Regulation ofAustralian Agriculture

Productivity Commission
Inquiry Report
No. 79, 15 November 2016 Commonwealth of Australia 2016

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Canberra Office
Level 2, 15 Moore Street
Canberra City ACT 2600
GPO Box 1428
Canberra City ACT 2600
Telephone
Facsimile

02 6240 3200
02 6240 3399

Melbourne OfficeTelephone

15 November 201603 9653 2100

www.pc.gov.au

The Hon Scott Morrison MP
Treasurer
Parliament HouseCANBERRA ACT 2600
Dear Treasurer
In accordance with Section 11 of the Productivity Commission Act 1998, we have pleasurein submitting to you the Commission’s final report into the Regulation of Australian
Agriculture.
Yours sincerelyTerms of reference

Inquiry into regulation of Australian agricultural sector
I, Scott Morrison, Treasurer, pursuant to Parts 2 and 3 of the Productivity Commission Act
1998, hereby request that the Productivity Commission undertake an inquiry into theregulatory burden imposed on Australian farm businesses.

Background
The Australian Government has identified the agriculture sector as one of the five pillars of
the economy. It is promoting the economic potential of the sector by removing unnecessary
regulatory burdens and promoting improved productivity and global competitiveness.
The Australian Government’s deregulation agenda has focussed on reducing
Commonwealth red tape. As part of its deregulation agenda, the Government is
implementing reforms in agricultural and veterinary chemicals, biosecurity and export
certification. However, there is an opportunity for better national outcomes for the
agriculture sector by considering regulation at all levels of government. This is particularly
applicable in the areas of transport, environmental protection, native vegetation
management, land tenure, animal welfare and food safety in which the states and territories
have significant responsibility.
While regulation targets valid objectives, such as protecting consumers from unsafe food,protecting the environment or supporting the export of goods, poorly implemented andadministered regulation and the cumulative impact of regulation can have adverse effects
on farm businesses. It can unnecessarily restrict farm management decisions and reduceinvestment.
Inconsistent and overlapping regulations between jurisdictions can also create adverse
effects and raise costs for farm businesses.

Scope of the inquiry
The inquiry will focus on regulation with a material impact on domestic and international
competitiveness of farm businesses and the productivity of Australian agriculture.

iv

REGULATION OF AUSTRALIAN AGRICULTURE

The inquiry will define priority areas for removing or reducing unnecessary regulatoryburdens where doing so will/can contribute to improved productivity for farm businesses
as well as the wider economy.
The inquiry will also review regulation of farm businesses to identify unnecessary
restrictions on competition.
While focussed on the impact of regulation on farm businesses, the inquiry should also
consider the material impact arising from regulation imposed along the supply chain suchas regulations introduced to meet the requirements of international markets.
Consistent with its legislative remit, the Commission is to have particular regard to:•areas of regulation that directly affect farm businesses, including those identified as
areas of concern through the white papers on agricultural competitiveness and northern
Australia. This includes regulatory arrangements affecting access to new technologies,
investment opportunities, land tenure, relevant environmental protection and native
vegetation laws, animal welfare and the Exporter Supply Chain Assurance System•

areas where there is greatest scope to reduce unnecessary regulatory burden and pursue
regulatory objectives in more efficient (least cost) ways•

whether the current level at which matters are regulated (national, State and local) is
appropriate and whether there is scope for better coordinated action across governments
to reduce unnecessary overlap•

whether Australia’s farm export competitiveness can be improved by minimising
duplication between domestic regulation and importing country requirements•

relevant regulatory approaches adopted in other countries.

Specific requirements
In undertaking the inquiry, the Commission should:•

identify specific areas of regulation that are unnecessarily burdensome, complex or
redundant•

identify priority areas for regulatory reform•

provide recommendations to alleviate regulatory burden identified.

•

For the purposes of this inquiry, the regulatory issues affecting:•marine fisheries and aquaculture industries will be investigated as part of a separate
Productivity Commission inquiry into the Regulation of Australian Marine Fisheries
and Aquaculture Sectors.

TERMS OF REFERENCEv

Process
The Commission is to advertise nationally, consult with key interest groups and affectedparties, hold hearings, invite public submissions and release a draft report to the public.
To expedite the review the Commission should consider relevant submissions to the white
papers on agricultural competitiveness and Northern Australia and other relevant material
in the public domain.
The final report should be provided within nine months of the receipt of these Terms ofReference.

S. MORRISON
Treasurer[Received 20 November 2015]

vi

REGULATION OF AUSTRALIAN AGRICULTURE

Letter of extension

Peter Harris AO
Chairman
Productivity Commission
Locked Bag 2, Collins Street East
Melbourne VIC 8003

Dear Mr HarrisThank you for your recent letters seeking extensions of the reporting dates for three Productivity
Commission (the Commission) reports with timetables impacted by the caretaker period
associated with the Federal election.
I understand that during this period the Commission was precluded fTom releasing draft reports
and fully engaging with government departments and agencies.
On that basis, I agree to extend the due date for the Commission to present:
the final report of its inquiry into Intellectual Property Arrangements from
18 August 2016 to no later than 23 September 2016;
the final report of its inquiry into Regulation of Agriculture from 20 August 2016 to nolater than 15 November 2016; andthe study report of its inquiry into Human Services from 29 October 20 I 6 to no later than
30 November 2016.
I have copied this letter to the Prime Minister, the Deputy Prime Minister, the Minister for
Trade, Tourism and Investment, the Attorney-General, the Minister for Industry, Innovation andScience, the Minister for Health and Aged Care, the Minister for Communications and the Arts,
the Minister for Social Services, the Minister for Human Services and the Minister for
Education and Training.

Parliament House Canberra ACf 2600 Austrnlia
Telephone: 61 2 6277 7340 I Facsimile: 61 2 6273 3420

TERMS OF REFERENCE

vii

Contents

Terms of referenceiv

Acknowledgments

xiii

Abbreviations

xiv

Overview

1

1

Our approach to reviewing regulation

62

Benefits, not just costs, are acknowledged

83Some common themes

10

4

Issues by topic area

16

Recommendations and findings

35

1

About this inquiry

47

1.1

Why regulatory burden matters

47

1.2

There are regulations at every stage of the agricultural
supply chain

50

1.3

What the Commission has been asked to do

52

1.4

Our approach to reviewing regulation

53

1.5

Benefits, not just costs, are acknowledged

57

1.6

Conduct of the inquiry

61

2Land use regulation

63

2.1

The role of government in land use

65

2.2

How is land use regulated?

67

2.3

Agriculture on Crown land

69

2.4

Planning, zoning and development assessment

79

2.5

Conflicts between farming and residential land use

90

2.6

Conflicts over land access for resource exploration andextraction

98

CONTENTS

ix

3

4

5

6

7

x

Environmental regulation

105

3.1

Why are governments involved in environmental protection?

106

3.2

Environmental regulations: the current state of play

109

3.3

What effect do the regulations have on farm businesses?

116

3.4

Improving environmental regulations

136

3.5

Other environmental regulations

158

On-farm regulation of water

165

4.1

Water and agriculture

165

4.2

Farm access to water

173

4.3

Farm use of water

191

4.4

Farm disposal of water

192

4.5

Water reporting

194

Regulation of farm animal welfare

199

5.1

The concept of animal welfare

201

5.2

A role for government in farm animal welfare?

202

5.3

Australia’s animal welfare system

206

5.4

How are farm animal welfare standards set?

208

5.5

Improving the effectiveness of farm animal welfare
regulation

227

5.6

Live export regulation

245

Regulation of technologies

261

6.1

Why are governments involved?

262

6.2

Regulating genetically modified organisms and products

264

6.3

New breeding techniques

286

6.4

Regulation of drones

289

6.5

Access to telecommunications infrastructure

289

Agricultural and veterinary chemicals

291

7.1

About agvet chemical regulation

292

7.2

Reforming the regulation of agvet chemicals

293

7.3

Excessive time and costs for registration

297

7.4

Inconsistencies in control-of-use regimes

303

REGULATION OF AUSTRALIAN AGRICULTURE

8

9

7.5

Access to agvet chemicals for minor uses

306

7.6

Labelling of agvet chemicals under work health and safety
regulations

308

Biosecurity

311

8.1

Australia’s biosecurity arrangements

312

8.2

Why are governments involved in biosecurity?

319

8.3

Benefits and costs of biosecurity

320

8.4

Issues raised about biosecurity

324

8.5

Other regulatory issues

341

Transport

345

9.1

Heavy vehicles

347

9.2

Rail

380

9.3

Ports

384

9.4

Coastal shipping

388

9.5

Biofuel support programs394

10 Food regulation

399

10.1 Rationale for food regulation

400

10.2 Food regulation in Australia403

10.3 Regulation of food labelling406

10.4 Regulation of food safety in the production process430

11 Labour regulation

443

11.1 The role of government in labour markets

445

11.2 Access to overseas workers

446

11.3 Workplace relations464

11.4 Work health and safety467

12 Competition regulation

477

12.1 Statutory marketing479

12.2 Competition law

511

12.3 Industry codes of conduct520

13 Foreign investment in agriculture527

13.1 About Australia’s foreign investment framework

529
CONTENTS

xi

13.2 The importance of foreign investment to Australia

533

13.3 A closer look at the new arrangements

542

14 Export regulation

569

14.1 Regulation of agricultural exports

570

14.2 The regulatory burden of export certification

573

A

Public consultation

583

B

A brief history of statutory marketing in Australian
agriculture

613

Economic impacts of statutory marketing

616

Deregulation of Australian agriculture

618

Case studies: the burden of regulation on farm businesses

623

Purpose of the case studies

623

Case study results

623

Analysis of rice price premiums

629

Methodology

629

Results

632

Conclusion

632

C

D

References

xii

REGULATION OF AUSTRALIAN AGRICULTURE

637

Acknowledgments

The Commission is grateful to everyone who freely gave their time to discuss the very
wide range of matters canvassed in the terms of reference, especially those who met with
the Commission, participated in case studies and provided written submissions.
The Commissioners would like to express their appreciation to the staff who worked on theinquiry. The team was led by Rosalie McLachlan and included Lisa Chan, Imogen Curtis,
Senna Eswaralingam, Cordelia Foo, Yvette Goss, Lisa Lee, Ana Markulev, Rohan Nelson,
Bonnie Nguyen, Marianna Olding, Oliver Richards, Anne Rudolph and Isfaaq Timol.

ACKNOWLEDGMENTS

xiii

Abbreviations

ABARES

Australian Bureau of Agricultural and Resource Economics andSciences

ABS

Australian Bureau of Statistics

ACCC

Australian Competition and Consumer Commission

ACL

Australian Consumer Law

AGMIN

Agriculture Ministers’ Forum

agvet

agricultural and veterinary

APVMA

Australian Pesticides and Veterinary Medicines Authority

ASIC

Australian Securities and Investments Commission

ATO

Australian Tax Office

COAG

Council of Australian Governments

CoOL

Country-of-origin labelling

CSIRO

Commonwealth Scientific and Industrial Research Organisation

DAWR

Department of Agriculture and Water Resources

EPA

Environment Protection Authority or Agency

EPG

Ethanol Production Grants

EU

European Union

FAO

Food and Agriculture Organization of the United Nations

FDA

United States Food and Drug Administration

FDI

Foreign direct investment

FIRB

Foreign Investment Review Board

FoFR

Australia and New Zealand Ministerial Forum on Food Regulation

FSANZ

Food Standards Australia New ZealandGDP

Gross domestic product

GHS

Globally Harmonised System of Classification and Labelling

GM

Genetic modification, genetically modified

GMO

Genetically modified organisms

xiv

REGULATION OF AUSTRALIAN AGRICULTURE

HVCI

Heavy Vehicle Charging and Investment

HVNL

Heavy Vehicle National Law

IAPIntelligent Access Program

ICA

Interstate certification assurance

IIO

Irrigation Infrastructure Operator

IGAB

Intergovernmental Agreement on Biosecurity

MDBA

Murray-Darling Basin Authority

NBC

National Biosecurity Committee

NEBRA

National Environmental Biosecurity Response Agreement

NFF

National Farmers’ Federation

NHVR

National Heavy Vehicle Regulator

NPI

National Pollutant Inventory

NRM

National resource management

NZ

New Zealand

NWC

National Water Commission

NWI

National Water Initiative

OAW

Office of Animal Welfare

OBPR

Office of Best Practice Regulation

OECD

Organisation for Economic Co-operation and Development

OGTR

Office of the Gene Technology Regulator

OIEWorld Organisation for Animal HealthPC

Productivity Commission

PPP standard

Primary production and processing standard

PIMC

Primary Industries Ministerial Council

RIA

Regulatory impact assessment

RIS

Regulation impact statement

RSRT

Road Safety Remuneration Tribunal

RSPCA

Royal Society for the Prevention of Cruelty to Animals

SDL

Sustainable Diversion Limit

SKU

Stock keeping unit

VICH

International Cooperation on Harmonisation
Requirements for Veterinary Medicinal ProductsofTechnical

ABBREVIATIONS

xv

WHO

World Health Organization

WHS

Work Health and Safety

WTO

World Trade Organization

xvi

REGULATION OF AUSTRALIAN AGRICULTUREOVERVIEW

Key points•

Farm businesses are subject to a vast and complex array of regulations. Regulations are inplace at every stage of the supply chain — from land acquisition to marketing — and areapplied by all levels of government. The number and complexity of regulations affecting farmbusinesses means that the cumulative burden of regulation on farmers is substantial.

•

The need for regulation is not disputed by farm businesses. In fact, some regulations, suchas biosecurity and food safety regulations, were highlighted as providing clear benefits toAustralian farmers. Rather, Australian farmers want ‘better’ (or less burdensome) regulation.

•

Some regulations lack a sound policy justification and should be removed. 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,mandatory labelling of genetically modified foods, and the regulated marketing of rice in New
South Wales and sugar in Queensland.

•

In other cases, regulation is the wrong policy tool. Regulatory changes to addresscommunity concerns about foreign investment in agriculture, for example, are costly andlikely to be ineffective. A better informed conversation about foreign investment is needed.

•

Other regulations and regulatory systems need to be reformed so they can more fully
achieve their objectives.
− Native vegetation and biodiversity conservation regulations need fundamental change sothat risks and impacts are considered at a relevant landscape-wide scale. Environmental
regulatory decisions also need to take into account economic and social factors.
− Animal welfare regulations seek to achieve welfare outcomes that (among other things)
meet community expectations. However, the current process for setting standards for farmanimal welfare does not adequately value the benefits of animal welfare to the community.
− The process for setting standards would be improved through the creation of a statutory
agency responsible for developing national farm animal welfare standards using rigorous
science and evidence of community values for farm animal welfare.
− International evidence could be put to greater use in assessing agricultural and veterinary(agvet) chemicals, reducing the time and cost taken to grant registration.
− Road access arrangements for heavy vehicles should be streamlined and simplified.

•

Inconsistent regulatory requirements across and within jurisdictions make it difficult forfarmers to understand their obligations and add to the cost of doing business. A moreconsistent approach would improve outcomes in the areas of heavy vehicle regulation androad 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 andunnecessary 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 processes are used as an analytical tool
to support quality regulation making, not as a legitimising tool or compliance exercise.

2

REGULATION OF AUSTRALIAN AGRICULTURE

Overview

The key task for this inquiry was to identify regulations that impose an unnecessary (andtherefore avoidable) burden on farm businesses. And, where there were legitimate policy
objectives underlying the regulations, to look at whether the regulatory objectives could beachieved in a more efficient way.

Why regulatory burden matters
Regulatory burden matters because it can weigh heavily on farm businesses and undermine
the agricultural sector’s productivity and competitiveness.
Reducing regulatory burden, and improving the efficiency of the regulatory environment,
is important for all sectors of the economy, but particularly for the agricultural sector
given:•

its high dependence on international markets — around two-thirds of Australia’s
agricultural output is exported (with most producers being price takers in international
markets)•

most Australian farms are small businesses, and regulatory burdens can have asignificant and disproportionate impact on small businesses.

For farm businesses, reducing regulatory burden means less time spent dealing withregulation and more time spent on productivity-enhancing activities. For the community,
less regulatory burden can mean lower prices (because farmers face lower costs), fewer
taxpayer dollars spent on regulation and improved living standards. For governments,
lower regulatory burden means that more resources can be devoted to higher priority areas.

There are regulations at every stage of the supply chain
Farm businesses in Australia are subject to a vast and complex array of regulations.
At every stage of the agricultural supply chain farmers face regulations — including forland acquisition and preparation, production and on-farm processing, transport of inputs
and products to market, marketing and product sales (table 1).

OVERVIEW

3

Table 1

Regulation across the agricultural supply chaina,b

Key Australian Government
involvement/regulation

Key stages of the
agricultural cycle• native title• environmental protection− biodiversity conservation− international treaties− natural, cultural and world
heritage

Acquisition, leasing andpreparation of land

• land tenure and use− land use planning− building regulations− pastoral leases• environmental protection− native vegetation− natural and cultural
heritage• agricultural and veterinary
chemical standards

Agricultural production andon-farm processing• agricultural and veterinary
chemicals• animal welfare• biosecurity− pest and disease control
and response• food certification for export• building regulations• genetically modified crops• land use planning• livestock regulation andidentification• transport− road access− transport and use ofmachinery− vehicle licensing• water access and regulation

Transport and logistics• transport regulations− road access− transport and use ofmachinery− vehicle and machinery
licensing• animal welfare• livestock regulation andidentification• food safety• food packaging• biosecurity− pest and disease control
and response• food certification for export• statutory marketing• biosecurity− pest surveillance• export control• environmental protection− biodiversity conservation− international treaties− natural, cultural and world
heritage• national land transport
regulatory frameworks• water access andregulation• welfare of exported animals• biosecurity− pest surveillance• export control• national land transport
regulatory frameworks• shipping and maritime safety
laws• welfare of exported animals• biosecurity− pest surveillance• export control

Marketing• food labelling• food standards• welfare of exported animals

Key state/territory government
involvement/regulationa Italics denote local government responsibility in at least one jurisdiction. b There is also a range ofissues and regulations that affect all stages of the agricultural supply chain. Cross-cutting issues include
investment opportunities and access to capital, as well as regulations relating to competition, foreign
investment, immigration, industrial relations, work health and safety, and taxation.

4

REGULATION OF AUSTRALIAN AGRICULTURE

All levels of government impose regulations that affect the agricultural sector.
•

The Australian Government regulates national and interjurisdictional issues, including
biosecurity and access to agricultural and veterinary (agvet) chemicals. The Departmentof Agriculture and Water Resources is responsible for around 90 non-fisheries related
Acts. This is a small proportion of the regulations affecting farm businesses. Others
include those from the environment, treasury, immigration, infrastructure and industry
portfolios.

•

State and territory governments administer regulations including in the areas of roadtransport, environmental protection, native vegetation management, land tenure andland use. As an indicator of the extent of regulation at the state and territory level,
AgForce said that in Queensland, agriculture was affected by over 75 Acts andregulations covering 17 590 pages.

•

Local governments implement regulations (often on behalf of state and territory
governments) in the areas of land use, planning and (in some cases) environmental
protection, as well as setting conditions for local road access by heavy vehicles andfarm machinery.

Regulations addressing some areas, such as aspects of environmental protection, arecovered by all three levels of government. There are also other regulations — such as thoserelating to water use, transport and temporary labour from overseas — that affect a rangeof businesses across the economy, but are of particular concern to some farm businesses.
Many farm businesses spoke about the large number of regulations that directly affectthem. The Consolidated Pastoral Company (one of Australia’s largest beef producers)
estimated that it complies with, or takes account of, over 300 Acts, regulations and codes.
The cumulative burden of regulation provoked the most comment in consultations
conducted on this inquiry. One participant (AgForce) said that:
The regulatory burden within Australian agriculture is effectively a cumulative one; resulting
from the impact of many individual regulations of which each regulation, seen in isolation,
does not appear to represent a significant imposition.

Another (the Tasmanian Farmers and Graziers Association) said that:
It is only when we have the accumulated burden of federal, state, local government andregional council associations that we begin to understand that with four or more layers ofcompeting and often contradictory regulation it becomes near impossible to find an economical
way through. When coupled with seemingly minor regulatory imposts, the competitive burden
can become overwhelming. The malaise of regulation often leads to developments notproceeding on the basis that it is all too hard.

Australian governments have removed many agriculture-specific regulations in recent
decades (in the early 1980s, there were more than 60 statutory marketing boards; today justone remains). Over the same period the volume and reach of regulations aimed ataddressing environmental and social policy issues increased. Most of the concerns about
OVERVIEW

5

regulatory burden raised in this inquiry were about regulations that are not specific to theagriculture sector.
The breadth of regulation gives an indication of the number (and complexity) ofregulations that can and do apply to farm businesses. It is clear that the overlay of different
agencies and levels of government adds complexity and cost to doing business. This is inpart because farmers face regulations across many areas and their farm operations andvalue chains can span borders.

