- Could the costs of the regulation be reduced or the benefits increased (is there a more efficient way to achieve the same objectives)?
Some questionable, unclear or conflicting regulatory objectives
The Commission found that some regulations lack a sound policy justification. Examples include:
- restrictions on the use of land held under pastoral lease arrangements
- state bans on cultivating genetically modified crops
- barriers to entry for foreign shipping providers
- statutory marketing legislation relating to rice in New South Wales and sugar in Queensland.
The Commission also found that some regulations and regulatory systems need reforming so they can more fully achieve their objectives.
- Native vegetation and biodiversity conservation regulations need to be changed so that risks and impacts are considered at a relevant landscapewide scale (not just at the level of the individual property).
- The process for setting standards for farm animal welfare could be improved by applying scientific principles and building the evidence base on community expectations.
- International evidence could be put to greater use in assessing agricultural and veterinary (agvet) chemicals, reducing the time and cost taken to register agvet chemicals.
In addition, inconsistent regulatory requirements across jurisdictions make it difficult for farmers to understand their obligations and add to the cost of doing business. A more consistent approach would improve outcomes in the areas of heavy vehicle regulation and road access, and the use of agvet chemicals.
Governments could also reduce the regulatory burden on farm businesses by:
- improving their consultation and engagement practices – there is scope to better support landholders to understand environmental regulations, and to reduce duplicative and unnecessary information gathering regarding water management by farm businesses
- doing more to coordinate their actions, both between agencies and between governments
- ensuring that good regulatory impact assessment practices are used as an analytical tool to support quality regulation making, not as a legitimising tool or compliance exercise.
Summary of key draft findings and recommendations*
Farmers often bear the costs of conserving species and ecosystems for the benefit of the wider community. Regulators can also be narrowly focused on environmental protection, and fail to adequately consider the social or economic effects of their regulations.
Native vegetation and biodiversity conservation regulations should be risk based and consider economic, social and environmental factors. Better use could also be made of market-based approaches – if governments were required to buy environmental services from landholders, this would provide a discipline on government demand for conservation on private land.
Regulation of farm animal welfare
Farm animal welfare is a policy area that is expected to evolve over time as community attitudes change and as new scientific evidence becomes available. The policy challenge is to have arrangements in place that can transparently deliver balanced outcomes over time.
There is scope for greater rigour and balance in the process of developing national farm animal welfare standards and guidelines. The Commission recommends the establishment of an independent body tasked with developing national standards and guidelines.
The body could also be responsible for regularly providing an independent assessment of the effectiveness of monitoring and enforcement activities, and assessing the performance of the live export regulatory system.
Genetically modified crops
There is no economic or health and safety justification for banning the cultivation of genetically modified (GM) crops. The successful coexistence of GM and non-GM crops is possible and has been demonstrated both in Australia and overseas.
This means that if there are any market access or trade benefits (including price premiums for non-GM products), they would be achieved regardless of whether GM crops are in the market.
Removal of the bans should be accompanied by the provision of accurate information to the community about the risks and benefits of GM technology and the gene technology regulatory framework in Australia.
Foreign investment has been, and will continue to be, important for improving the competitiveness and productivity of the Australian agriculture sector. However, many Australians are concerned about foreign investment, particularly foreign investment in agriculture.
The Treasurer’s prior approval is required for foreign acquisitions of agricultural businesses and land valued above prescribed thresholds. In 2015, the Australian Government significantly lowered these thresholds for agribusinesses (from $252 million to $55 million) and agricultural land (to $15 million, based on cumulative land holdings).
The Australian Government also established a national register of foreign ownership of agricultural land and introduced application fees for all foreign investment proposals.
The lower screening thresholds (combined with different thresholds depending on the investor’s country of origin) will increase the cost and complexity of investing in Australian agriculture. There is a risk that this will deter foreign investment in the sector without offsetting public benefits.
It is unclear what additional public benefits will be derived from the lower thresholds, particularly given that other measures (such as the Register of Foreign Ownership of Agricultural Land) are in place to increase transparency and public confidence about foreign investment in Australian agriculture.
Lowering the screening thresholds is unlikely to be the most effective or efficient way of addressing community concerns about foreign investment in agriculture, particularly as some concerns appear to be misplaced and based on a misunderstanding of the effects of foreign investment.
The Australian Government should raise the screening thresholds for agricultural land and agribusinesses to $252 million — in line with the thresholds that applied to agriculture prior to 2015, and those that currently apply to business acquisitions and developed commercial land for investors from most countries.
The Commission recommends that remaining statutory marketing arrangements (which constrain competition and productivity) should be removed — this includes repealing the New South Wales Rice Marketing Act (1983) and the amendments made by the Queensland Sugar Industry (Real Choice in Marketing) Amendment Act 2015, and deregulating the Western Australian potato market.
* A complete list of the Commissions findings and recommendations is available in the overview of the draft report.
Regulation of Agriculture
- Read the Draft Report released 21 July 2016
- The Inquiry Report is due to be provided to the Australian Government by 15 November 2016.