1

Our approach to reviewing regulation

For the purpose of this inquiry, ‘regulation’ is defined as any laws or other government
rules (such as standards and codes of conduct) that influence or control the way people andbusinesses behave. User charges and taxation are not in scope.
Given the broad scope (and depth) of the regulatory environment affecting farmbusinesses, the Commission was greatly assisted by inquiry participants to identify specificregulations of concern. We also undertook a number of case studies to get a better sense of
the magnitude of the cumulative burden of regulation on farm businesses.
An unnecessary regulatory burden exists when the objective of the regulation can beachieved at a lower cost to the community. To assess whether regulations imposed
unnecessary regulatory burdens on the agriculture sector, we asked four questions(figure 1).
•

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 objective)?

The inquiry focused on unnecessary regulations that have a material impact on thecompetitiveness of farm businesses and on the productivity of Australian agriculture.
However, regulations and suggested potential remedies were assessed against providing a
net benefit to the Australian community, not just to the agricultural sector.
With only limited quantitative evidence on the costs of regulations, our views about
whether regulations have a material impact were based on judgments about the potential
gains to the Australian community from removing or amending regulations. Other factors
taken into account included the number of businesses and consumers affected (directly andindirectly) and whether the regulation spanned multiple jurisdictions or agriculturalindustries.

6

REGULATION OF AUSTRALIAN AGRICULTURE

Figure 1

A framework for reviewing agricultural regulation

OVERVIEW

7

2

Benefits, not just costs, are acknowledged

By design, regulation imposes costs on those affected, including farm businesses.
However, the benefits of well-designed and -implemented regulation should outweigh thecosts to the community as a whole. Good regulation should also achieve its stated policy
objectives at least cost to the community. The agriculture sector openly acknowledged thatwell designed regulation is critical to its ability to function effectively and can benefit
Australian farm businesses (box 1). For example, Australia’s biosecurity regulatory
arrangements were highlighted as providing a reputational advantage to Australian farmers
and access to premium export markets.
Box 1

The agriculture sector recognises the benefits of regulation

National Farmers’ Federation:… acknowledges the need for effective regulation. Often regulation provides important protections forthe business owners, workers, and the community, and sets a minimum level of performance required
to meet community standards and expectations.

WAFarmers:
Agricultural producers and growers are not adverse to comply with appropriate regulatory obligations
as these are seen as being beneficial to production systems and market access … WAFarmers
recognise the importance of effective and necessary regulation to maintain and uphold the industry’s
reputation as a producer of safe and nutritious food … we support comprehensive food standards andregulation across the production and processing chain to ensure the integrity of the industry.

Voice of Horticulture:… regulation can be of benefit to horticulture where it meets economic, social and/or environmental
objectives and is designed and implemented efficiently and effectively.
Avoiding pest and disease incursions is critical to the viability of the horticulture industry. Australia’s
unique biodiversity and relative disease-free status must be maintained, along with horticulture’s
reputation as a supplier of fresh, high quality, clean produce. Freedom from many of the world’s major
pests and diseases provides a clear advantage in both domestic and global markets.

Australian Pork Limited:
Australia’s favourable biosecurity status enables it to produce premium agricultural goods
competitively, efficiently and sustainably. Current biosecurity protocols make Australia one of only a
few countries that maintains a high disease-free status for pig herds.

Canegrowers:
Continued effort in biosecurity is important for the productivity and profitability of the Australian sugar
industry. Stopping the entry, establishment and spread of exotic diseases and pests is vital for ourindustry’s future. If unchecked, yield losses would be high and devastating to industry productivity andprofitability.

Australian Chicken Growers Council:
Food safety is critical to the chicken industry, and regulation in this area is necessary to protect
consumers and also the reputation of the product and the industry itself.

However, inquiry participants also identified regulations in a number of areas that impose
unnecessary compliance and administrative costs. Farm businesses provided many
8

REGULATION OF AUSTRALIAN AGRICULTUREexamples of unnecessary paperwork and excessive amounts of time and energy spentcomplying with regulatory requirements, such as applying for permits, filling out forms
and reporting to regulators (box 2). Many farmers expressed frustration about delays anduncertainties involved in obtaining regulatory approvals. Some reported that they needed toengage consultants (at considerable cost) to help them comply with regulations.
Box 2

Burdens of regulation — some examples from farmers

A Queensland producer described what was required each time he moved his oversized
agricultural machine between farms along 25 kilometres of a public road:•two transport permits from the state transport department — one for the machine, and one
for the route taken•a railway crossing permit from the state’s rail authority (this had to be lodged four days inadvance, and the vehicle was required to cross the railway within the nominated time frame
otherwise a new permit was required)•

two police drivers (the producer had to pay for the personnel time)•a permit from the local council and the telecommunications and electricity infrastructurecompanies. While the permits lasted 12 months, they took five days to process.

These types of application processes are time consuming, administratively burdensome andinterfere with weather-dependent farming activities.
A landholder in New South Wales who sought to clear 1.2 hectares of land for a blueberry farmnear Coffs Harbour found that state government approval was not required as the clearing wasconsidered to be clearing of ‘regrowth’ under New South Wales native vegetation laws.
However, because the proposed clearing area included the habitat (or potential habitat) ofseven species listed as threatened under the Environment Protection and Biodiversity
Conservation Act 1999 (Cwlth), the landholder was required to submit 60 pages of documents
and 18 maps to the Australian Government Department of the Environment. The outcome wasthat Commonwealth assessment and approval was not required, as only five of the protected
plants were in the proposed clearing area (and thousands remained elsewhere on the property).

Other regulations were identified as reducing flexibility, constraining the use of more
efficient production techniques and discouraging investment. Examples include:•

pastoral leases that require land to be used for a specific purpose•

environmental regulations that can reduce the availability of land for grazing andcropping, and limit farmers’ capacity to respond to changes and to use newtechnologies. The Australian Farm Institute described New South Wales’ native
vegetation laws as ‘a cumbersome and tangled web of productivity-sapping
regulations’•state and territory moratoria (effectively bans) on genetically modified (GM) crops, thatdeny farmers access to technological advances.

In sum, farmers (and other participants) called for better (or less burdensome) regulation,
not the elimination of regulations. And in some areas, such as competition policy, some
OVERVIEW

9farm businesses were seeking more rather than less regulation. The NSW Farmers’
Association captured the views of farm businesses when it said:
Regulation should enhance productivity, not impinge it, and this must be the bottom line.
Whilst there is often a negative interpretation given to regulatory burden … many rules andregulations are necessary for the effective operation of business.

3

Some common themes

Questionable, unclear or conflicting regulatory objectives
Some questionable objectives were uncovered when we asked the question: ‘is theobjective of the regulation affecting farm businesses clear and relevant?’ Examples
include:•the regulation of genetically modified organisms (GMO) for marketing purposes when
there is evidence that industry (both in states without regulatory restrictions andinternationally) can successfully manage the co-existence of GM and non-GM crops.
There is also limited evidence of GMO-free marketing benefits at the bulk trade level•

the re-regulation of sugar marketing in Queensland has the stated objective of allowing
sugar cane growers more choice in who markets their sugar. However, the regulation
restricts the marketing choices of sugar millers when they should have the property
rights over the sugar that they crush. There is no market failure (or other reasonableobjective) to justify the re-regulation. The evidence also suggests that the growers’
preferred choice of marketing arrangements is likely to reduce the productivity andprofitability of the industry (by constraining investment and structural adjustment)•

one of the Rice Marketing Board’s objectives is to secure the best possible price forAustralian rice in export markets. However, the Australian rice industry can achieve
price premiums in international markets without incurring the costs of single-desk
marketing•coastal shipping regulation — the objective of the reforms made in 2012 was to create aregulatory framework that ‘maximises the use’ of Australian vessels, but the effect is toincrease the barriers to entry for foreign flagged vessels and the price of shipping facedby Australian farmers.

Where regulations were found to lack a sound policy justification, the Commission
recommended that they be removed.
In other cases, it was difficult to answer questions about the effectiveness of regulations
because the objectives were unclear or conflicting. For example, some states’ native
vegetation laws outline social and economic interests alongside environmental interests,
but also aim to improve native vegetation (with an absence of guidance on how decision
makers should weigh the objectives).

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In the area of animal welfare regulation, the objectives are unclear because they are tied tocommunity expectations, and these are not well understood or articulated (nor are thewelfare implications of various farming practices well understood by the community).
Limited understanding and agreement about community values in this area has also
contributed to conflicts in the development of animal welfare standards and guidelines,
particularly between industry and animal welfare groups.
And in foreign investment policy, there is discord between the Australian Government’s
stated policy objectives and the likely impact of recent regulatory changes. The
government recently made changes to the foreign investment framework for agriculturethat impose additional costs on foreign investors (and the wider Australian community),create uncertainty and risk deterring foreign investment.

Duplicative roles and inconsistencies across jurisdictions
When we asked the question, ‘is there a more efficient way to achieve the regulatory
objectives?’, we found that better coordination across jurisdictions and agencies would
simplify arrangements and reduce the regulatory burden on farmers.
There is scope to reduce duplicative and overlapping regulation between the tiers ofgovernment in a number of areas (while still achieving their regulatory objectives),
including:•overlap and duplication between the Environment Protection and Biodiversity
Conservation Act 1999 (Cwlth) (EPBC Act) and state native vegetation regulations. For
example, a farmer wanting to clear trees may need approval from both the AustralianGovernment and the relevant state government. Initiatives such as developing
consistent assessment processes for the listing of threatened species and one-stop shops
for environmental assessments and approvals should make it easier for farmers tonavigate the regulatory requirements in this area•

overlapping Australian and state government responsibilities in the management ofwater resources. Farmers said that they are required to submit the same or similar data
to different agencies. Data sharing should be significantly increased in this area.

In other areas, inconsistent regulation across jurisdictions is a source of an unnecessary
regulatory burden that adds to the cost of doing business and makes it more difficult forfarmers to understand their obligations. A more consistent approach would improveoutcomes in the areas of:•animal welfare — inconsistent regulation makes it difficult to effectively informconsumers, and inconsistent standards create uncertainty for industry•

biosecurity — while different regulations across jurisdictions can reflect specific risks,
in some cases regulations can unnecessarily hinder access to interstate markets and add
to the cost of transporting products between jurisdictions

OVERVIEW

11•

agvet chemicals — differences between control-of-use regimes (such as differences inpermitted ‘off-label’ uses) lead to confusion for users and add to compliance costs (andthe variation is not always justified on regional factors)•

heavy vehicle access regulations — differences across the road network lead toincreased compliance costs for producers, such as costly changes to vehicle
configurations and loads to meet different requirements. More should be done to reduce
unnecessary restrictions and variations across the road network while still achieving
amenity objectives and addressing risks to public safety and infrastructure. Thisrequires building a better understanding of road user needs.

Differences in how rules are enforced (particularly in the area of planning decisions acrosslocal governments) can create uncertainty for farm businesses. Leadership from state andterritory governments is important to guide local government planning and development
and improve consistency in approaches. Accountability could be improved by increasing
the transparency of council decisions. Community confidence in local government
decisions and processes could also be improved through regular independent auditing.

Excessive prescription and rules that are disproportionate to risk
Less prescriptive regulations in a number of areas could reduce costs to farm businesses
without jeopardising the underlying objectives of the regulation. Some regulations aredesigned with the operation of other industries (like manufacturing) in mind, making them
incompatible with the operating conditions of farming businesses. Regulations relating tonoise, odour, air emissions and waste discharge can be appropriate in more densely
populated areas, but when applied on an isolated farm they can have an unnecessary
dampening effect on the productivity of agricultural industries. Cotton Australia, forexample, noted that ‘allowed dust limits, which may be entirely reasonable in a coastal city
environment, can be lower than the ambient dust levels in areas where cotton gins arelocated’.
Examples of disproportionate responses to risk were also uncovered in this inquiry,
including in the areas of agvet chemicals (not making full use of international evidence inassessments), some native vegetation and biodiversity conservation regulations, and theregulatory requirements for agricultural machines to use public roads.
In other areas (including biosecurity and animal welfare), participants called for greater
reliance on industry-led initiatives, such as quality assurance schemes, to improve
regulatory outcomes and reduce the costs of complying with regulation.

Ongoing changes to regulations create uncertainty
Changing regulations create uncertainty for those affected. Farmers stressed theimportance of clarity and consistency in the objectives of regulation, and having sufficient
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REGULATION OF AUSTRALIAN AGRICULTURE

time to adjust to regulatory changes. For example, fears of future changes to native
vegetation regulations can create perverse incentives by encouraging landholders to plant
exotic plants instead of native plants, or to clear native vegetation as insurance against
future policy changes. Frequent changes to water regulations also create uncertainty forfarmers and can undermine the confidence of farm businesses to innovate and invest.

Regulators need to be better communicators
Governments could also reduce the regulatory burden on farm businesses by improving theway they consult and engage with farmers.
A number of farm businesses (especially small farm businesses) said that they struggled tonavigate their way through the complex web of rules. GrainGrowers, for example, saidthat:
A key issue for farmers navigating the regulatory space is the lack of clarity around whatregulations apply to different activities and how best farmers can work within their legal
boundaries. The time spent attempting to work out regulatory requirements, including the manypotential ‘missteps’ that can occur along the way due to misinterpretations or lack ofknowledge, are themselves a form of red tape.

Complexity adds to compliance costs and can lead to a higher incidence of inadvertent
non-compliance by farm businesses. Environmental regulations were identified as an area
where complexity is a particular concern, as was work health and safety. There is scope inboth these areas to better support farm businesses to understand the regulations (and theirintent) which could lead to better environmental and work health and safety outcomes.
There is also scope for governments to work more cooperatively with landholders andallow for flexible and innovative ways to meet regulatory objectives. More risk-based
decision making has the potential to enhance stakeholder trust in environmental regulators.

Regulatory response when there are differences in risk perceptions
Regulations have been introduced in a number of areas in response to community concerns
or incidents, including where some in the community perceive there to be a much higher
level of risk than is suggested by the experts (based on scientific, technical and/or
economic evidence). Examples include mandatory labelling of GM products and lower
screening thresholds for foreign investment in agriculture.
More effective communication and public engagement by government agencies about
benefits and risks could help address community concerns in these areas. Better
communication strategies could also help to build community confidence in regulators, andprovide a basis for more informed, evidence-based debate. A better informed debate could
also reduce the likelihood that governments will resort to costly and ineffective regulatory
responses to address community concerns.
OVERVIEW

13

Good regulatory processes are not always observed in practiceThis inquiry (like many other reviews of regulation) found that regulation that imposes
unnecessary costs on business can often be traced back to poor regulation-making
processes. It is hard to dispute that good regulation-making processes are essential for goodquality regulation and evidence-based policy making. Participants to this inquiry strongly
supported these processes. The National Farmers’ Federation, for example, said:… adherence to good regulatory impact assessment is essential to limiting unreasonable
regulatory creep into the future. … policy makers should have both incentives to better utilise
the [regulatory impact assessment] process, but also disincentives to discourage poor practice.

However, good regulation-making processes are frequently not followed in practice. The
Commission found examples of:•regulatory impact assessments (RIAs) that failed to rigorously assess the costs or
benefits of regulations•

RIA processes that did not adequately consider alternative options•

regulations that were put in place despite a finding that the regulation would impose a
net cost on the community•

RIA processes that appear to have been disproportionally influenced by particularstakeholders (box 3).

Stronger oversight of the quality of RIA processes is one way to reduce the incidence ofregulations being put in place when there is no case for doing so. Wider and more
systematic stakeholder engagement is another — drawing on a wider evidence base can
improve the assessment of the costs and benefits of any proposed regulations. Stakeholder
engagement is also an important step in determining whether regulation is the mostappropriate policy tool to use and, where it is, to design it so that it achieves its policy
objective in the simplest and most cost-effective way. A number of participants to thisinquiry commented favourably on stakeholder engagement on the Biosecurity Act 2015
(Cwlth).
RIA processes need to be used as an analytical tool to support the quality of regulation
making, not as a legitimising tool or compliance exercise. RIAs enable potential regulatoryburdens to be considered before they are imposed, and place regulatory burdens in context(that is, against the potential benefits). Some of the regulations that participants were mostcritical of were the ones that were found not to have been subject to good RIA processes.
However, improving the quality of regulation involves more than good RIA processes. No
one-off inquiry (such as this) or red-tape reduction target will be able to eliminate or
reduce the regulatory burdens that comprise a ‘death by a thousand cuts’. As regulatoryburdens (over all levels of government) change because of interactions with otherregulations, it is not sufficient to merely examine the impact of new regulations.

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REGULATION OF AUSTRALIAN AGRICULTURE

Box 3

Good RIA processes are not always followed in practice

The Tasmanian Government prepared a regulation impact statement (RIS) to assess anextension of the moratorium on the commercial release of genetically modified (GM) organisms
into the environment. A marketing advantage in domestic and international markets was noted
as one of the main benefits of maintaining Tasmania’s GM organism free status. However, thevalue of this was not quantified (but was assessed to be ‘not insignificant’). The benefits ofallowing GM crops were theoretically assessed as being relatively small. The RIS concluded
that the (unquantified) benefits were likely to be substantial and to exceed the costs ofextending the moratorium from 2014 to 2019. (By contrast, a cost–benefit analysis conducted
as part of the review of the moratorium on GM canola in Victoria estimated that the Victorian
moratorium imposed a net cost. The moratorium was allowed to expire.)
There were also examples of regulations being introduced despite findings that there would be
a net cost to the community. In December 2015, the Queensland Parliament passed the Sugar
Industry (Real Choice in Marketing) Amendment Act 2015 which re-regulates the international
marketing of Australian sugar. The amendments were introduced despite a highly critical RIS
which found no case for the regulation and also that the costs would outweigh the benefits (andthe overall returns to the sugar industry could be reduced). Similarly, the RIS for the (recently
abolished) Road Safety Remuneration Tribunal found that the road safety remuneration system
would lead to net costs.
The Commission found examples where only a limited range of options were considered in
RISs. One example was the RIS assessing the value of egg stamping in improving traceability.
This RIS did not consider alternative traceability systems, such as egg carton labelling or
requiring restaurants and caterers to keep records of the eggs they were supplied with. The
Commission found no evidence that egg stamping provides higher net benefits to thecommunity than the alternatives.
Disproportionate industry influence in RISs was also raised as a concern by some participants.
For example, for the newly endorsed sheep standards and guidelines, the assessment made in
the RIS with respect to pain relief for mulesing was that the net incremental welfare benefits did
not justify the additional compliance costs to industry. This assessment was based on the viewsof a reference group, which comprised representatives of 11 national livestock industry
organisations, representatives from the eight state and territory relevant government
departments, and the Australian Government, two animal welfare organisations and theAustralian Veterinary Association.

Although it has been said many times, it bears repeating: policy makers within all
government agencies need to be responsible for actively examining the impact ofregulations under their remit, and using the results to implement policy and regulatory
reforms that could benefit the community. The price of liberty from unnecessary regulatoryburdens is eternal vigilance.

OVERVIEW

15

4

Issues by topic area

Land use and access regulations
About half of Australia’s land area is used for agriculture, mostly for grazing. Land use for
agriculture has come under increased scrutiny in recent years as a result of:•

expanding major urban centres and increasing residential populations in city fringe(peri-urban) areas•

a trend towards more intensive farming practices, which can affect the amenity ofnearby residential areas•

growing environmental awareness and the conversion of agricultural land to nationalparks and conservation areas.

These issues have put pressure on regulators to intervene in land use conflicts, including tocurtail particular land use activities. Managing these tensions, while ensuring that land isallocated to its highest value use, is a key challenge for policy makers. It involves
balancing land use against other considerations, such as the environment and native title
interests.
More effective management of Crown land by reforming leases
Restrictions on the use of Crown land place unnecessary burdens on farm businesses thatlease Crown land. Pastoral leases generally require land to be used for a specific purpose,
which can hamper the ability of farmers to flexibly respond to environmental, economic
and other factors that affect their business.
Reform solutions to improve land use flexibility for leaseholders, and to promote more
efficient use of, and investment in, land include:•

extending the length of leases or introducing rolling leases•

allowing the conversion of leases to freehold land•

streamlining land use restrictions, including implementing land management objectives
directly through land use regulation, rather than through pastoral lease conditions.

In principle, those who benefit from any additional property rights, such as those from theconversion of leasehold to freehold title, should pay for the higher value of the land andany costs associated with implementing the change (including administrative costs).
Aligning the incidence of the costs and the benefits of property rights helps ensure that theland is put to its most valuable use.

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REGULATION OF AUSTRALIAN AGRICULTURE

Planning, zoning and development processes remain problematic
Planning, zoning and development assessment processes were identified as a significant
source of unnecessary burdens for farmers. The regulations and processes areunnecessarily complex, time consuming and costly and the adoption of leading practices
has been patchy and slow. Also, planning regulations, such as building codes and theclassification of intensive agriculture, can fail to meet their regulatory objectives because
they are not adaptable or targeted for managing agricultural land uses. Ensuring that
regulation is fit for purpose and implementing outcomes-based (rather than prescriptive)
regulation would help address these problems.
Managing conflicts between agriculture and other land uses
Conflict between agricultural and other land uses is another area of concern for farmers,
particularly residential land use, and resource exploration and extraction. While there is arole for government in promoting the efficient allocation of land rights and the timely
resolution of land rights conflicts, policies that seek to protect existing land uses as ana priori objective are unlikely to be consistent with facilitating efficient land use.
Calls for a ‘right to farm’ and the ‘right to say no’ to resource development appear to be
symptomatic of other concerns.
•

Calls for a ‘right to farm’ arise from broader concerns about land use regulation,
including frustrations with planning and zoning regulation, and regulator attitudes
towards agricultural land use (especially local governments).

•

Calls for a right to veto stem from concerns about the regulatory arrangements
governing the allocation of resource exploration and extraction rights. In particular,
participants were concerned about how the risks of resource projects are assessed andabout compensation arrangements for land access.

Such concerns are more effectively managed through improvements to planning andzoning, and the allocation of resource exploration and extraction rights, rather thanindirectly through right to farm or right of veto laws.

Environmental regulations
Farmers, as significant landholders, play an important role as managers of theenvironment. They have a strong incentive to conserve the environment where doing so
benefits their farming operations (for example, by maintaining or improving the
productivity of the land). But there are also clear public benefits in conserving native
vegetation, biodiversity and threatened species and ensuring there is healthy soil and clear
air and water (hence a role for government).

OVERVIEW

17

Conservation regulations impose unnecessary costs
Environmental regulations are complex — there are multiple pieces of legislation withmany overlapping federal, state and (sometimes) local government requirements, as well asinternational conventions to which Australia is a signatory. But environmental regulations
are essential, and so need to be effectively designed and implemented.
Native vegetation and biodiversity conservation regulations can:•impose considerable costs on some farm businesses, including the cost of conserving
species and ecosystems — farmers can bear a disproportionate share of the financial
burden of conservation for the benefit of all Australians•

involve complex and costly processes (including the need to obtain and pay for detailed
specialist advice about the presence of protected species on the property)•

in some cases be administered in a very bureaucratic and inflexible way. As theVictorian Farmers Federation put it, the regulations ‘focus on a tree-by-tree assessmentof a complex ecosystem. The focus is on one piece of a jigsaw puzzle rather than whatrole that piece has in solving the puzzle’•

be rigid and contribute to landholders’ distrust of government, and limit their voluntary
participation in environmental programs and actions (box 4). They do not always resultin improved environmental outcomes and in some cases may even result in poorer
environmental outcomes.

The nature of environmental regulations means that some degree of cost and complexity is
an inherent part of effective regulation. But continuous improvement of environmental
regulations is both possible and desirable.
Working with farmers to protect the environment
Native vegetation and biodiversity conservation regulations need to be changed so thatthey:•consistently consider economic, social and environmental factors•

account for the impact of proposed activities on the landscape or the region (not just the
impact on individual properties)•

are based on a thorough assessment of environmental risks.

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REGULATION OF AUSTRALIAN AGRICULTURE

Box 4

One farmer’s experience when trying to improve
environmental outcomes

The owner and operator of a large cotton farming business on the Macintyre river in southern
Queensland told the Commission about his experience dealing with regulatory agencies andlocal councils when trying to improve environmental outcomes on his property. A recent flood
event led to frog spawning and an increase in the water bird population on the farmer’s
property. The farmer sought to prolong this natural event by adding water from his farm to thenatural flow. Timing was critical because, in order to benefit the bird population, the water fromthe farm needed to arrive before the natural flow dried up.
It took the farmer six weeks to negotiate with multiple agencies (at considerable cost) before
permission was granted to supply water for this ecological application. The lengthy delays
reduced the effectiveness of the water flow. According to the farmer, each agency was focused
exclusively on its area of responsibility and they were unable to work together. For example:•

the authority in charge of stock routes initially rejected the proposal due to its potential tocause erosion, while the local council was concerned with flood risk•

the farmer had to build a pipeline under a main road to reduce the risk of erosion as well as
increase the capacity of the culvert (to allow water flow) that was already in place•a temporary weir was built at the head of this pipeline to make it more effective, but had tobe removed following a complaint from a local resident.

The farmer reported that he had to convince an environment authority of the merits of the
proposal. He hired a zoologist to monitor bird species before and after the flow. The farmer was
also required to design the activity to fit within the regional irrigation management plan, and to
gain permission from other landholders. He was also required to test the water quality before
and after the flow.
According to the farmer, the environment agency insisted that the project be labelled as a ‘pilot’
so that it did not form a precedent committing them to similar projects in future. The farmer,
however, would like to do similar projects more efficiently in future.
Although the flow did eventually take place, its biological effectiveness was reduced by thedelay. The experience left the farmer with a sense that regulatory agencies exist to inhibit rather
than enable innovative projects.
Source: Productivity Commission case study interview (appendix C).

Better use could be made of market-based approaches to native vegetation and biodiversity
conservation at times. This could include governments buying environmental services(such as native vegetation retention and management) from private landholders. Requiring
governments to fund conservation helps discipline governments’ demand for conservation
on private land (rather than risk treating it as a ‘free good’ where more is always better).
Importantly, where governments choose to allocate land for conservation, they should
provide adequate funding to meet the objective of conservation (this should include tocontrol weeds and feral species which can affect adjoining properties).
The administration of native vegetation and biodiversity conservation regulations could
also be improved. Governments need to improve the advice and support they provide to

OVERVIEW

19

landholders, and explain how different regulatory requirements interact. This would befacilitated by building the capability of, and landholders’ trust in, environmental regulators.

Water regulation
Water is an essential input for farm businesses. It is used for irrigating crops, as drinking
water for livestock, and for managing waste in intensive livestock and processing
industries. The agricultural sector accounts for around two-thirds of Australia’s total water
consumption.
An important focus of water regulation has been creating markets in regions where this isviable, to allow surface water to be traded to its highest value uses. Farmers reported thatwater trading has increased the productivity of their businesses by giving them theflexibility to buy and sell water in response to changing market and seasonal conditions.
While farmers said that there is room for improvement, they also said that the process of
trading water is gradually becoming faster and more efficient.
As regulation of surface water matures, the attention of regulators is turning togroundwater and the interception of overland flows on farms. The regulation ofgroundwater and overland flows has the potential to increase the security of the water
entitlements held by farm businesses.
Complexity and change in water regulation is contributing to the cumulative burden felt byfarm businesses. The diversity of Australia’s river catchments limits the potential toaddress this complexity by making it more uniform. More flexible governancearrangements may be needed to develop locally relevant regulations for accessing water.
The Commission will examine these and other water-related matters in its future work
program in light of its new responsibilities following the repeal of the National Water
Commission Act 2004 (Cwlth).

Regulation of farm animal welfare
Australians generally accept the rearing of animals for commercial purposes (revealed bytheir consumption of animals as food or in other products). They also place a value on farmanimal welfare and benefit from knowing animals are being treated humanely.
Good animal management practices are an essential part of commercial livestock
operations. Many welfare improvements increase the productivity and profitability oflivestock operations, and producers have an incentive to improve animal welfare to meetchanging consumer demands for higher welfare products. However, some welfare
measures, such as those that reduce the intensity of production processes, may increase
costs without offsetting gains to the business.

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REGULATION OF AUSTRALIAN AGRICULTURE

Farm animal welfare is a policy area that is expected to evolve over time as community
attitudes evolve and as new scientific evidence becomes available. The policy challenge isto have arrangements in place that can transparently weigh up the costs of improved animal
welfare against the benefits (the value of animal welfare to the community).
Farm animal welfare regulation could be improved
Since the 1980s, the welfare of farm animals in Australia has been governed by national
Model Codes of Practice, implemented by state and territory governments (many were
implemented as voluntary standards). The codes cover a number of categories of livestock(cattle, poultry, pigs and sheep) and include land transport, processing, and saleyard codes.
In 2005, Australian governments agreed to convert the codes into mandatory standards andvoluntary guidelines that reflect contemporary scientific knowledge and community
expectations for animal welfare. However, progress has been very slow and the standard
setting process does not adequately value the benefits of animal welfare to the community.
A number of concerns about the current arrangements were raised, including that:•animal welfare regulations are not meeting community expectations about the humane
treatment of farm animals — not mandating pain relief for some invasive surgicalprocedures and unstunned (religious) slaughter were highlighted as examples (and theissue of unstunned slaughter is not being considered as part of the current process forsetting standards for livestock at slaughtering establishments)•

there is a risk that regulations will be imposed on farmers based on emotive reactions
rather than evidence-based policy (including evidence on what represents an
improvement in the welfare of farm animals and how this is valued by the community)•

there is a patchwork of different standards, which imposes costs on businesses
operating in more than one state, creates confusion for consumers and reducescompetition between producers — free-range hen stocking densities were raised as an
example•conflict of interest is an issue — the main concerns were disproportionate industry
influence and perceptions of conflicts of interests of agriculture departments (that are
responsible for farm animal welfare policy).

There is scope for greater rigour in the process of developing national farm animal welfare
standards, and importantly, for science and (soundly elicited) community values to play amore prominent role. Without reform to the process, there is a risk that the agricultural
sector, and the Australian community, will continue to face a patchwork of different
regulatory arrangements across jurisdictions that do not rigorously take into accounteconomic and social considerations. There are three main areas where farm animal welfare
regulations could be improved.
•

The objective of the national standards and guidelines needs to be clearer.

OVERVIEW

21•Standards and guidelines should be more evidence-based, drawing on the existing bodyof evidence on animal welfare science and research on community views of animal
welfare. Such evidence should also be used in RIA processes.

•

There should be more independence in the standards development process so thatoutcomes are not overly influenced by the views of any one group, either industry or
animal welfare groups. Judgments made to balance conflicting views should betransparent and apply rigorous scientific principles. Surveys of community values foranimal welfare should be statistically robust and transparent.

The Commission considered a number of options, including: establishing an independent
animal science and community ethics advisory body to provide independent advice in thestandards setting process; establishing an independent body responsible for developing thestandards and guidelines; and the Australian Government being responsible for all aspectsof farm animal welfare regulation.
After closely considering submissions and evidence from hearings on this matter, theCommission maintains the view that the most effective approach would be to establish an
independent statutory agency — the Australian Commission for Animal Welfare (ACAW)— with responsibility for developing the national standards — the standards would be
implemented and enforced by state and territory governments. ACAW would be
responsible for managing the RIA process for the proposed standards, and would include
science and community ethics advisory committees to provide independent and rigorous
evidence on animal welfare science and community values. ACAW would also
disseminate information to the community on best-practice farm animal husbandry
practices and contemporary animal welfare science, including through the development
and publication of standards and guidelines. ACAW would be able to offer assured
scientific guidance (often missing in debates about animal welfare) which would help
facilitate a more proactive, rather than reactive, response to community concerns aboutanimal welfare.
ACAW would not result in a duplication of current regulatory processes or necessarily
result in an increase in regulation (a concern that was raised by some industry participants).
ACAW would replace (and improve upon) the national structure that is already in place fordeveloping standards and guidelines. Importantly, ACAW would be an advisory body, nota regulatory body, and comprise a small number of members with specified skills andexperience.
Live export regulation is costly but has led to some improvements
Following the public response to ABC’s Four Corners footage of mistreatment ofAustralian animals in some Indonesian abattoirs in mid-2011, Australian trade of cattle forslaughter to Indonesia was temporarily suspended. During the suspension, the AustralianGovernment and industry developed a new regulatory framework — the Exporter Supply
Chain Assurance System (ESCAS). The ESCAS was first implemented in Indonesia in
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REGULATION OF AUSTRALIAN AGRICULTURE

August 2011 and then extended to all countries receiving Australian livestock during 2012.
The ESCAS has the objectives of:•providing assurance to the Australian community that the welfare of animals exported
from Australia is maintained through to the point of slaughter in the importing country•

facilitating the livestock export trade so that exporters can increase market shareoverseas.

Industry and animal welfare groups support the ESCAS, although some animal welfare andanimal rights groups would prefer a ban on live exports, and along with some otherparticipants, argued for the system to be strengthened. There was also a renewed call for aban on live exports following reports of inappropriate handling and slaughter of cattle at
ESCAS facilities in Vietnam in June 2016.
The ESCAS has led to some improvements in welfare outcomes for Australian livestock insome overseas export supply chains. For example, the rate of pre-slaughter stunning has
increased in Indonesia, as has awareness of international welfare standards in someoverseas countries. LiveCorp said that as a result of the ESCAS there has been ‘widespreadtransformation across Australia’s markets and the involvement of the industry andexporters in supply chains’. The livestock export industry has made substantial investments
in infrastructure, training and systems to meet ESCAS requirements.
However, industry is concerned about the administrative burden of the ESCAS. The
regulatory burden on exporters could be reduced through greater cooperation between
exporters, including the sharing of audits and implementing an industry quality assurance
program.
Whether an industry-developed quality assurance program could be used by exporters todemonstrate compliance with the requirements of the ESCAS depends on whether it can beshown to assure the welfare of Australian live exports, in line with the Australiancommunity’s expectations. It is critical that the community has confidence in the systemused to regulate live exports. Incidents of mistreatment of animals in facilities that arewithin the purview of the ESCAS, and that are overseen by the Australian livestockindustry, reduce community confidence in the trade and the regulator’s effectiveness.
Focusing government resources ($8.3 million has been announced) on the implementationof an industry quality assurance program (the Livestock Global Assurance Program)should not be at the expense of continual review and refinement of the ESCAS.
The performance of the ESCAS should be reviewed on a regular basis (including to
identify opportunities for reform to improve its efficiency and effectiveness). Regular,
independent reviews will help to address any perceived or actual conflict of interest in
livestock export regulatory arrangements, and ultimately help to further improve thewelfare of Australian livestock exports. If, as is probable, ACAW is not established in time
to review livestock export regulations by 2017, then the Australian Government should
appoint an independent expert or committee to undertake the first review.
OVERVIEW

23

Genetically modified crops
Genetic modification technology can benefit both the agricultural sector and consumers. It
has been used to create crops that are more resistant to weeds and pests, and that increase
yields. It has also been used to improve the nutritional value, shelf life and other quality
characteristics of food.
However, genetic modification technology may present risks to human health and safety
and the environment, and for this reason GMOs are assessed at a national level by the
Office of the Gene Technology Regulator (OGTR) — a respected regulatory body that
relies on credible scientific evidence. The OGTR conducts risk assessments on GMOs,
identifies risk management controls, and grants licences for dealings with GMOs. Before
issuing a licence for use of a GMO, the regulator must be satisfied that any risks to health,safety and the environment can be managed.
The OGTR has approved certain varieties of GM cotton and canola for release in Australia,
having assessed these to be no less safe than their conventional counterparts. FoodStandards Australia New Zealand (FSANZ) also assesses GM foods to ensure they are assafe as their conventional counterparts, and has approved some GM foods for release into
the Australian food supply.
Despite this, a number of state and territory governments have imposed moratoria (partial
or complete) on the cultivation of GM crops (figure 2), on the basis of market access andtrade benefits such as price premiums for non-GM crops. There is mixed evidence about
these benefits. However, the ability for GM and non-GM crops to coexist has been
demonstrated both in Australia and overseas, and therefore the claimed benefits of themoratoria would be able to be achieved even in the presence of GM crops.
New South Wales, South Australia, Tasmania and the Australian Capital Territory should
remove their moratoria. State and territory governments should also repeal the legislationthat imposes moratoria or gives them the discretion to designate GM-free zones. This will
provide certainty to businesses that the moratoria will not be re-introduced in the future.
Removal of the moratoria should also be accompanied by a coordinated communication
strategy to improve knowledge in the community about the risks and benefits of GM
technology, and the gene technology regulatory framework in Australia (as someconsumers remain concerned about GM technology). This should help build confidence inAustralia’s regulation of GM technology. Government agencies responsible for food policy
and regulation (including agriculture and health departments), the OGTR and FSANZ
should actively coordinate their communication strategies, aided by trusted, neutral
third-party experts or organisations, such as the Office of the Chief Scientist.

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Figure 2

Moratoria on the cultivation of genetically modified crops

Regulation of agricultural and veterinary chemicals
Farm businesses require access to safe and effective chemicals to manage weeds, diseases
and pests and to manage the health and wellbeing of their animals. Access to agvet
chemicals depends on an array of regulations administered by the Australian, state andterritory governments. At the national level, the Australian Pesticides and Veterinary
Medicines Authority (APVMA) is responsible for administering regulatory controls of
agvet chemicals up to the point of sale. This includes assessing chemical products for theirimpact on human health, the environment, and trade, as well as for their efficacy.
Registration and assessment requirements for products already registered overseas areoften duplicative, with the result that farm businesses are prevented from, or delayed in,accessing important agvet chemicals. While the APVMA takes into account someinternational evidence, there is scope to do more. It could make greater use of data andassessments from reputable and comparable international regulatory agencies with similar
outcomes in risk management. The Department of Agriculture and Water Resources is
considering reform in this area. The Commission considers that this work should be
pursued with high priority.

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25

State and territory governments are responsible for controlling the use of agvet chemicals
after retail sale. Differences between control-of-use regimes (such as differences inpermitted ‘off-label’ uses) has led to confusion for users and added to compliance costs. A
national harmonised control-of-use regime has been proposed, but progress has been slow
and the proposed scheme only includes minimal harmonisation of off-label use provisions.
Work on implementing a single control-of-use regime (that includes increased
harmonisation of off-label use provisions) should progress more rapidly. The states andterritories should have the regime in place by the end of 2018 — this will be ten years after
the Commission’s review of chemicals and plastics regulation recommended moving to anational control-of-use regime. The lack of progress is disappointing.

Coordinating Australia’s biosecurity arrangements
Australia’s biosecurity system is vital to maintaining the competitiveness of the
agricultural sector and protecting Australia’s unique environment. The entry of serious
exotic pests, weeds or diseases into Australia would have a major impact on Australian
farmers, including loss of production and access to premium export markets. Biosecurity
activities also protect the community from harmful diseases and the natural environment
from exotic threats. An effective biosecurity system should be risk-based, and not used toprotect local industries from international competition.
The Australian Government has recently modernised biosecurity legislation by introducing
the Biosecurity Act, which took effect in June 2016. The new Act is designed to reduce redtape and provide a more flexible risk-based approach to compliance.
Many inquiry participants were highly supportive of the new Act, but some concerns wereraised about self-regulation by industry through approved arrangements and the potential
for adverse impacts on Australia’s biosecurity system. Assessing the impact of approved
arrangements is difficult given the Act only recently took effect. However, businesses werepreviously able to apply to self assess risks under the Quarantine Act 1908 (Cwlth). The
new approved arrangements mainly streamline this application process, reducing costs tobusinesses.
Australia’s biosecurity system will be most effective when resources are targeted to thoseareas of greatest return to the nation, from a risk management perspective (including
whether resources are directed towards pre- and post-border activities or towards particulardiseases, weeds or threats). Positive progress has been made towards a more coordinatedapproach to Australia’s biosecurity arrangements, and developing national priorities forinvestment. A national biosecurity strategy could improve progress.
The current independent review of the Intergovernmental Agreement on Biosecurity isassessing the effectiveness of the agreement and its capacity to support a national
biosecurity system going forward. It is important that this review look at whether clearer
national leadership could improve Australia’s biosecurity system, and consider ways tofurther involve industry in decision making.
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REGULATION OF AUSTRALIAN AGRICULTURE

Heavy vehicle and other transport regulations
Given the long distances between many of Australia’s farms, intermediaries (such as saleyards and abattoirs) and end users, an efficient and cost-effective transport system iscritical to the competitiveness of the agricultural sector.
Most transport regulation concerns for farmers related to heavy vehicle road access.
Regulations on heavy vehicle road access are in place to address spillover effects fromheavy vehicles and their use of the road network (including damage to roads and bridges,
safety concerns, traffic congestion and noise pollution). Farm businesses concerns
included:•inconsistent heavy vehicle regulation between jurisdictions•

restrictions on access to the road network, especially on local roads at the start and endof a journey•

processing times for road access permits•

restrictions on moving oversized agricultural machinery.

The adoption of a heavy vehicle national law (HVNL) in most jurisdictions and thecreation of the National Heavy Vehicle Regulator (NHVR) is a step in the right direction
for improving road access. However, heavy vehicle operators continue to deal withvariations in regulations across jurisdictions and delays in obtaining road permits.
Improving the visibility of road access decisions across the road network could help toaddress these concerns. The NHVR should also be reviewed to ensure that responsibilities
are appropriately assigned under the national system, and the system is operating
efficiently.
It can take a long time to process road access permits because consent is required fromstate and local government road managers. The states and territories participating in the
HVNL should try to increase the number of road routes that are gazetted for heavy vehicle
access, for example by allowing industry to propose and undertake road route assessments
for gazettal (as is currently the case in South Australia), or by directly funding assessmentsof state and local roads (as in Queensland). Ideally, permits and conditions would only be
used when there is a significant risk to public safety, amenity or infrastructure that can only
be managed on a case-by-case basis.
Road access restrictions can be partly attributed to the road funding model which does notlink the cost of road use with road investment. A direct (or more cost-reflective) road user
charging system could ensure a sustainable revenue base to cover road expenditures, andremove the need for road managers to restrict heavy vehicle access. (Pricing reform would
also help address concerns over the effect of pricing distortions on investment in rail
networks.) A Road Fund model (an institutional framework that involves a dedicated body
responsible for managing the allocation of road revenues to road projects) would assist in
ensuring that road investments are directed to where they have the highest value to road

OVERVIEW

27

users. Better data on road user needs and the state of road assets — particularly on local
roads — is also required.
Farmers are required to obtain multiple permits and comply with other regulatory
requirements (such as curfews and police escorts) to move oversized agricultural
machinery on public roads. This can interfere with weather-dependent activities that are
time sensitive and need to take place at short notice. Issuing permits for longer periods oftime or for multiple journeys, or removing the need for permits by making greater use ofgazettal notices, would give farmers far greater flexibility (and could be achieved withoutcompromising the safety of other road users).
Heavy vehicle driver safety regulations are necessary to ensure safety on public roads.
However, the former Road Safety Remuneration Tribunal imposed costs on businesses,
including farm businesses, that were not well justified on the basis of public safety
improvements. The system had significant overlaps with other heavy vehicle safety
regulations, and poor regulatory processes were followed in its establishment. There was
no evidence to suggest that such strong regulation of remuneration in the road transport
sector was necessary. There was also no conclusive evidence of the link between
remuneration and safety outcomes. The abolition of the Road Safety Remuneration
Tribunal has reduced the burden of regulation. The resources reallocated from the Road
Safety Remuneration Tribunal to the NHVR are being used to progress road safety
initiatives, including some that cover all states and territories, and the review of the NHVR
should assess its use of those resources.
Other significant unnecessary transport-related regulatory burdens on farm businesses
include:•coastal shipping regulations which, by giving preference to Australian-flagged ships fortransporting domestic cargo between Australian ports, increase costs for farmbusinesses reliant on sea freight. As an example, Voice of Horticulture said that it costs$7.00 to ship a box of fruit from Tasmania to Brisbane, but only $5.60 to ship it from
Tasmania to China. To increase competition in coastal waters, coastal shipping laws
should be amended to substantially reduce barriers to entry for foreign vessels•

arrangements to support the biofuel industry, such as ethanol mandates and excise
arrangements. These should be removed as they deliver negligible environmental
benefits and impose unnecessary costs on farmers and the community.

Regulation of food labels
Governments in Australia regulate food to support public health and safety and informconsumer decisions about food. Food labelling regulations seek to ensure that labels
convey correct and relevant information to consumers, while regulations regarding the
production process protect consumers against unsafe practices. Food labelling concerns
were raised in four areas — country-of-origin labelling (CoOL), free-range egg labelling,labelling of GM foods, and gluten-free labelling.
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REGULATION OF AUSTRALIAN AGRICULTURE

CoOL requirements have been confusing for consumers and have limited Australianproducers’ ability to differentiate their products. To address these concerns, a new CoOL
framework was announced in March 2016. The new system requires products labelled‘made in Australia’ to identify the proportion of Australian ingredients they contain. The
new system is expected to help clarify the meanings of country-of-origin claims and saveconsumers time (by providing better visual elements on labels). What is unclear, however,is whether the new arrangements will deliver higher net benefits to the community as amandatory or a voluntary system.
A voluntary system could result in higher net benefits because a mandatory system
imposes costs on all producers, but not all consumers’ purchasing decisions are driven bycountry of origin. It is essential that, as part of any future reforms to the CoOL framework,
a RIS is used to assess the costs and benefits of voluntary labelling. This will establish
whether a voluntary labelling system would result in higher net benefits to the Australiancommunity compared to mandatory labelling.
The production methods used for eggs labelled as ‘free-range’ do not always align with
consumers’ expectations (or understanding) of those methods, and consumers lackconfidence that they are getting what they are paying for. The Australian Government
recently announced an information standard for free-range eggs to create consistency andallow consumers to compare different ‘free-range’ eggs. The standard provides a definition
for the term ‘free-range’ (with a maximum outdoor stocking density of 10 000 hens per
hectare) and requires producers who claim that their eggs are free-range to prominently
disclose the stocking density on the label. Compliance with the information standard
provides producers with a safe harbour defence against allegations that they are engaged infalse and misleading conduct.
The new standard should provide greater clarity for consumers. However, because poultry
welfare outcomes are affected by the production system used (and hen welfare is one of the
key reasons why consumers purchase free-range eggs), there should be consistency
between animal welfare and egg labelling standards. The new information standard forfree-range eggs was established independently of the conversion of the Model Code ofPractice for poultry welfare into mandatory national standards and voluntary guidelines,
and may need to be revised after this conversion has occurred.
Some participants argued that labelling of GM foods should not be mandatory because
GM foods are safe (and labelling imposes a cost on businesses). All GM foods must
undergo a safety assessment by FSANZ, and therefore GM labelling is a consumer value
issue, not a food safety issue. The Commission is not convinced that GM labelling should
be mandatory — if consumers want to avoid GM foods, suppliers have an incentive tovoluntarily label their product as ‘GM free’.
Despite GM foods being assessed as safe, some consumers remain concerned, and wantmandatory GM labelling so they can identify which foods to avoid. Consumers’ concerns
about the safety of GM foods would be better addressed by governments engaging with the

OVERVIEW

29

community, including by communicating the risks and benefits of genetic modification
technology.
Gluten-free labels play an important role in ensuring the safety of food for someconsumers. Australia’s gluten-free labelling regulations are stricter than international
standards, and evidence suggests that this is a barrier to the adoption of innovations such as
the ultra-low gluten barley. While the Australian Consumer Law does not allow foods with
detectable levels of gluten to be labelled ‘gluten free’ (even if the gluten present is unlikely
to be harmful), producers are able to establish other claims to communicate the nature of
their products. FSANZ should establish a standard defining the level of gluten that can begenerally tolerated by gluten-intolerant consumers, which would provide producers withguidance on the kinds of claims that would not be deemed misleading.

Employing overseas workers
The ability to access overseas workers (particularly working holiday makers) is important
for addressing labour shortages in the agricultural sector. Hiring local workers can bedifficult because they can be reluctant to work on farms or relocate to rural areas.
The recent proposal to tax working holiday makers as non-residents generated someconcern on the basis that it would dissuade overseas workers from coming to Australia.
Following a review, the Government announced its intention to reduce the proposed tax onworking holiday makers’ income and increase the tax on superannuation that working
holiday makers can claim when leaving Australia (the Departing Australia Superannuation
Payment). Legislation to implement these changes is currently before Parliament. With thischange, nearly all working holiday makers’ superannuation would be collected as tax, but a
portion would be collected by superannuation funds as management fees. Better ways ofcollecting the tax on working holiday makers’ superannuation (such as the AustralianGovernment collecting the superannuation directly) should be explored.
More generally, many temporary residents are unlikely to use superannuation to save forretirement and some farm businesses claimed that being required to pay superannuation for
temporary residents is an unnecessary compliance cost. While there are costs to farmbusinesses in administering superannuation guarantee arrangements for temporary
residents, any changes to address these could have broader and unintended economic
effects.
Farm businesses also reported high compliance costs associated with the temporary work
(skilled) 457 visa programme and noted features of the programme that limit their access tooverseas workers. Many of the concerns raised by participants were addressed in a recent
independent review of the 457 visa programme (the Azarias review).

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Competition policy
Competition is a key driver of innovation and productivity in agriculture.
For most of the 20th century, governments used statutory marketing to shield many ofAustralia’s agricultural industries from competition (a response to concerns about theconcentration of market power among a relatively small number of wholesale merchants
and/or supermarkets). However, during the late 1980s and early 1990s it became
increasingly clear that restricting competition was impairing agricultural industry
performance and imposing significant costs on taxpayers, consumers and downstream
industries. The legislative review program under National Competition Policy provided theimpetus to reform statutory marketing arrangements.
The Rice Marketing Board in New South Wales is Australia’s only remaining statutory
marketing board. One of the board’s objectives is to secure the best possible price forAustralian rice in export markets. However, statutory marketing is not necessary for theAustralian rice industry to pursue price premiums in international markets. In a deregulated
market, competing companies would have an incentive to retain grower loyalty by
maximising price premiums without incurring the costs of statutory marketing. Repealing
the Rice Marketing Act 1983 (NSW) would create incentives to innovate and reduce
marketing costs, and is likely to result in higher returns for rice growers.
The marketing of potatoes in Western Australia was deregulated in September 2016. The
regulation of Western Australia’s potato industry had its origins in concerns about reliablefood supplies during World War II, but in recent years has reduced the choice of potatoes
available to consumers and increased their cost. Deregulation should improve the future
responsiveness of the industry to changing consumer preferences and reduce the cost of
potatoes in Western Australia.
Legislation was passed in Queensland in December 2015 to enable sugarcane growers to
direct how millers market sugar internationally. The legislation restricts competition andwill deter structural adjustment in sugarcane farming, investment in milling capacity andinnovation in sugar marketing. Reduced or degraded milling capacity is likely to reduce theproductivity of the industry and if existing sugar millers decide to leave the industry there
will be less competition.
Queensland Sugar Limited (QSL) was granted charity status in late 2015. Its statedcharitable purpose is to ‘promote the development of the Australian sugar industry’ andsupport its ‘long term prosperity and sustainability’ for the benefit of the ‘generalcommunity in Australia’. However, QSL’s main activity is exporting raw sugar for thecommercial benefit of 14 mills and around 3600 commercial sugarcane farming businesses
in Queensland.
QSL’s charity status provides it with tax concessions that benefit a small number ofcommercial milling and farming businesses (which affects the competitive neutrality of themarket) in an industry which has cost Australian taxpayers almost $2 billion since 1990.
OVERVIEW

31

Charity status also reduces the transparency of QSL’s financial performance, and is likely
to further impede structural adjustment in the sugar industry.
There were calls from the agricultural sector to amend the Competition and Consumer Act
2010 (Cwlth) (CCA) to increase the adoption of collective bargaining by farm businesses(and in so doing help empower farm businesses to negotiate on more equal terms withtraders and supermarkets).
Adoption of collective bargaining in the agricultural sector is low. However, this is not
surprising as collective bargaining is only likely to be attractive to small groups of farmbusinesses with similar production characteristics. In diverse groups of farm businesses,
the benefits to larger and more efficient farms of bargaining individually are likely tooutweigh the costs of bargaining collectively. As such, government efforts aimed at
encouraging the use of collective bargaining under the CCA are unlikely to significantly
increase adoption by farm businesses.
Perceptions in the agricultural sector that the introduction of an effects test to section 46 of
the CCA is likely to shield farm businesses from intense competition — passed on bytraders and supermarkets — are not well supported by evidence. In any event, even if theperceptions were accurate, shielding farm businesses from these competitive pressureswould not be in the interest of consumers. Competition serves the interests of consumers
by lowering the cost, and improving the quality, of food.

Foreign investment in Australian agriculture
Australia, as a small open economy, relies (and has historically relied) on foreign
investment to bridge the gap between national savings and investment. The benefits offoreign investment to Australia’s agricultural sector, including access to new technology,
skills, knowledge and global supply chains, were readily acknowledged by participants.
However, many Australians are concerned about foreign investment in agriculture. The
2016 Lowy Institute Poll found that 87 per cent of those surveyed (1202 respondents) wereagainst foreign investment in agricultural land, an increase of 6 percentage points from the2012 poll.
Australia’s foreign investment review framework aims to balance the benefits of foreign
investment against any risks to the national interest. The Treasurer’s prior approval isrequired for acquisitions of agricultural businesses and land valued above prescribed
thresholds (which trigger review of foreign investment proposals by the Foreign
Investment Review Board).

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In 2015, the Australian Government made a number of changes to the foreign investment
review framework for the agricultural sector, including:•significantly lowering the screening thresholds for agribusiness (to $55 million) andagricultural land (to $15 million, based on cumulative land holdings) for private(non-government) investors from most countries•

establishing a national register of foreign ownership of agricultural land to provide
more public information on foreign investment in Australian agricultural land•

introducing application fees for all foreign investment proposals.

Prior to the changes, there were no agriculture-specific thresholds and agricultural
proposals were assessed in the same way as general business acquisitions and private
investment in developed commercial land.
The lower screening thresholds (combined with different thresholds depending on theinvestor’s country of origin) increases the cost and complexity of investing in Australian
agriculture. This ultimately risks deterring foreign investment in the sector without
offsetting public benefits, particularly as other measures (such as the agricultural land
register) are in place to provide information and increase transparency about foreign
investment in Australian agriculture (figure 3).
It is difficult to objectively demonstrate that national interest considerations are different
for foreign investors proposing to invest in agriculture compared to other sectors of theeconomy that have a higher screening threshold of $252 million (including acquisitions insensitive businesses, such as telecommunications, transport, defence and military relatedindustries). Consistent policy is important for its credibility.
Accordingly, the Commission is of the view that the Australian Government should returnthe screening thresholds for agricultural land and agribusiness to $252 million.

OVERVIEW

33

Figure 3

Top 5 countries, proportion of Australian agricultural landthat is foreign held

Lower thresholds are not the most effective (or efficient) policy tool to address community
concerns about foreign investment in agriculture. And in fact, if anything, public
opposition to foreign investment in agriculture appears to have increased since the change
to the thresholds in 2015.
The Australian Tax Office’s report on the register of foreign ownership of agricultural landshould help dispel some of the myths about foreign ownership of agricultural land (forexample, on the extent, distribution and origin of foreign ownership, figure 3). But facts
can only go so far and may not address many of the concerns (such as those relating tofood security and national sovereignty). Facts need to be effectively translated otherwise
myths and misinterpretation will prevail.
To facilitate a more informed public conversation about foreign investment in agriculture,
the Australian Government should request that the Productivity Commission, through its
annual Trade and Assistance Review, analyse and report on the trends, drivers and effects
of foreign investment.

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Recommendations and findings

Land use regulation
RECOMMENDATION 2.1

Land management objectives should be implemented directly through land use
regulation, rather than through pastoral lease conditions. State and territory
governments should reform land use regulations to enable the removal of restrictions
on land use from pastoral leases.

RECOMMENDATION 2.2

State and territory governments should:•

ensure that, where reforms to Crown lands confer additional property rights on alandholder, the landholder pays for the higher value of the land and any costs
associated with the change (including administrative costs and loss of value toother parties)•

set rent payments for existing agricultural leases to reflect the market value of
those leases, with appropriate transitional arrangements.

RECOMMENDATION 2.3

The Tasmanian Government should repeal the Primary Industry Activities Protection
Act 1995.

FINDING 2.1

Regulation and policies aimed at preserving agricultural land per se can prevent land
from being put to its highest value use.
A right of veto by agricultural landholders over resource development would arbitrarilytransfer property rights from the community as a whole to individual landholders.

RECOMMENDATIONS

35

Environmental regulation
RECOMMENDATION 3.1

The Australian, state and territory governments, in consultation with natural resource
management organisations, should ensure that native vegetation and biodiversity
conservation regulations:•are risk based (so that landholders’ obligations are proportionate to the impacts of
their proposed actions)•rely on assessments at the landscape scale, not just at the individual property
scale

•

consistently consider environmental, economic and social factors.

RECOMMENDATION 3.2

The Australian, state and territory governments should continue to develop
market-based approaches to native vegetation and biodiversity conservation.
Governments could achieve desired environmental outcomes by buying environmental
services (such as native vegetation retention and management) from private
landholders.

RECOMMENDATION 3.3

The Australian, state and territory governments should review the way they engage
with landholders on environmental regulations, and make necessary changes so that
landholders are assisted in understanding the environmental regulations that affectthem, and the actions required under those regulations. This would be facilitated bydoing more to:•recognise and recruit the efforts and expertise ofcommunity-based natural resource management organisations•

build the capability of, and landholders’ trust in, the organisations that administerenvironmental regulations (including local governments).

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REGULATION OF AUSTRALIAN AGRICULTURE

landholders

andOn-farm regulation of water
FINDING 4.1

Complexity and ongoing changes in water regulation contribute to the cumulative
burden of regulation on farm businesses. However, the diversity of Australia’s rivercatchments makes streamlining and harmonising regulation difficult. More flexible
governance arrangements may be needed to develop locally relevant regulatory
settings for accessing water.

RECOMMENDATION 4.1

The Australian Government should implement the findings of the Interagency Working
Group on Commonwealth Water Information Provision to reduce duplicative andunnecessary water management information requirements imposed on farmbusinesses.

RECOMMENDATIONS

37

Regulation of farm animal welfare
RECOMMENDATION 5.1

To facilitate greater rigour in the process for developing national farm animal welfare
standards, the Australian Government should take responsibility for ensuring thatscientific principles guide the development of farm animal welfare standards. To dothis, a stand-alone statutory organisation — the Australian Commission for Animal
Welfare (ACAW) — should be established. The functions of ACAW should include:•

determining if new standards for farm animal welfare are required, and if so, todevelop the standards using good-practice public consultation and regulatory
impact assessment processes•

publicly assessing the efficiency and effectiveness of the implementation andenforcement of farm animal welfare standards by state and territory governments•

publicly assessing the efficiency and effectiveness of the livestock export
regulatory system and making recommendations to improve the system to theAustralian Government Minister for Agriculture.

ACAW should comprise no more than five members (including a Chair) appointed by
the Australian Government following consultation with state and territory governments.
Members should be appointed on the basis of skills and experience, not as
representatives of a particular industry, organisation or group.
It should also include animal science and community ethics advisory committees toprovide independent, evidence-based advice on animal welfare science andcommunity values.

RECOMMENDATION 5.2

State and territory governments should review, by the end of 2017, the way in which
their farm animal welfare regulations are monitored and enforced, and makenecessary changes so that:•

there is separation between agriculture policy matters and farm animal welfare
monitoring and enforcement functions•

a transparent process is in place for publicly reporting on monitoring andenforcement activities•

adequate resourcing is available to support an effective discharge of monitoringand enforcement activities.

State and territory governments should also consider recognising industry quality
assurance schemes as a means of demonstrating compliance with farm animal
welfare standards, provided that the scheme complies (at a minimum) with standards
in law, and involves independent and transparent auditing arrangements.

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REGULATION OF AUSTRALIAN AGRICULTURE

RECOMMENDATION 5.3

The Australian Government should appoint an independent expert or committee topublicly inquire and report, by the end of 2017, on the efficiency and effectiveness of
the livestock export regulatory system.
The review should include an assessment and make recommendations for reform on:•industry-developed initiatives, such as quality assurance programs, as a means ofcompliance with livestock export regulations•

recognition of equivalence of regulatory arrangements in livestock export markets•

the effectiveness of the auditing arrangements used to demonstrate compliancewith livestock export regulatory requirements, including mandatory rotation ofauditors and requirements for auditors to have expertise in animal welfare andanimal husbandry.

If the Australian Commission for Animal Welfare (recommendation 5.1) is establishedin time, it should undertake the first review. It should also undertake subsequent
regular reviews of the livestock export regulatory system.

Regulation of technologies
FINDING 6.1

There is no economic or health and safety justification for banning approved
genetically modified (GM) organisms.
•

The Office of the Gene Technology Regulator (OGTR) and Food Standards
Australia New Zealand (FSANZ) assess GM organisms and foods for their effecton health, safety and the environment. Scientific evidence indicates that
GM organisms and foods approved by the OGTR and FSANZ are no less safe
than their non-GM counterparts.

•

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.

RECOMMENDATIONS

39

RECOMMENDATION 6.1

The New South Wales, South Australian, Tasmanian and Australian Capital Territory
Governments should remove their moratoria (prohibitions) on genetically modified
crops. All state and territory governments should also repeal the legislation that
imposes or gives them powers to impose moratoria on genetically modified organisms
by 2018.
The removal of the moratoria and repeal of the relevant legislation should beaccompanied by coordinated communication strategies designed to increase publicknowledge about the benefits and risks to the Australian community from genetic
modification technologies. The Australian, state and territory governments, the Officeof the Gene Technology Regulator and Food Standards Australia New Zealand should
actively coordinate their communication strategies.

Agricultural and veterinary chemicals
RECOMMENDATION 7.1

The Australian Pesticides and Veterinary Medicines Authority should make greateruse of international evidence in its decisions on agricultural and veterinary chemicals(including by making greater use of data and assessments from trusted comparable
international regulators). Reforms currently underway in this area should be expedited.

RECOMMENDATION 7.2

The Australian, state and territory governments should implement a national
control-of-use regime (including harmonisation of off-label use provisions) for
agricultural and veterinary chemicals by the end of 2018.

Transport
FINDING 9.1

Despite the commencement of the Heavy Vehicle National Law and the establishmentof the National Heavy Vehicle Regulator, there remain significant variations andinefficiencies in heavy vehicle regulation, including costly delays in processing roadaccess permits.

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REGULATION OF AUSTRALIAN AGRICULTURE

RECOMMENDATION 9.1

States and territories that are participating in the Heavy Vehicle National Law should,
as a high priority, increase the number of routes that are assessed and gazetted forheavy vehicle access. Permits should only be required in locations where there are
significant risks to public safety or infrastructure that must be managed on acase-by-case basis.
There are arrangements in South Australia to allow road users to propose andundertake road route assessments for gazettal, and in Queensland to fund road routeassessments and gazettals on both state and local roads. These arrangements should
be considered for adoption in other jurisdictions or expansion in respective states.

RECOMMENDATION 9.2

The Australian, state and territory governments should pursue road reforms to improvethe efficiency of road infrastructure investment and use, particularly through theintroduction of direct road-user charging for selected roads, the creation of Road
Funds, and the hypothecation of revenues in a way that incentivises the efficient
supply of roads.

RECOMMENDATION 9.3

The National Heavy Vehicle Regulator, road managers, and relevant third parties(such as utilities and railway companies) should ensure that requirements for moving
oversized agricultural machinery are proportionate to the risks involved. To achieve
this they should, wherever possible, make greater use of gazettal notices or otherexemptions for oversized agricultural machinery, and issue permits that are valid for
longer periods and/or for multiple journeys.

FINDING 9.2

The road safety remuneration system (including the former Road Safety Remuneration
Tribunal) imposed costs on businesses, including farm businesses, without
commensurate safety benefits, and its abolition has reduced this burden.

RECOMMENDATIONS

41

RECOMMENDATION 9.4

The Australian, state and territory governments should review the National Heavy
Vehicle Regulator (NHVR) as part of the planned review of the national transport
regulation reforms. The review should:•

assess the efficiency and effectiveness of heavy vehicle regulations, including thescope to improve the allocation of responsibilities under the national system•

identify ways in which new funds allocated following the abolition of the Road
Safety Remuneration Tribunal could best be used by the NHVR to improve roadsafety in all states and territories.

FINDING 9.3

Privatisation of major ports has the potential to increase economic efficiency, provided
the public interest is protected through structural separation, regulation or saleconditions. Increasing the sale price of ports by conferring monopoly rights on buyers
is not in the public interest.

RECOMMENDATION 9.5

As a matter of priority, the Australian Government should amend coastal shipping laws
to substantially reduce barriers to entry for foreign vessels, to improve competition incoastal shipping services.

RECOMMENDATION 9.6

Arrangements to support the biofuel industry — including excise arrangements andethanol mandates — deliver negligible environmental benefits and impose
unnecessary costs on farmers and the community. The Australian, New South Walesand Queensland Governments should remove these arrangements by the endof 2018.

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Food regulation
RECOMMENDATION 10.1

The Australia and New Zealand Ministerial Forum on Food Regulation should amend
its policy guidelines to make labelling of genetically modified foods voluntary, andFood Standards Australia New Zealand should remove the requirement in the FoodStandards Code to label genetically modified foods.

RECOMMENDATION 10.2

Food Standards Australia New Zealand should establish a standard defining the levelof gluten in foods that can be generally tolerated by gluten-intolerant consumers,
taking into account:•the varying levels of gluten sensitivity among gluten-intolerant consumers•

scientific evidence on the risks of gluten to these consumers•

the costs and benefits to the Australian community.

RECOMMENDATION 10.3

Food Standards Australia New Zealand should remove the requirement for egg
stamping under the Primary Production and Processing Standard for Eggs and Egg
Products, unless it can be shown through a transparent and rigorous cost–benefit
analysis that egg stamping is more effective and confers higher net benefits comparedto alternative traceability methods.

RECOMMENDATION 10.4

The Department of Agriculture and Water Resources and state and territory foodsafety authorities should determine whether regulatory food safety audits could be
reduced by recognising compliance with commercial quality assurance programs.

RECOMMENDATIONS

43Competition regulation
RECOMMENDATION 12.1

The New South Wales Government should repeal the Rice Marketing Act 1983.

FINDING 12.1

Statutory marketing of potatoes in Western Australia reduced consumer choice andincreased the price of potatoes in Western Australia. Deregulation of the industry willallow potato production in that state to better respond to changing consumer
preferences and reduce the cost of potatoes for consumers.

FINDING 12.2

There is no market failure or other reasonable objective to justify the re-regulation of
the Queensland sugar industry.

RECOMMENDATION 12.2

The Queensland Government should repeal the amendments made by the Sugar
Industry (Real Choice in Marketing) Amendment Act 2015.

RECOMMENDATION 12.3

The Australian Government should legislate to exclude agricultural commodity trading
companies from being granted charity status and receiving the associated tax
concessions.

FINDING 12.3

Collective bargaining arrangements are only likely to be attractive to small groups offarm businesses with similar production characteristics. Government efforts toencourage collective bargaining under the Competition and Consumer Act 2010
(Cwlth) are unlikely to result in a significant increase in adoption among farmbusinesses.

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REGULATION OF AUSTRALIAN AGRICULTURE

FINDING 12.4

The perception in the agricultural sector that introducing an ‘effects’ test to section 46
of the Competition and Consumer Act 2010 (Cwlth) is likely to shield farm businesses
from intense competition in retail grocery markets is ill-founded. In any event, doing sowould not be in the interest of consumers.

Foreign investment in agriculture
RECOMMENDATION 13.1

The Australian Government should increase the screening thresholds for examinationof foreign investment in agricultural land and agribusinesses by the Foreign
Investment Review Board to their previous level of $252 million (indexed annually andnot cumulative).

RECOMMENDATION 13.2

The Australian Government should request that the Productivity Commission, in its
annual Trade and Assistance Review, analyse and report on the trends, drivers andeffects of foreign investment.

RECOMMENDATION 13.3

The Australian Government should set application fees for foreign investment
proposals at the level that recovers the costs incurred by the Foreign Investment
Review Board in reviewing proposals, and should closely monitor the fees to ensure
no over- or under-recovery of costs.

RECOMMENDATIONS

45

1

About this inquiry

This inquiry is about regulation that affects farm businesses.
The Australian Government asked the Productivity Commission to identify regulations that
impose an unnecessary burden on farm businesses, with a focus on those regulations thathave a material impact on the competitiveness and productivity of Australian agriculture.
And, where there are legitimate policy goals underlying the regulations, to look at whether
there is scope to achieve the regulatory objectives in a more efficient way.
Regulation can benefit farm businesses (and the community more broadly) where it meets
econonomic, social or environmental objectives. While regulation imposes costs on thoseaffected, the benefits of well-designed and -implemented regulation should outweigh thecosts to the community as a whole. Good regulation should also achieve its stated policy
objectives at least cost to the community.

1.1

Why regulatory burden matters

Regulatory burden matters because it can weigh heavily on farm businesses and undermine
the agricultural sector’s productivity and competitiveness. As the Australian Bureau of
Agricultural and Resource Economics and Sciences said:
Although some regulations benefit farmers, other regulations, which are unnecessarily
burdensome, complex or redundant, can constrain productivity growth and impose heavy costs
on farm businesses. (Gray, Oss-Emer and Sheng 2014, p. 31)

The National Farmers’ Federation (NFF) also said:
The opportunities for the agricultural sector in the coming years have been well documented
through Government initiatives such as the National Food Plan and the recent AgriculturalCompetitiveness White Paper, along with industry reports such as the Blueprint for Australian
Agriculture. Despite this, the sector is being limited in its efforts to seize these opportunities
through a tangle of complex regulations which increase costs to industry and government, andlimit our competitiveness as individual businesses and a nation as a whole. (sub. 61, p. 6)

For farm businesses, reducing the regulatory burden can mean less time spent dealing withregulation and more time spent on productivity-enhancing activities. The Australian Dairy
Farmers said:
When regulation is unnecessary, it often adds an avoidable cost to dairy farmers, which has tobe absorbed by the business. This can have the effect of constraining growth or limiting a
farmers’ ability to allocate funds to necessary aspects of the business. (sub. 63, p. 2)

ABOUT THIS INQUIRY47

For the community, less regulatory burden on businesses can mean lower prices (because
farmers face lower costs), fewer taxpayer dollars spent on regulation, and improved living
standards. For governments, lower regulatory burden means that more resources can be
devoted to higher priority areas.
Improving the efficiency and effectiveness of the regulatory environment is important for
all sectors of the Australian economy, but particularly for the agricultural sector given that
Australian farmers export a significant proportion of their production — about two-thirdsof Australia’s agricultural production is exported (although this varies by commodity,
figure 1.1) (DFAT 2015b).
Figure 1.1

Share of production exported, selected agriculturalcommoditiesa
2014-15a ‘Beef’ includes veal and ‘lamb’ includes mutton. ‘Production’ refers to volume of production, except forvegetables, where the gross value of production was used.

Sources: Productivity Commission estimates based on ABARES (2015a) and ABS (2016k).

Exporters of many agricultural products (such as beef, wheat and wool) are price takers inglobal markets. This reduces their capacity to absorb or pass on costs to consumers, whichmeans that regulatory burdens can weigh heavily on their competitiveness (Grafton,
Mullen and Williams 2015). As the Tasmanian Farmers and Graziers Association said:
We are continually told that farmers must operate in a global market — and we do. That means
our prices are set by factors well beyond our control; and we have limited capacity to claw backmore of the retail dollar to cover increasing on-farm costs. (sub. 16 , p. 3)

Dependence on international markets is also expected to increase as the global market forfood and fibres expands (Australian Government 2015a; Gray, Oss-Emer and Sheng 2014).
Also, most Australian farms are small businesses (box 1.1), and regulatory burdens canhave a significant and disproportionate impact on small businesses. There are two main
reasons for this:48

REGULATION OF AUSTRALIAN AGRICULTURE•

where there are fixed compliance costs (such as learning about the regulations andestablishing systems to comply with regulations) small businesses typically have anarrower revenue base over which to spread these fixed costs•

small businesses often do not have specialised staff to handle regulatory matters andcomplying with regulations means managers are diverted from other farm businessactivities.

As AgForce said:
The large majority of broadacre livestock and grain enterprises in Queensland are small
businesses … and the majority of these businesses are operated without any employees,
particularly for specialist beef and livestock-grain operations. As a result, many producers lackthe time and financial resources to stay abreast of their many responsibilities and incorporate
ongoing regulatory changes. (sub. 17, p. 2)

Box 1.1

Some facts about Australia’s agricultural sector

Australia’s agricultural sector is diverse, with a range of agro-ecological zones and products
including meat and poultry, grains, horticulture, milk and wool.
Over the past three decades, the sector’s share of both GDP and employment has fallen from
5 per cent to about 2 per cent. In 2014-15, the gross value of Australian farm production was
about $55 billion.
Farmers own or manage about half of Australia’s land mass and agriculture accounts for about
two thirds of Australia’s water use.
Australian farms vary in size, ranging from small family-owned/operated businesses to large
agricultural corporations, but most Australian farms are small (measured by turnover). In
2014-15, there were about 123 000 businesses mainly engaged in agricultural production
employing about 275 000 people.

Multifactor productivity growth for the agricultural sector has averaged about 2 per cent per year
over the past three decades, although it has slowed in recent years.
Sources: ABS (2012, 2014a, 2015a, 2015d, 2015f, 2015g, 2015h, 2016i); ABARES (2016a, 2016b); ACIL
Allen Consulting (2014); Gooday (2015); NRAC (2012).

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49

1.2

There are regulations at every stage of the
agricultural supply chain

At each stage of the agricultural supply chain there are regulations in place, including forland acquisition and preparation, capital and labour use, transport of inputs and outputs,
marketing and product sales (table 1.1). The NFF said:
The types of regulation impacting farm business are diverse and come from many sources.
(sub. 61, p. 7)

All levels of government impose regulations that affect the agricultural sector.
•

The Australian Government is mainly involved in regulating national andinterjurisdictional issues, including biosecurity and access to agricultural and veterinary
chemicals. The Department of Agriculture and Water Resources is responsible forabout 90 non-fisheries related Acts. This is a small proportion of the regulations
affecting farm businesses. Others include those from the environment, treasury,
immigration, infrastructure and industry portfolios.

•

State and territory governments administer regulations including in the areas of roadtransport, environmental protection, native vegetation management, land tenure andland use. As an indicator of the extent of regulation at the state and territory level,
AgForce said that in Queensland, agriculture was affected by over 75 Acts andregulations covering 17 590 pages (sub. 17, p. 2).

•

Local governments implement regulations (often on behalf of state and territory
governments) in the areas of land use, planning and (in some cases) environmental
protection, as well as setting conditions for local road access by heavy vehicles andfarm machinery.

Regulations covering some areas, such as aspects of environmental protection, are coveredby all three levels of government. There are also other regulations, such as those relating towater use and temporary labour from overseas, that affect a range of businesses across the
economy, but are of particular concern to some farm businesses.

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REGULATION OF AUSTRALIAN AGRICULTURE

Table 1.1

Regulation across the agricultural supply chaina,b

Key Australian Government
involvement/regulation

Key stages of the
agricultural cycle• native title• environmental protection− biodiversity conservation− international treaties− natural, cultural and world
heritage

Acquisition, leasing andpreparation of land

• land tenure and use− land use planning− building regulations− pastoral leases• environmental protection− native vegetation− natural and cultural
heritage• agricultural and veterinary
chemical standards

Agricultural production andon-farm processing• agricultural and veterinary
chemicals• animal welfare• biosecurity− pest and disease control
and response• food certification for export• building regulations• genetically modified crops• land use planning• livestock regulation andidentification• transport− road access− transport and use ofmachinery− vehicle licensing• water access and regulation

Transport and logistics• transport regulations− road access− transport and use ofmachinery− vehicle and machinery
licensing• animal welfare• livestock regulation andidentification• food safety• food packaging• biosecurity− pest and disease control
and response• food certification for export• statutory marketing• biosecurity− pest surveillance• export control• environmental protection− biodiversity conservation− international treaties− natural, cultural and world
heritage• national land transport
regulatory frameworks• water access andregulation• welfare of exported animals• biosecurity− pest surveillance• export control• national land transport
regulatory frameworks• shipping and maritime safety
laws• welfare of exported animals• biosecurity− pest surveillance• export control• food labelling• food standards• welfare of exported animals

Marketing

Key state/territory government
involvement/regulationa Italics denote local government responsibility in at least one jurisdiction. b There is also a range ofissues and regulations that affect all stages of the agricultural supply chain. Cross-cutting issues include
investment opportunities and access to capital, as well as regulations relating to competition, foreign
investment, immigration, industrial relations, work health and safety, and taxation.

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51

Moving from farming-specific to general regulation
Australian farmers were critical of, what they claim to be, an increasing and excessive
regulatory burden. While Australian governments have removed many agriculture-specificregulations in recent decades (in the early 1980s, there were more than 60 statutory
marketing boards; today just one remains), over the same period the volume and reach of
regulations aimed at addressing environmental and social policy issues increased.
Both the nature and pace of this change is likely to have contributed to the burden reported
by farming businesses. For example, the NFF told the Commission that:
In addition to the myriad of local and state government environmental regulations farmers haveto comply with on a daily basis, farmers are also regulated by the 1,000-odd page
Environmental Protection and Biodiversity Conservation Act 1999 (EPBC Act) … Further, as
the footprint of environmental laws is extended with new listings – an activity that does not
require consent today may require approval if a new listing comes on line. This results inconsiderable confusion for farmers. (sub. 61 , p. 10)

The NSW Farmers’ Association also commented that:As small business operators, farmers are exposed to a range of regulatory mechanisms. In
addition, as landholders they must also comply with numerous environmental requirements,
and as food producers there are a number of food safety standards that they must meet.
(sub. 72, p. 6)

Most of the concerns about regulatory burdens raised in this inquiry were about regulations
that are not specific to the agricultural sector.

1.3

What the Commission has been asked to do

The terms of reference for this inquiry (set out at the beginning of this report) ask theCommission to:•

identify specific areas of regulation that are unnecessarily burdensome, complex or
redundant•

identify unnecessary restrictions on competition•assess whether the current level at which matters are regulated is appropriate and if
better coordination across governments would reduce unnecessary overlap•

have particular regard to areas where there is greatest scope to reduce unnecessary
regulatory burden and pursue regulatory objectives in a more efficient (least cost) way•

identify priority areas for regulatory reform•

provide recommendations to alleviate regulatory burdens identified.

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REGULATION OF AUSTRALIAN AGRICULTURE

The scope of the inquiry
For the purpose of this inquiry, ‘regulation’ is defined as any laws or other government
rules (such as standards and codes of conduct) that influence or control the way people andbusinesses behave.
Regulations at all three levels of government that have a material impact on thecompetitiveness of farm businesses and on the productivity of Australian agriculture wereconsidered in this inquiry. Regulations imposed along the supply chain (including
regulations introduced to meet the requirements of international markets) were also
examined.
Areas not in scope included:•

related but distinct primary sectors, including fisheries and forestry — regulatory issues
affecting marine fisheries and aquaculture are being investigated as part of a separate
Commission inquiry•

non-regulatory policies, such as user charges and taxation — these are potentially
important for improving the productivity and competitiveness of the agricultural sector
but are not regulatory in nature.

This inquiry did not examine the multiple and complex regulatory frameworks associatedwith water planning or establishing water markets. Following the abolition of the National
Water Commission in 2015, the Commission has taken over its review functions. The
Commission will look into water policy reform in more depth as part of upcoming
inquiries on the progress of the National Water Initiative and on the effectiveness of theimplementation of the Murray Darling Basin Plan.

1.4

Our approach to reviewing regulation

A key question for this inquiry was whether regulation, and the way it is implemented,
imposed an unnecessary regulatory burden. An unnecessary regulatory burden exists when
it is possible to achieve the objective of the regulation at a lower cost (including lower
compliance and administrative costs and less distortion to the economy).
Some of the ways in which unnecessary burdens can arise include:•

poorly targeted or excessive regulatory coverage — where the regulation covers more
activities than was intended or warranted, or where the reach of regulation has become
more extensive over time•

redundant regulation — well-designed and implemented regulation can become
ineffective or unnecessary with changes in circumstances or technology•

overly complex or prescriptive measures which reduce the flexibility of regulators andthose regulated to respond to changing circumstances
ABOUT THIS INQUIRY53

•

heavy-handed regulators, such as those who conduct overly frequent inspections•

inconsistent or overlapping reporting requirements, either within or between
governments, which can generate confusion and extra work for businesses (PC 2007,
2011c).

Regulations can also sometimes have unintended effects and can cause businesses to adjust
their production decisions and processes. This can also inhibit innovation and competition
or reduce incentives to improve productivity.
Best practice or good regulation achieves worthy objectives at least cost (box 1.2).
Regulation should be appropriate (addresses a real economic, environmental or social
concern), effective (achieves the objective of the regulation) and efficient (does not impose
unnecessary distortions or burdens).
Box 1.2

What is good regulation?

According to the Organisation for Economic Cooperation and Development, good regulation
should:•serve clearly identified policy goals, and be effective in achieving those goals•

have a sound legal and empirical basis•

produce benefits that justify costs, considering the distribution of effects across society and taking
economic, environmental and social effects into account•

minimise costs and market distortions•

promote innovation through market incentives and goal-based approaches•

be clear, simple, and practical for users•

be consistent with other regulations and policies•

be compatible as far as possible with competition, trade and investment-facilitating principles atdomestic and international levels.

Source: OECD (2005, p. 3).

To identify regulations that impose unnecessary regulatory burdens on the agricultural
sector, the Commission asked four questions (figure 1.2).
•

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 objective)?

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REGULATION OF AUSTRALIAN AGRICULTURE

Figure 1.2

A framework for reviewing agricultural regulation

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55

When reviewing regulation it is essential to revisit the objectives of the regulation — thatis, to establish that there is a clear and valid rationale for the regulation. Even if regulation
was initially appropriate, changes can occur in markets and technologies and in people’s
preferences and attitudes over time which can mean that the rationale for the regulation is
no longer valid.
However, an in-principle reason for regulation does not of itself justify regulation (oranother policy tool). Because government action involves costs, it is also necessary todemonstrate that the benefits to the community (the difference, compared to thecounterfactual, that the regulation will make), outweigh the costs.
Regulation is just one policy option, so the cost-effectiveness of other policy tools mustalso be considered. It is therefore crucial to ask if the regulations (and the supporting
institutional arrangements) are the best solutions. Do they provide a higher net benefit to
the community than other feasible options (box 1.3)? And once it has been established that
regulation is the best policy tool, it is important to ensure that the regulation achieves its
stated policy objectives at least cost to the community.
Box 1.3

Regulation or another policy tool?

Policy makers have a range of options available for achieving policy objectives. These include:•

Doing nothing — in some cases the most cost-effective option will be to do nothing,including, for example, when government action is unlikely to change behaviour (or would
make it worse), or where the costs of a policy are expected to outweigh the benefits.

•

Information, education and advertising campaigns — governments can influence thebehaviour of individuals and businesses by providing information and advice. The Registerof Foreign Ownership of Agricultural Land is an example of governments providing facts toincrease transparency and help dispel some myths about foreign investment in agriculture.

•

Financial incentives — taxes, penalties and government payments influence the behaviourof individuals and businesses. An example is governments buying environmental services(such as native vegetation retention and management) from farmers.

•

Self-regulation, voluntary codes of conduct — industry formulates rules, standards andcodes of conduct, and is responsible for enforcing them. These ‘light handed’ regulatory
options can have lower costs and offer more flexibility than government regulation.

•

Co-regulation — this is a hybrid form of regulation in which industry typically develops andadministers particular codes, standards or rules, and the government provides formal
legislative backing to enable the arrangements to be enforced.

•

Regulation — governments prescribe the behaviour it expects from individuals and/or
businesses by setting the rules.

Factors that are relevant to the choice of policy tool include: the extent of risk, the severity of the
problem and the need for flexibility and certainty.
Sources: Australian Government (2014c); Better Regulation Task Force (2003).

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Given the broad scope (and depth) of the regulatory environment affecting farmbusinesses, the Commission was greatly assisted by inquiry participants to identify specificregulations of concern. The inquiry focused on unnecessary regulations that have amaterial impact on the competitiveness of farm businesses and on the productivity ofAustralian agriculture. However, regulations and suggested potential remedies wereassessed against providing a net benefit to the Australian community, not just to theagricultural sector.
With only limited quantitative evidence on the costs of regulations, the Commission’sviews about whether regulations have a material impact were based on judgments about
the potential gains to the Australian community from removing or amending regulations.
Other factors taken into account included the number of businesses and consumers affected(directly and indirectly) and whether the regulation spanned multiple jurisdictions or
agricultural industries.

1.5

Benefits, not just costs, are acknowledged

The agricultural sector openly acknowledged that regulation is critical to its ability tofunction effectively (box 1.4). The NFF, for example, said it:… acknowledges the need for effective regulation. Often regulation provides important
protections for the business owners, workers, and the community, and sets a minimum level of
performance required to meet community standards and expectations. (sub. 61, p. 6)

Australia’s biosecurity regulatory arrangements were also highlighted as providing a
reputational advantage to Australian farmers and access to premium export markets.
Australian Pork Limited, for example, said:
Australia’s favourable biosecurity status enables it to produce premium agricultural goods
competitively, efficiently and sustainably. Current biosecurity protocols make Australia one of
only a few countries that maintains a high disease-free status for pig herds. (sub 36, p. 4)

However, inquiry participants also identified regulations that impose unnecessary
compliance and administrative costs on farm businesses and that reduce flexibility,
discourage innovation and restrict the use of more efficient production techniques. The
Queensland Farmers’ Federation, for example, said:
We remain concerned … that the current excessive amount of regulation acts as a hindrance toproductivity and stifles innovation. (sub. 32, p. 2)

The NFF also said:
Each day farm businesses battle through a myriad of burdensome, complex and duplicative
regulations which make it difficult for farmers to ensure Australia has an ongoing, reliable andsustainable source of domestically produced food and fibre. (sub. 61, p. 7)

ABOUT THIS INQUIRY57

The West Australian Pork Producers Association noted that:
Over time … the amount of regulation and cross-over between agencies has reached a tipping
point where there are incessant calls for reducing ‘red tape’. Producers are frequently frustrated
by the protracted processes they are confronted with when they want to expand or improve
productivity through innovation. Some of these regulations have created uncertainty forinvestors, over-cautious decision making and excessive time-frames. (sub. 24, p. 3)

Box 1.4

Inquiry participants recognise the benefits of regulation

NSW Farmers’ Association suggested that:
While there is often a negative interpretation given to regulatory burden, the Association recognisesthat many rules and regulations are necessary for the effective operation of business. The task forgovernment is to ensure that regulations foster effective operation and do not compromise thecompetitiveness of Australian businesses. (sub. 72, p. 6)

WAFarmers said that:
Agricultural producers and growers are not adverse to comply with appropriate regulatory obligations
as these are seen as being beneficial to production systems and market access … WAFarmers
recognises the importance of effective and necessary regulation to maintain and uphold the industry’s
reputation as a producer of safe and nutritious food … we support comprehensive food standards andregulation across the production and processing chain to ensure the integrity of the industry.
(sub. DR226, pp. 1–2)

AusBiotech said that its members:… recognise that the application of good regulation is critical to build confidence and certainty; it
underpins public investment and ensures the competitiveness of Australian agriculture. Ambiguous orabsent regulation elevates risk and is a strong barrier to innovation and as a result undermines
economic benefit. (sub. 20, p. 2)

Voice of Horticulture recognises that:… regulation can be of benefit to horticulture where it meets economic, social and/or environmental
objectives and is designed and implemented efficiently and effectively. (sub. 42, p. 1)

Australian Chicken Growers Council stated that:Food safety is critical to the chicken industry, and regulation in this area is necessary to protect
consumers and also the reputation of the product and the industry itself. (sub. 51, p. 6)

EDOs of Australia said that:Environmental laws exist to protect the environment and conserve natural resources in the public
interest, for the benefit of all Australians, including farmers. (sub. 60, p. 4)

Vegan Australia submitted that:
Animal welfare regulations are in place to ensure that community expectations for the humane
treatment of animals are met. (sub. 25, p. 2)

The cumulative burden of regulation provoked the most comment in consultations
conducted on this inquiry. AgForce said:
The regulatory burden within Australian agriculture is effectively a cumulative one; resulting
from the impact of many individual regulations of which each regulation, seen in isolation,
does not appear to represent a significant imposition. (sub. 17, p. 2)
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The Tasmanian Farmers and Graziers Association also said:
It is only when we have the accumulated burden of federal, state, local government andregional council associations that we begin to understand that with four or more layers ofcompeting and often contradictory regulation it becomes near impossible to find an economical
way through. When coupled with seemingly minor regulatory imposts, the competitive burden
can become overwhelming. The malaise of regulation often leads to developments notproceeding on the basis that it is all too hard. (sub. 16, p. 2)

The Consolidated Pastoral Company, Australia’s largest private beef producer (operating
20 stations across Queensland, Western Australia, and the Northern Territory), estimatedthat it complies with, or takes account of, 327 Acts, regulations and codes (including 46
environmental Acts and regulations across four jurisdictions). It also noted that:
The wide range of laws, regulations and codes, and the complexity of some of these regulatory
systems, across not only three tiers of Government but also between the three northern
jurisdictions of Western Australia, the Northern Territory and Queensland unnecessarily adds
to the cost of doing business for northern beef producers. (sub. 71, p. 3)

The cumulative burden of regulation reflects the diversity of farm activities and the degree
to which these activities are regulated. The time and effort required to keep track ofregulation also expands when activities or issues are regulated by multiple agencies indifferent jurisdictions, and when regulations are subject to ongoing change. What thissuggests is that reducing even relatively small regulatory burdens could make a difference
to farmers.
The cumulative burden can also be compounded when regulatory demands coincide witheach other or with the operational pressures of the farm business. The Australian Bureau of
Statistics, commenting on the burden of responding to surveys, noted that:
Stakeholders indicated that there were a number of factors contributing to this survey burden –including: the sheer volume of survey requests farmers receive from multiple organisations(both government and industry); the time required to provide a response, which many found too
short; the timing of the surveys, particularly where these are received at times of peak businessactivity; and the cumulative impact of all of those factors. (sub. 59, p. 1)

Previous reviews found a heavy burden of regulation
In 2007, the Commission examined regulatory burdens on the primary sector and foundthat from the perspective of farmers, mining companies and other primary sectorbusinesses, governments imposed a heavy burden of regulation. The Commission made anumber of recommendations to remove or reduce regulation (PC 2007).
In 2013, the Australian Bureau of Agricultural and Resource Economics and Sciences also
released the findings of a review of selected regulatory burdens on agricultural and forestry
businesses (Gibbs, Harris-Adams and Davidson 2013). The review found that theAustralian Government could take action to reduce the unnecessary burden in 8 of the of

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59

the 32 issues investigated and that for a further 4 issues there was scope for the AustralianGovernment to address cross-jurisdictional issues.
A number of studies have attempted to quantify the regulatory burden facing Australian
farmers (box 1.5), and found that it can be substantial.
Box 1.5

Estimating the regulatory burden on farm businesses

ProAnd Associates (2016) — Regulatory costs in the red meat and livestock industries
This study identified major regulatory costs for different types of businesses in the red meat andlivestock industries. These costs included:•

items identified or underpinned in legislation affecting the red meat and livestock industries•

costs to others that are passed on to enterprises in the red meat sector•

non-legislated industry initiatives, whose roles would otherwise be filled by regulation•industry-imposed costs such as Meat and Livestock Australia marketing and research anddevelopment levies•

on-costs, payroll tax, superannuation, training and recruitment costs, leave entitlements,
workers’ compensation costs and occupational health and safety•bank charges, utilities and fuel.

For the year 2014-15, regulatory costs were estimated to be about 10-15 per cent of total
revenue for beef producers, 16 per cent for sheep producers, and about 4 per cent for the
feedlot sector.
Stenning & Associates (2013) — Measuring red tape: understanding the complianceburden on Tasmanian businesses
This report used a survey-based method to quantify various regulatory costs incurred by
Tasmanian businesses, including:•time spent on regulatory compliance•the cost of external assistance to meet regulatory requirements•

delay costs.

For the agriculture, forestry and fishing industry, it was estimated that businesses that employ
staff spent 19.9 hours per week meeting regulatory requirements, whereas businesses that did
not employ staff spent 3.2 hours per week.
Holmes Sackett (2014) — A snapshot of the red tape costs on farms in Australia
This study estimated the cost of complying with regulatory requirements, including:•overhead expenses, which relate to whole farm management and cannot be attributed toany specific enterprise•the time cost required for completing red tape related tasks.

This study estimated that grazing farms spent an average of $24 625 and 16 days per year
performing tasks relating to regulatory compliance, while mixed farms spent $43 935 and
29 days per year.
Sources: Holmes Sackett (2014); ProAnd Associates (2016); TDPIPWE (sub. 62, att. 1).

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However, it is important to note that these estimates of regulatory burden do notnecessarily equate to ‘unnecessary’ regulatory burdens because:•the costs calculated were only those which relate to the business administration ofregulation (‘red tape’). Other costs incurred by government or relating to the economic
distortion of the regulation were not considered•

not all the costs in the estimates were regulatory costs (such as industry-imposed costs
and labour-related costs)•

all administrative costs of regulation were included rather than those that were‘unnecessary’.

That said, quantifying the costs of unnecessary regulatory burdens is not easy. This is inpart because some compliance activities are unavoidable or would have been undertaken
by businesses in the absence of regulation.

1.6

Conduct of the inquiry

The terms of reference for this inquiry was received from the Treasurer on 20 November
2015. To help interested parties to prepare submissions, the Commission released an issues
paper in December 2015. Following the release of the draft report in July 2016, theCommission conducted eight formal public hearings located across several capital cities
and regional centres. Hearing transcripts are available on the Commission’s website.
The Commission consulted with farmers and peak industry groups in the agricultural sector
as well as with Australian and state government agencies, academics and other interested
parties, as well as with their counterparts in New Zealand. The Commission also undertook
case studies involving semi-structured interviews with farm businesses in northern New
South Wales and southern Queensland (appendix C).
The Commission received 312 submissions, as well as a large number of brief submissions
from private individuals and organisations expressing opinions on the regulation of farmanimal welfare in Australia. A list of those who made submissions and/or participated in
discussions is in appendix A. Submissions are available on the Commission’s website.
The Commission also received a large number of personal responses and views fromprivate individuals expressing opinions on the regulation of Australian agriculture. These
are also available on the Commission’s webpage.

ABOUT THIS INQUIRY

61

2

Land use regulation

Key points•

Land is essential for farming. About half of Australia’s land is used for agricultural
production, with the majority of land used for livestock grazing on native vegetation.

•

Land use regulation is in place to address a range of economic, social and environmental
objectives. For land use regulation, the challenge is to promote efficient land use while
striking a balance between different uses (including agriculture, residential and resource
exploitation) and objectives (such as economic development and conservation).

•

Pastoral leases offer less security of tenure than freehold land, which, in principle, cancreate uncertainty for leaseholders and investors. However, evidence about whether tenure
inhibits the ability of farm businesses to raise capital or undertake investments is mixed.

•

Restrictions on the use of Crown land hamper the ability of farmers to flexibly respond toenvironmental, economic and other factors.

•

Reforms recommended in recent reviews on Crown land and pastoral leases have thepotential to improve security of tenure and land use flexibility for leaseholders and promote
the efficient use of, and investment in, land.
– Restrictions on land use should be removed from pastoral leases and land management
objectives should be implemented directly through land use regulation.
– Prima facie, the conversion of pastoral leases to freehold land will encourage investment
and allow land to be put to its highest value use, although there may sometimes be acase for Crown ownership of land.
– In general, where reforms to Crown land confer additional property rights on a landholder,that landholder should pay the higher value of the land and any costs associated with thechange.

•There is a role for governments in promoting the efficient allocation of land rights and thetimely resolution of conflicts. However, policies that seek to protect existing land uses as ana priori objective are likely to impose a net cost on the community.
– Conflicts between residential and agricultural land uses should be managed directly
through planning regulations, rather than indirectly through ‘right to farm’ laws.
– Granting farmers a right of veto over land access by resource companies introduces
additional transaction costs to the allocation of mineral rights and is not consistent withfacilitating efficient land use.

•

Planning and zoning regulations represent a significant source of unnecessary burdens forfarmers. The adoption of recommendations from recent reviews of these regulations has
been patchy and slow. Regulations often fail to meet their objectives because they are notsufficiently adaptable or targeted for managing agricultural land uses. In many cases, these
problems could be addressed by ensuring that regulation is ‘fit for purpose’ and adopting
outcomes-based regulation.

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63

Land is essential for farming and grazing. About half of Australia’s land is used for
agricultural production, with the majority of land used for livestock grazing on native
vegetation, followed by dryland cropping and grazing on modified pastures (2015b). For
many farmers, farming land is not only their place of business, but also their home.
Farmers are facing increasing pressures to find more productive and innovative ways to
use land in order to keep up with the demand for agricultural products. Land available for
agriculture is unlikely to increase over time given increasing competition from other land
users, and as a result of land degradation, climate change and water availability(DAFF 2012).
Land use by the agricultural sector has also come under greater scrutiny from thecommunity in recent years as a result of:•changing patterns of settlement, including increasing residential populations in city
fringe (peri-urban) areas that historically were used for agricultural production•

the adoption of intensive farming practices, which can affect the amenity of nearby
residential areas•

heightened community concerns about the environmental and animal welfare impactsof farming practices.

There is also increased pressure on regulators to intervene in land use conflicts between
farming and other activities. This includes calls for governments to curtail particular land
use activities (such as intensive farming) and to protect incumbent farming activities,
including through ‘right to farm’ laws and a right of veto over resource exploration on
farming land.
Effective land use regulation is critical to ensuring that land is put to its highest value use,
for the benefit of the community as a whole. The highest value use for land varies case bycase and, in some instances, not using the land could be the most efficient use of the land.
Given Australia’s geography, a lot of our land is likely to be best suited to farming or
grazing.
The challenge for regulators is to manage the tensions between competing demands forland in a way that facilitates the allocation of land to its highest value use. This includes
balancing land use and development against other considerations such as the environment
and native title interests. It also involves resolving conflicts between competing land uses,
such as agricultural production, resource exploration and residential areas.
This chapter looks at the role of government in land use (section 2.1) and briefly outlines
current land use regulations (section 2.2). It then examines the regulatory burdens
associated with land use for farm businesses, including those relating to:•

agriculture on Crown lands, in particular pastoral lease arrangements (section 2.3)•

planning, zoning and development assessment processes (section 2.4)

64

REGULATION OF AUSTRALIAN AGRICULTURE•

land use conflicts between residential and agricultural developments (section 2.5)•

land access conflicts between resource and agricultural sectors (section 2.6).

Many of the unnecessary regulatory burdens identified in this chapter can be mitigated bygovernments ensuring that land use regulations:•are fit for purpose and directly address the regulatory problem•

minimise transaction costs associated with land use dealings•

allocate landholding costs on a ‘user pays’ basis.

2.1

The role of government in land use

Rights and interests in land are intrinsically legal constructions that rely on government for
their recognition and enforcement. When property rights are clear, secure and can be
traded freely, they will usually be acquired by those willing to pay the most for them. This,in principle, allows land to be put to its most valuable use, which maximises community
welfare (box 2.1).
However, private ownership of land or the private exercise of land rights can sometimes
lead to inefficient outcomes and there may be a case for government intervention.
•

The way land is used can have spillovers that affect third parties (Rama et al. 2012). A
feedlot, for example, can produce noise and odours that reduce the amenity of nearby
residential areas (a cost unlikely to be taken into account by the feedlot operator).
Regulation can be used to manage this type of ‘externality’.

•

Efficient agglomeration (or clustering) of similar land uses may not occur without someform of intervention. Regulation to facilitate agglomeration can result in positive
externalities beyond the benefit received by the individual landholder. Examples
include transport efficiencies, knowledge spillovers and labour pooling (Krugman,Obstfeld and Melitz 2015).

•

Land assets can be overexploited (in the case of common resources, such as forests) or
under-provided (in the case of public goods, such as biodiversity values). Regulation
can be used to manage the use of common resources and the provision of public goods.
For example, development approval processes can help protect native vegetation andbiodiversity values, and preserve areas of environmental and cultural significance.

Regulation can also be used to help manage competing uses and users of land (where thebenefits outweigh the costs to the community). This can be done by assigning land to aparticular use (for example, through land use planning regimes) or facilitating theco-location of different types of land uses (for example, pastoral leases and native title
rights can coexist on the same piece of land). That said, land use conflicts cannot be fully
eliminated. This is because patterns of settlement and land use are constantly evolving over

LAND USE

65

time. Nevertheless, regulation can help ensure that effective processes are in place tomanage and resolve these conflicts.

Box 2.1

What is the ‘value’ of a land use activity?

The overriding objective of land use regulation is to facilitate land being put to its highest valueuse. The ‘value’ of a land use refers to the total benefits (positive value) and costs (negativevalue) of using a piece of land for a particular purpose. The value of a particular land use
depends on the parcel of land in question and assessments need to be made on acase-by-case basis. For example, the use of land for conservation is most valuable in areas
with high biodiversity values.

Community-wide value
The value of a land use refers to its costs and benefits to the community as a whole. This not
only includes the value that accrues to the person using the land, but also accounts for any
impacts on third parties or the broader community. This means that the value of a land use isoften affected by what adjacent or nearby land is used for. For example:•

the use of land for resource extraction or for industrial purposes is often accompanied byemissions (such as noise and odour), which may affect the amenity of neighbouring
properties•

agricultural land use can provide habitat ‘corridors’ for native wildlife, which is anenvironmental benefit enjoyed by the community as a whole.

More than the monetary value
The value of a land use is not limited to monetary or financial benefits. It also includes
non-monetary costs and benefits associated with that land use, such as environmental andsocial impacts. For example:•

the value of residential land use includes the social benefit of providing people with a place
to live and facilitating social communities•

the value of using land for farming not only covers the value of agricultural outputs produced,
but also includes the value of the environmental impacts (e.g. degradation of water quality)
and social impacts (e.g. contribution to food security) associated with the use of the land.

These impacts can be difficult to identify and quantify, but that does not mean they should be
ignored.

Long-term value
The value of a land use should be assessed on a long-term basis. Hence, a moderate-income
land use (such as agriculture) may be of higher value than a high-income use that renders theland less productive in the long term (such as resource extraction).

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REGULATION OF AUSTRALIAN AGRICULTURE

2.2

How is land use regulated?

Private interests in land can be held as freehold, leasehold, or native title (box 2.2). These
different forms of land interests are often described as conferring a ‘bundle of rights’ on
the title holder, and can include the right to use, transfer, manage or possess land. The
precise content of the rights conferred depends on the nature of the land interest inquestion. Specific legislation or regulations can modify the rights and responsibilities that
accrue from holding title in land. For example, environmental and planning laws may
restrict a landholder’s ability to undertake certain activities or developments on their land.
State and territory and local governments share responsibility for land use regulation. Landuse regulation varies across jurisdictions, but each is underpinned by a land use planningregime that provides an overarching scheme for land use management, and comprises:•

legislation, which includes state and territory Acts governing planning, zoning,development assessments and the environment•

statewide and regional plans, strategies and policies, which set out objectives andactions relating to the use, development, and protection of land•

local planning schemes, which involve land use zoning and development standards, aswell as local strategic plans and planning overlays (these are required to be consistent
with state policies and guidelines (PC 2011d).

In addition, all jurisdictions have regulation for managing specific land use issues,
including those that relate to:•land tenure, including leases of Crown land (such as pastoral leases)•

the resolution of land use conflicts, including legislation regulating land access by
resource companies.

These regulations also interact with Australian government regulation, the most prominentof these being the native title regime (box 2.3).

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Box 2.2

Rights and interests in land

Freehold
A freehold (or fee simple) estate is the most complete form of land interest that can be held by aperson. It grants a perpetual interest in land and allows the estate holder to deal with the land,
including selling, leasing, or mortgaging the land. However, freehold title does not grantabsolute ownership of land, as the Crown may withhold certain rights (such as, in Australia,
subsurface mineral and resource rights), and the estate holder must comply with laws that can
restrict the way the land is used (such as planning and environment laws). Most properties inAustralia are held as freehold.

LeaseholdA leasehold estate is created when Crown land is leased to a person or corporation by thegovernment, either for a specified term or in perpetuity. Crown leases are administered at thestate and territory level, meaning that leasehold arrangements vary between jurisdictions.
Crown leases in each jurisdiction are also typically governed by several different regimes.
In some cases, leasing regimes are tied to the type of land to be leased. For example, in
Victoria, leases of reserved forests, Crown reserves and unreserved Crown land are eachmanaged under separate pieces of legislation. Other regimes centre on the identity of thelessee or the purpose of the lease. For example, in Western Australia, different regulatory
regimes exist for pastoral leases, leases to Indigenous parties and leases as part of the War
Services Land Settlement Scheme. Some regimes are general and not restricted to certain
types of land or land uses, such as Crown leases in the Northern Territory and leases under the
Crown Land Management Act 2009 (SA).

Native title
Native title recognises the interests and rights of Indigenous people in relation to land, and can
include the right to the possession, use and occupation of land or the right to access land forparticular purposes. The native title rights and interests held by particular Indigenous people
depend on both their traditional laws and customs, and what interests are held by others in thearea concerned. Native title can coexist with other rights and interests in land, such as pastoral
leases, on the same piece of land.
The nature of native title varies internationally, as a result of differences in historical, legal andother factors. For example, whereas native title in some overseas jurisdictions (such as
Canada, the United States, New Zealand and Norway) is affected or influenced by constitutionalor treaty recognition, this is not the case in Australia.

Other mechanisms for land access
Access to Crown land may also be granted through a licence, permit or a profit-à-prendre. In
general, a licence or permit allows a person to occupy, access or use the land in a specified
way. A profit-à-prendre gives the holder the right to take natural resources (such as timber andwild game) from the land. Unlike a lease, these rights do not confer an interest in the land andcannot be transferred to another party.
Sources: Australian Trade Commission (nd); Butt (2001); Dow and Gardiner-Garden (1998); KimberleyLand Council (2014); Queensland Government (2015d); VDSE (2012); WA DRDL (nd).

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REGULATION OF AUSTRALIAN AGRICULTURE

Box 2.3

About native title processes

Native title describes the interests and rights of Indigenous people in relation to land. It can
include the right to the possession, use and occupation of land or the right to access land forparticular purposes.
The Native Title Act 1993 (Cwlth) allows for recognition of native title through various claims
and mediation processes.
•

Native title determination: A native title determination is a decision by the Federal Court ofAustralia that native title does or does not exist in relation to a particular area of land or
waters.

•Compensation: The Federal Court of Australia may determine that native title holders havethe right to be compensated because native title has been extinguished in whole or in part,or because governments plan to undertake acts that extinguish native title in the future.

•

Future acts: Activities occurring after 1 January 1994 that affect native title (‘future acts’) aregoverned by the future act regime. Future acts can include the making or amendment oflegislation, or the grant or renewal of licences and permits, such as those for resource
exploration and extraction. This regime specifies what future acts are permitted, theprocedures to be followed before the future act can be done, the effect that the act will haveon native title, and whether compensation will be payable for interference with native title
rights.

•Indigenous land use agreements (ILUAs): An ILUA is an agreement between a native titlegroup and others about the use and management of land and waters. ILUAs allow people tonegotiate flexible and pragmatic agreements to suit their particular circumstances. An ILUA
can be negotiated and registered whether there is a native title claim over the area or not.
When registered, ILUAs bind all parties and all native title holders to the terms of theagreement.

Sources: Australian Government (2015e); Kimberley Land Council (2014); National Native Title
Tribunal (2011, 2015).

2.3

Agriculture on Crown land

A significant proportion of agricultural activity takes place on land that is leased from the
Crown. Across Australia, the predominant form of agricultural leasehold is pastoral
leases — this is where Crown land is leased for the purpose of grazing livestock onrangelands. Pastoral lease arrangements exist in New South Wales, Queensland, Western
Australia, South Australia and the Northern Territory. They make up approximately:•

36 per cent of land in New South Wales•

52 per cent of land in Queensland 1•

34 per cent of land in Western Australia

1 Includes pastoral holdings, grazing homestead perpetual leases and grazing homestead freeholding leases.

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69•

40 per cent of land in South Australia•

45 per cent of land in the Northern Territory (Australian Government 2015e; South
Australian Government, sub. 57; Queensland Government 2013b; WA DoL 2015a).

Pastoral leases are generally situated in the arid and semi-arid regions and tropicalsavannas (PC 2002).

The rationale for leasehold land
Pastoral lease arrangements were initially established in the mid-18th century to manage
early pastoral occupation while preserving future government options for land allocation
and use (Holmes 2000; PC 2002b). Over time, the policy objectives of pastoral leases havechanged (box 2.4). In the past two decades, pastoral leases have been used as ‘instruments
for the delivery of emergent national policies on Indigenous land rights, on sustainability inresource use, on biodiversity protection, and on facilitating non-pastoral enterprises andinterests’ (Holmes 2014, p. 428). Pastoral leases continue to facilitate the cultural objectiveof retaining grazing as a form of land use.
Box 2.4

Pastoral leases and policy instruments

The policy objectives of pastoral leases have shifted over time. Holmes (2000) identified six key
phases in the development of New South Wales legislation underpinning pastoral leasearrangements, with similar trends occurring in other jurisdictions.
1. 1847 – 1861: Pastoral leases provided temporary low-cost access for early pastoralists while
preserving future options on land allocation and use.
2. 1861 – 1884: Pastoral leases were used as a means for ‘unlocking the land’ and facilitatingcloser settlement.
3. 1884 – 1950s: Pastoral leases were used to facilitate even closer settlement, with thesequential, managed subdivision of pastoral leases into family-sized holdings.
4. 1950s – 1970s: Pastoral leases had no clear policy function. New South Wales tinkered withthe system and responded to lessees’ concerns about tenure upgrading. Rents werereduced and other concessions were made.
5. 1980s – 1996: Pastoral leases were used as a mechanism for encouraging sustainable use
and the conservation of biodiversity, with controlled public access and the emerging use ofrangeland monitoring.
6. 1997 – present: Pastoral lease management evolved to account for the recognition of native
title claims and the practicalities of coexisting titles.
Sources: Holmes (2000); PC (2002b).

In some cases, pastoral leasehold also facilitates the co-location of native title andnon-Indigenous property rights. This is because, unlike freehold land, a grant of a pastoral
lease over Crown land does not necessarily extinguish native title (Wik Peoples v The State70

REGULATION OF AUSTRALIAN AGRICULTURE

of Queensland (1996)). In this way, Crown leasehold is an essential instrument for
maintaining the continued coexistence of native title rights and agriculture.

Key concerns relating to pastoral lease regulation
The main concerns raised in this inquiry about pastoral lease regulation were that:•

pastoral leases offer less security of tenure than freehold land, which can create
uncertainty for leaseholders and investors (making it potentially more difficult or
expensive to obtain finance)•

pastoral lease conditions restrict the use of land for non-pastoral activities andadditional approvals are often required to undertake these activities.

The Western Australian Government, for example, in light of the restrictive conditions
imposed by pastoral leases, questioned whether pastoral leases continued to be the rightform of tenure:
While pastoral leases may have an important role historically in the agricultural development of
the regions concerned, they may not necessarily be the most appropriate instrument in the morevolatile market conditions which now typify most agricultural industries. In part, this may be
due to the restrictive nature of the land tenure. (sub. 54, p. 10)

Similar concerns were raised in recent reviews of pastoral leases (AustralianGovernment 2015e; CSIRO and JCU 2013; NSW Government 2013, 2014a, 2014b, 2015b;
QSDIIC 2013; WA DRDL 2011; Western Australia Public Administration
Committee 2014). In its White Paper on Developing Northern Australia, the AustralianGovernment pointed to the importance of removing restrictions on pastoral leases:
Much more of the land across the north can potentially be used for a variety of agriculture
projects … Removing unnecessary restrictions imposed on pastoral leaseholds will help to
unlock the potential of this land, to the benefit of pastoral leaseholders, including Indigenous
leaseholders and the Australian economy in general. (2015e, p. 35)

A number of jurisdictions have proposed or are implementing reforms to their leasearrangements (box 2.5).

Lack of tenure security can create uncertainty
Previous studies in this area found security of land tenure to be a key concern for many
pastoral leaseholders, due to the uncertainty it creates for land users and other investors(CSIRO and JCU 2013). Uncertainty can arise as a result of short lease terms (box 2.6) —for example, while WA legislation allows for a term of up to 50 years, some leases were
granted for as little as 18 years (Western Australian Government, sub. 54). There can also
be uncertainty about lease renewal and extensions — for example, lease renewal
provisions in Western Australia and Queensland include clauses that may allow part or allof an expiring term lease to be resumed for public purposes, such as conservation reserves.
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Box 2.5

Recent developments in pastoral lease regulation•

In New South Wales, proposed reforms include allowing certain perpetual pastoral leases tobe converted to freehold. The NSW Government has also indicated that it intends to revise
the list of activities permitted on pastoral leasehold land.

•

In Queensland, changes to the pastoral lease arrangements now allow for rolling leases for
grazing, agricultural and pastoral purposes for terms of up to 50 years. Other reforms
include simpler arrangements for converting leases to freehold titles, and revised rental
arrangements on term leases.

•

In Western Australia, the Rangelands Reform Program has proposed the introduction of a
new type of leasehold, the Rangelands Lease. This lease will allow land to be used for awider range of purposes including tourism, Indigenous land management practices, grazing,horticulture and broad scale agriculture.

•

In the Northern Territory, amendments to the Pastoral Land Act in 2014 allow permits to be
granted for up to 30 years for non-pastoral use on less than half of all pastoral leasehold
land. This includes uses such as horticulture, aquaculture, tourism and forestry.

Sources: Australian Government (2015e); NT DLRM (2015); Thynne Macartney (2014); WA DoL (2015b).

Box 2.6

Lease tenure in Australia

Across Australia, pastoral leases are issued as either term leases or perpetual leases:•

A term lease is a lease that is issued for a defined period of time. Term leases may berenewed or extended, although there is no guarantee that renewal or extension will be
granted.

•A perpetual lease is a lease that is granted in perpetuity and therefore does not require
renewal or extension (provided that lease conditions are met). Perpetual leases for pastoral
purposes are not granted in all jurisdictions.
Term lease

Perpetual lease

State

Initial term

Renewal or extension

Term of renewal or
extension

Availability

NSW

Up to 40 years

At any time

Up to 40 years

Yes

Qld

Up to 50 years

Yes

SA

42 years

In last fifth of lease or, for rolling Up to 50 years
leases, during the last 20 years
Rolling 14-year term
14 yearsWA

Up to 50 years

During last ten years

Up to 50 years

No

NT

Up to 25 years

Before last year

Up to 25 years

Yes

No

The process for lease renewal or extension of term leases varies across jurisdictions. Renewals
or extensions are usually subject to certain land management conditions being met by thelessee. By contrast, in South Australia, each lease is subject to assessment by the Pastoral
Board every 14 years and, subject to meeting certain land management conditions, the lease isextended by 14 years to maintain the original term of 42 years.
Sources: PC (2002b); Queensland Government (2015d).

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REGULATION OF AUSTRALIAN AGRICULTURE

Evidence presented to this inquiry on the practical implications of leasehold tenure was
mixed. Some participants argued that a lack of tenure security can make long-term
investment less attractive, and that uncertainty around lease renewal and extensions canmake it difficult for farm businesses to obtain financing (GrainGrowers sub. DR247; Larry
Acton, sub. 55; Western Australian Government, subs. 54 and DR285).
Other participants said that the form of land tenure can be a barrier to capital investment,
but identified the main impediments to improved productivity as ‘inflexible conditions ofuse, … increasing annual rents and cumbersome and expensive processes to convert tofreehold tenure’ (NFF, sub. DR216, p. 16; WAFarmers, sub. DR226, p. 3).
While noting that pastoral leases may no longer be the right form of tenure, the Western
Australian Government (sub. 54) said that pastoral lease tenure per se is not an issue formost financial institutions. Other factors, such as risk and the ability to repay loans, weresaid to be more important determinants of the ability to secure funding (WA DoL 2013).
The Ag Institute of Australia also expressed doubt that the length of lease terms had any
practical implications for security of tenure:
Given the length that pastoral leases are normally granted for (typically 40+ years), thesuggestion that this results in less security for the leaseholder is spurious. Major investments inthe form of pastoral leases are held by large public (e.g. AACo) and private companies (e.g.
Jumbuk Pastoral Company, NAPCo, Minderoo); overseas investors are keen to participate.
(sub. DR182, p. 13)

Similarly, the Australian Property Institute said that uncertainty associated with leaserenewals was overstated:
There is a pattern there of more or less automatic renewals, and so that’s something that therural lending areas of the banks and financial institutions are fully aware of. (trans., p. 152)

The South Australian Government also said:
There is no evidence to suggest that the system of pastoral lease tenure in South Australia limits
open market transfers of pastoral leases compared with other forms of tenure. Pastoral leaseterms are for a maximum of 42 years but there has been a number of examples in recent years
where properties with less than 28 years remaining on their leases have been purchased at highmarket value. (sub. DR295, p. 4)

Restrictions in pastoral leases can impede land use diversification
In general, pastoral leases require land to be used for a specific purpose, with limited scopefor activities unrelated to the pastoral (or agricultural) use of land, including ecotourism
and conservation. The permitted uses of land under pastoral leases in different jurisdictions
are summarised in table 2.2.

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Table 2.2

Permitted land uses for pastoral leases
Pastorala

Agricultural

Related usesb

Other uses

NSW: Western Lands Act 1901









QLD: Land Act 1994









SA: Pastoral Land Management
and Conservation Act 1989









WA: Land Administration Act 1997









NT: Pastoral Land Act 1992









a Refers to the grazing or pasturing of stock. b Permits certain activities undertaken as supplementary or
ancillary to the primary pastoral use, including agricultural and horticultural activities and tourism.
Sources: PC (2002b); WA DoL (nd).

Past inquiries into rangeland management found that improved access to diversification
options can help increase investment (WA DRDL 2011). The ability to diversify can also
give farm businesses the flexibility to adapt to changing market conditions and otherenvironmental factors (Limestone Association of Australia, Inc., sub. DR152). That said,
not all land is suitable for diversification, as land can sometimes only have one viable use.

Reforming pastoral leases
Recent reviews (including those outlined in box 2.5) identified a number of reforms to
improve pastoral lease arrangements. Each jurisdiction faces a unique set of considerations
when regulating pastoral land, such as environmental factors and the prevalence of native
title claims. As a result, regulation that is appropriate for one jurisdiction may beill-adapted to the circumstances of another — there is no one-size-fits-all approach toreforming pastoral lease arrangements.
Extending the length of leases
Security of tenure for leaseholders can be improved by:•extending the term of leases: in its White Paper on Developing Northern Australia, theAustralian Government proposed increasing the term of leases to 99 years (AustralianGovernment 2015e)•

introducing rolling leases or creating rights of renewal: recent reforms to the
Queensland pastoral lease regime now allow for rolling leases for grazing, agriculture
and pastoral purposes for terms of up to 50 years (Queensland Government 2015d).
The Western Australian Government is also currently pursuing reforms that would‘provide pastoral lessees with certainty that their lease will be renewed for the sameterms and conditions, provided lessees are able to demonstrate compliance with theterms of their pastoral lease and the Land Administration Act 1997’ (Western
Australian Government, sub. 54, p. 11)

74

REGULATION OF AUSTRALIAN AGRICULTURE•converting term leases to perpetual leases: in New South Wales, the Western Lands
Advisory Council has deemed that ‘perpetual leases are appropriate and effective in
limiting damage to sensitive rangelands’ (NSW Government 2014b, p. 25).

The Commission supports reforms that extend the terms of leases. These reforms will
increase the security of tenure for leaseholders and help to facilitate investment in the
agricultural sector.
Streamlining land use restrictions
Productivity gains could also be made by removing land use restrictions in pastoral leases(Australian Government 2015e; CSIRO and JCU 2013). For example, the removal of land
use restrictions can improve land use flexibility and encourage a wider range of investmentin the area.
Many jurisdictions are in the process of reforming their regulatory arrangements to allow
or facilitate land use diversification, including expanding the list of activities permitted on
pastoral leasehold land (box 2.5). The Commission supports efforts to remove land use
restrictions in pastoral leases where practicable.
Some current restrictions, such as stocking requirements, are in place to ensure that land
management objectives are met. There is scope to streamline pastoral lease conditions byimplementing these objectives directly through land use regulation, rather than throughpastoral lease conditions. Some participants expressed concern that this would lead to adegradation of land management practices on leasehold land, such as overgrazing(Environmental Farmers Network, sub. DR174). However, the removal of land
management conditions from leases is not intended to reduce or eliminate land
management requirements; rather, those requirements should be contained in land use
regulation (including primary and delegated legislation). This would also improve thetransparency of land use management and could reduce the cost of administering pastoral
leases.
However, there may be some exceptions where it is preferable to implement conditions
through the lease instrument. This includes conditions that are impractical to implement
through regulation, such as where the condition is specific to a small number of leases orvaries between different leases. In other instances, it may be preferable to implement a
condition through the lease if doing so improves compliance or enforceability.

RECOMMENDATION 2.1

Land management objectives should be implemented directly through land use
regulation, rather than through pastoral lease conditions. State and territory
governments should reform land use regulations to enable the removal of restrictions
on land use from pastoral leases.

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Alternative forms of leasehold
One approach to facilitate non-pastoral land use is to change its tenure — that is, to convert
all or part of a pastoral lease to a different form of lease, such as a Crown lease orcommercial lease. The availability of different forms of leases varies between states andterritories. Jurisdictions should ensure that processes for converting a pastoral lease toother forms of tenure are not unduly burdensome.
Jurisdictions should also consider whether new or additional forms of tenure are an
appropriate way of improving land use flexibility for leaseholders. For example, inWestern Australia, a proposed ‘rangelands lease’ would allow land to be used for ‘multiple
and varied uses’, provided the use is ‘broad scale and consistent with the preservation andongoing management of the rangelands as a resource’ (WA DRDL 2011, p. 8). The newrangelands lease regime would operate alongside the pastoral lease regime.
Conversion of pastoral leases to freehold land
In some jurisdictions, leaseholders (in some instances) can apply to convert their pastoral
lease to freehold land. For example, in Queensland, perpetual leaseholders (but not termleaseholders) may apply to convert their lease to freehold land (Land Act 1994 (Qld)s. 166). In general, the purchase price is calculated on the basis of the unimproved value ofthe land, plus the market value of commercial timber on the land belonging to the state(Queensland Government 2016).
Respondents to the NSW Crown Lands Legislation White Paper said that pastoral leases(including term leases and perpetual leases) are disadvantageous to graziers relative tofreehold land (NSW Government 2015b). The majority of Western Lands lessees who
made a submission to the Crown Lands Legislation White Paper supported the conversionof perpetual leases to freehold land and some argued that developers were more reluctant
to invest in leasehold land (NSW Government 2015b).
The Australian Government recently stated that ‘pastoral leaseholders should have theability to apply for broader, more secure and tradeable forms of tenure, including freehold,in a manner that complies with the [Native Title Act 1993 (Cwlth)]’ (AustralianGovernment 2015e, p. 37).
However, a number of participants stressed that leaseholding is not inherently ‘inferior’ tofreeholding (Australian Property Institute, trans., p. 146; Centre for Ecosystem Science,sub. DR200; NSWFA, sub. DR161). For example, the NSW Farmers’ Association said thatthe majority of leaseholders in the Western Division were satisfied with leasehold tenure,especially in light of the cost of converting to freehold:
The majority of leaseholders in the Western Division are happy with their leasehold status, butsome would like more flexibility with their covenants … This cost of conversion for mostgrazier leases would be far greater than the cost of converting a cultivation or agricultural lease
due to the sheer size of most grazier leases, which make up the majority of the Western
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Division in NSW. As such, the costs are likely to far outweigh the benefits of conversion inmost cases. (sub. 72, p. 8)

Crown leasehold may also be socially beneficial where it facilitates coincident land use.
For example, pastoral leases can facilitate the continued coexistence of native title rights
and agriculture, and preserve public access to land (Centre for Ecosystem Science,sub. DR200).
To account for this, the conversion of pastoral leases to freehold should (and does) occur
on a voluntary basis, giving pastoralists the option to continue under leasehold tenure.
Conversion applications should also be (and are) assessed on a case-by-case basis bygovernment, with the government retaining the power to deny or impose conditions on
applications.
Principles for reform to Crown Land
Reforms to Crown leases should aim to promote more efficient land use. Prima facie,
allowing the conversion of pastoral leases to freehold land would encourage investment
and allow land to be put to its highest value use. However, in some instances, it may beappropriate for the Crown to retain ownership of land, including where other land interests
exist or alternative future land uses are envisaged, such as native title rights or transport
corridors.
Reform should only proceed if there are net benefits. Assessing net benefits involves
weighing the benefits of reforming pastoral lease arrangements against any costs of doing
so. These costs include any loss of value to other parties (including native title holders andthe public) as well as any procedural and administrative costs associated with
implementing those reforms (for example, resolving conflicting interests in the land). The
net benefits of any particular reform will depend on the circumstances of the jurisdiction inquestion, including geographical factors and how property rights are currently allocated.
Reforms that allow the transfer of value from other parties to leaseholders will need toconsider issues such as compensation or payment. Where a reform confers additional
property rights to leaseholders, there will be a transfer from government (on behalf of thecommunity as a whole) to the leaseholders.
As a general rule, the recipient of any additional property rights should bear theopportunity cost of that allocation. This is because aligning the incidence of the costs andthe benefits of property rights helps ensure that their allocation is efficient and that land is
put to its highest value use. By contrast, changes to regulations or policies generally that
affect the value of existing property rights, typically do not call for compensation(PC 2001b).
This suggests that a leaseholder whose tenure is extended or converted to freehold should
pay the market value for that extension or conversion. In addition, the beneficiaries of the

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77reform should be responsible for any loss of value to other parties as well as any
procedural and administrative costs associated with that change:
In principle … the beneficiary of the broader tenure should be responsible for the costs of
conversion, including potential native title compensation. This ensures that moves to broader
tenure happen where the economic gains are greatest and consistent with native title interests.
(Australian Government 2015e, p. 38)

That said, the efficient allocation of property rights could be hindered if the prices that
landholders currently face are distorted. For example, if a freehold estate can be purchased
at market value, but pastoral lease rent payments are set well below market price, theincremental cost of converting to freehold will be artificially inflated. In this case, aleaseholder may be unwilling to pursue conversion even if freeholding is more efficientthan leaseholding. For this reason, state and territory governments should align rent
payments with the market value of the pastoral lease.
There are, however, some challenges with putting this principle into practice. For example,
in some instances, the market value of a lease may be difficult to determine empirically,
particularly if there is insufficient information about the market or where there is only one
prospective purchaser for the lease. In addition, governments will need to carefully
consider how quickly to implement changes (such as phasing in changes to rent payments)and how to manage the transition process, particularly where the incumbent leaseholder’sexisting rent payments are significantly below market value.

RECOMMENDATION 2.2

State and territory governments should:•

ensure that, where reforms to Crown lands confer additional property rights on alandholder, the landholder pays for the higher value of the land and any costs
associated with the change (including administrative costs and loss of value toother parties)•

set rent payments for existing agricultural leases to reflect the market value of
those leases, with appropriate transitional arrangements.

Native title processes
In some parts of Australia, changes to current land uses may be constrained by native title
interests. Reforms to pastoral lease regulation may also trigger native title processes as a‘future act’ (box 2.3).
Some participants noted that native title interests can constrain changes in land use(AgForce, sub. DR246; Limestone Association of Australia, subs. 48 and DR 152). Others
said that native title processes are complex, lengthy and costly (Consolidated Pastoral

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Company, sub. 71; NFF, sub. 61; NTDPIF, sub. 67; Sheepmeat Council of Australia andCattle Council Australia, sub. 88, attachment; Western Australian Government,
sub. DR285). For example, the National Farmers’ Federation said:
In some instances, consideration of native title claims has taken decades, and remains
unresolved. Of the claims that remain unresolved a substantial number involve disputes withoverlapping claims or the composition of the claim group. (sub. 61, p. 8)

Native title processes can be burdensome for farm businesses and regulators. However,native title processes recognise legitimate interests in land and are essential to ensuring thatthose interests are given due weight in land use decisions. Native title processes are also
inherently complex (Australian Property Institute, sub. 66), especially given the nature of
the evidence that must be considered.
Participants provided very little evidence about the extent to which the regulatory burden
imposed by native title processes is unnecessary. In particular, participants did not provide
specific examples of instances where proponents had incurred unnecessary costs as a resultof the current regulatory arrangements. And, while some participants called for reform or
proposed specific amendments to the Native Title Act 1993 (Cwlth) (Consolidated Pastoral
Company, sub. 71; NFF, sub. 61; NTDPIF, sub. 67; Western Australian Government,
sub. DR285), there was little discussion of what regulatory shortfalls these reforms shouldor would address.
The Australian Government has undertaken to improve native title processes for farmbusinesses and Indigenous Australians. In its White Paper on Developing Northern
Australia, the Australian Government outlined plans to:•

improve the efficiency of native title processes through the COAG’s Investigation into
Indigenous Land Administration and Use•

finalise all current native title claims within the next ten years•

invest $10.6 million in pilot land tenure reform projects, to be developed inconsultation with investors, Indigenous Australians and other stakeholders•

invest $20.4 million to better support native title holders to engage with potential
investors (Australian Government 2015).

2.4

Planning, zoning and development assessment

Planning, zoning and development assessment processes underpin the management of land
use across Australia and play an important role in balancing the social, environmental andeconomic impacts of development.
State and territory governments have primary responsibility for planning and development
activities within their jurisdictions. State planning frameworks set out the generalprinciples for planning and development, and lead agencies engage in broad strategic land

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79use planning and guide more detailed, regional and local plans. In most jurisdictions, land
use planning at a local level and development assessments are devolved to local
governments, but consistency with state-level instruments is required and there issignificant scope for improvements in this area.
Concerns about planning and zoning regulation and development assessment and approval
processes are not new. The Commission has previously undertaken a number of studies inthis area (PC 2011d, 2012b, 2013a, 2014e). Many of the concerns raised in this inquiry
were in line with those raised in previous reviews. These include concerns about:•unnecessarily complex regulation and processes•

the time and cost associated with development assessment processes•

prescriptive and over-restrictive regulation•

poorly designed or targeted regulations.

(Concerns relating to environmental regulations affecting land use, such as native
vegetation regulation and its implementation, are discussed in chapter 3.)
Most state and territory governments have recently conducted, or are conducting, major
reviews of their planning and zoning regulations. However, progress implementing therecommended reforms has been patchy and slow.
Previous Commission studies have also identified an increase in the stated objectives forplanning, zoning and development regulation over time (PC 2011d). This has led to an‘objectives overload’ and regulatory objectives that are unclear and conflicting (PC 2011d,
2012b, 2013a). For example, the Victoria Planning Provisions states two conflicting
objectives for the Farming Zone:•

to ensure that non-agricultural uses, including dwellings, do not adversely affect the useof land for agriculture•

to encourage the retention of employment and population to support rural communities(Animal Industries Advisory Committee 2015).

It is difficult to assess the efficiency and effectiveness of regulation when regulatory
objectives are poorly articulated or inconsistent.

Complexity of land use regulation and duplication of processes
The complexity of land use planning arrangements and duplication of regulation between
different levels of government was a key concern for participants. The NSW Farmers’
Association said that ‘poor regional planning is a result of excessive compliance[requirements] combined with a lack of strategic planning’ (sub. 72, p. 7). The National
Farmers’ Federation (2013b) also argued that there is ‘planning overload’ across multiple
jurisdictional levels and across different policy areas. The regulatory framework for

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planning, zoning and development assessments is complex. The Commission’s Planning,
Zoning and Development Assessment report described the regulations and agencies in thisarea as ‘one of the most complex regulatory regimes operating in Australia’(2011d, p. xxvi). The report also noted that:
By its very nature, the task of planning and zoning land to enable those land uses which will
optimise the welfare of communities and the nation is complicated and is becoming more so …
A large number of policy agendas impact on planning and zoning considerations … The
inherently challenging features of this task include: positive and negative impacts on others(such as on neighbourhood character, traffic congestion, air and sound pollution), insufficientor ‘asymmetric’ information; future generations not being part of decisions that ultimately will
impact on them; and conflicting outcomes of different stakeholders so that the costs of reachingcommunity consensus on objectives are high. (2011d, pp. xx–xxi)

The task for planners is also expected to become more complex over time, in light of issues
such as population growth, congestion, changes in environmental (including biodiversity)pressures and regulations, the continuing need to adapt to climate change and growing
community expectations that they will be consulted on changes in their neighbourhood.
Coordination across different levels of government
Participants called for better coordination across the different levels of government. The
Australian Chicken Growers Council said there was ‘a strong case for a common set of
guidelines for use in all state and local government areas’ (sub. 51, p. 4). The Australian
Forest Products Association also advocated for:[T]he Federal Government to work with other jurisdictions (state and local government) to both
review landscape management approaches across tenures and apply an improved holistic
landscape management approach, where multiple values are actively managed, incorporating
collaborative action across land tenures and managers. (sub. 11, p. 8)

While some state-level standardisation of land use regulation is desirable, this must be
weighed against the advantages of administering planning and zoning regulations at the
local level. In particular, local administration and enforcement may give greater flexibility
for regulations to be appropriately adapted to suit local social, economic andenvironmental needs, especially where the consequences of decision making are borne by
the local community. This is in line with what is known as the ‘subsidiarity principle’: thatdecisions should be made by the lowest level of government capable of considering all
costs and benefits, provided that it has sufficient resources and capacity to do so (box 2.7).
However, in many instances, local governments are not adequately resourced to undertakethe activities within their legislative remit (PC 2012b). A number of participants alsosuggested that local government does not have the skills or staff to deal with planningapplications.

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Box 2.7

The subsidiarity principle‘Subsidiarity’ is the principle that decisions should be made by the lowest level of government
capable of dealing with the issue. The reason for this is that smaller local governments havespecific knowledge and expertise relevant to their communities (such as decisions aboutdevelopment approvals), and that knowledge can be used to assess the competing interests atstake at a lower cost, thereby maximising net welfare of the local community.
Whether a particular level of government is the right decision maker depends on a number orfactors.
•

Whether it is capable of considering all costs and benefits. Decisions are best made at a
local level when their impacts are contained within that area. A decision is unsuited for local
determination if its effects are felt outside the relevant local government area. This isbecause the local decision makers tend to act in the interest of their constituents, rather thanthe broader community.

•

Whether it is sufficiently resourced. Proper decision making requires the relevant
government body to be adequately resourced. This includes ensuring adequate staff andskills to properly assess the decision, as well as to deliver, monitor or enforce the outcomeof the decision-making process.

Source: PC (2012b).

Australian Pork Limited, for example, said:
Local councils are often ill-equipped to deal with land planning applications. A lack ofunderstanding of intensive land use such as piggeries exacerbates this situation. Many local
councils have lost corporate knowledge and lack sufficient training and staff resourcing.
(sub. DR282, p. 2)

One option for mitigating resourcing constraints is service sharing. For example, the Rural
Council Planning Flying Squad program provides services to rural and regional councils
across Victoria, on matters including major projects and developments, long-term land use
issues and strategic plans, as well as providing immediate planning support(VDTPLI 2016). There is scope for greater adoption of service sharing, so that local
governments can better achieve the scale and skills required for discharging their
responsibilities.
Inconsistencies at the local government level
Inconsistent planning requirements between different local government areas was anotherarea of concern. The Victorian Farmers Federation (2014a) said that such inconsistencies
can make it difficult for farmers to understand their obligations under both planning andenvironmental law. To address this issue, reforms are underway in Tasmania that will see
the introduction of a single planning scheme for the state (TDoJ 2015).

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To some extent, these inconsistencies arise from the variation in local communities acrossAustralia — differences in local issues and values can sometimes merit different regulatory
approaches.
However, regulation at a local level can make arm’s length decision-making difficult,especially in small communities. For example, Australian Pork Limited said that‘community pressure on council staff and councillors is also resulting in local councils
becoming overly conservative, avoiding taking an informed position as this leads tocommunity repercussions’ (sub. DR282, p. 2).
Outcomes at the local government level can also be susceptible to bias, especially if
decision makers are affected by the issue under consideration. The Australian Chicken
Meat Federation, for example, suggested that outcomes of development applications are
based on particular prejudices of local governments.
There are significant inconsistencies between local councils in the interpretation of planningrequirements for similar operations, and the time, difficulty and success in obtaining approvalvaries between states and local councils. Under the current arrangements the outcomes ofdevelopment applications often appear to depend on the particular bias of local authorities
towards (or against) chicken meat production rather than the merits of the particularapplication. This has the effect of distorting which chicken companies are able to expand andwhich not, and contributes to the movement of location of chicken production from where it ismost efficient to operate to where it is easiest to do business. (sub. 40, p. 2)

Concerns about regulator attitudes and behaviour are discussed further in section 2.5.

Length and costliness of development assessment processes
Development application processes, which are primarily the responsibility of local
governments, can be complex and time consuming (PC 2013a). Farmers can also be
required to complete multiple applications in order to obtain approval for a single
development (Retailer and Supplier Roundtable Ltd 2014).
Many participants expressed frustration with the extensive delays, costliness andcomplexity of processes associated with obtaining development approvals (Australian
Chicken Growers’ Council, sub. 51; Australian Chicken Meat Federation; sub. 40;
Australian Property Institute, sub. 66; Burdekin Shire Council, sub. 35; Cordina Farms,
sub. 64; NFF, sub. 61; TFGA, sub. 16).
The main costs involved in obtaining a development approval include: preparing,submitting and providing supporting material, fees and charges, and the holding costs
associated with the time taken to obtain planning approval (capital holding costs arise
where businesses must pay interest on borrowed funds).
As highlighted by the Australian Chicken Meat Federation, for some regulatory
requirements businesses engage external consultants and the costs can be considerable.
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The costs of progressing a [development application (DA)] for a poultry farm are substantial. In
states where odour modelling in support of a DA is required, the up-front consultancy costs
associated with the preparation of a DA can start at $50 000-60 000 by the time theEnvironmental Impact Statement has been prepared (including the cost of odour dispersion
modelling). Depending on feedback, consultancy fees of the order of $100,000 can easily be
incurred simply in preparing the DA … If a DA goes to court, the cost could be upwards of$250 000 for the appellant alone. (sub. 40, pp. 2–3)

In addition to adding to the costs of development approvals, these costs can act as adisincentive for development or investment. The Australian Chicken Meat Federation also
argued that high costs of approval can create incentives for overinvestment or
overdevelopment in certain areas.
Once a site is identified which has a prospect of success, the emphasis of the developer is often
on making the most of the opportunity by maximising the size of the farm put on it, anddefraying the cost of the DA process over a greater production capacity. (sub. 40, p. 3)

Incentives to overdevelop can exacerbate negative spillovers from farming, such as
emissions and environmental impacts. This can heighten conflicts between agricultural
producers and neighbouring residential areas (section 2.5).

Prescriptive regulation
The prescriptiveness of development requirements and building codes was raised bygroups representing farmers. The National Farmers’ Federation, for example, argued thatthese regulations were inadequate or ill-adapted to agricultural developments, although insome cases there were ‘exemptions for a range of agricultural … structures’ (sub. 61, p. 8).
One farmer that the Commission interviewed said that zoning practices and requirements
were out of touch with how land was used in practice (box 2.8).
Box 2.8

Case study: a farmer’s experience with zoning regulations

The Commission interviewed the co-owner of a large vegetable processing business that has
evolved from a much smaller single farm operation over the past 25 years. The business’s
large, high-tech processing facility stands on land that is zoned as agricultural land. The ownersof the business are seeking to have the land rezoned as commercial land, so that they canborrow against it.
The business has been in protracted negotiations with local government over rezoning the site
for some time. The council has requested a range of changes to the facility and surrounds tomeet the standards set for commercial properties in urban settings. The farmer said that manyof these changes are impractical or prohibitively expensive to implement.
Source: Productivity Commission case study interviews (appendix C).

In addition, Cotton Australia (sub. 23) said that local governments’ one-size-fits-all
approach to agricultural and urban developments is inappropriate, citing the example of a
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planning approval for a farm shed that was held up for weeks because the application did
not deal with how the spoil from the footing excavations would be disposed. According to
Cotton Australia, the total spoil amounted to two truckloads, and the work was being
conducted on a 40 000 hectare farm, offering plenty of opportunity for sensitive disposal ofgenerated material.
The Australian Chicken Meat Federation questioned the requirements for water storage
and hydrants for fire brigades.
New poultry sheds are required to comply with a range of costly infrastructure additions thathave no or negligible impact on the safety of the operation. The most contentious issue in the2016 Code is the requirement for water storage and/or hydrants for fire brigades. The types offire that may occur on poultry farms tend to fall into two categories — one that can be
extinguished by the farmer immediately and very rapidly (normal farm infrastructure would
include a water supply to each shed which could be used by the farm staff to contain any spreadof a fire) or one in which the affected shed is totally engaged and on the point of or has
collapsed within 10 minutes of ignition. In the latter case, fire brigade response time would
need to be less than 10 minutes for intervention to have any impact, and there is therefore little
value in having storage tanks and hydrants for use by fire crews, and the requirement for these
becomes an unnecessary cost and complication … The cost of complying with theserequirements is substantial. (sub. 40, p. 2)

Overly restrictive and prescriptive land use regulation can act as a deterrent to investment
and operational expansion, particularly for small producers (Fitzgerald 2015). There has
been little recent reform to address the prescriptive land use regulation affecting farmbusinesses, the exception being reforms in Victoria (box 2.9).
Box 2.9

Reforms to rural zones in Victoria

In 2013, the Victorian Government announced a series of reforms to rural zones in response tosuggested improvements raised over several years by many industry bodies, local governments
and members of the community. The reforms include:•

making most agricultural uses ‘as of right’ in most rural zones instead of requiring a planningpermit•removing permit requirements for farming-related development such as netting and crop
support structures•

allowing for the sale of farm produce without the need for a planning permit and removing
restrictions on the sale of processed produce•

removing the prohibitions on complementary business uses in some zones, such as
landscape gardening supplies•

reducing or removing permit limitations in the Farming Zone and Rural Conservation Zone
relating to tourism uses, enabling applications to be considered on their merits in order toencourage tourism.

Source: VDTPLI (2013).

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Poorly targeted regulation
Some regulations fail to achieve their intended policy objectives. In some cases, this isbecause regulatory measures are not appropriately adapted to achieving their purpose.
Tropical Pines, for example, pointed to regulation designed to protect the agriculturalindustry in Queensland that had the opposite effect.
When we investigated the planning laws it became clear that we won’t be able to gain planningapproval due to the Rural Industries Code. That code, which is state government legislation,
will not permit the construction of a packing facility on Class A or Class B agricultural land.
The stated purpose is to protect agricultural land. Our argument is that if we are unable to builda packing facility to support the packaging and sale of fruit for 12 farmers in the area, then that
could be very detrimental to the long-term sustainability of the industry in that region. In otherwords there is no point in protecting agricultural land if farmers are prevented from packing
and selling their fruit in a coordinated manner that provides them with a good farm-gate returnand a sustainable farming business. (sub. 39, p. 5)

Some participants said poorly formulated regulation arose from a lack of understanding ofagricultural land use, especially in relation to peri-urban areas and hobby farms (Nillumbik
PAL, sub. DR159; Small Farm Stuff, sub DR102). For example, Ag Institute of Australia
said:
Strategic planning for land use and access has traditionally been urban-centric with emphasis
on residential, commercial and industrial land uses. There is a need in rural and peri-urban
regions to ensure appropriately qualified agricultural practitioners are included in thedevelopment of land use strategies resulting in balanced, evidence-based land use plans.
(sub. DR182, p. 4)

In other instances, regulation was thought to be ineffective or inadequate for addressing theperceived problem, particularly in relation to the definition of intensive farming, which can
trigger the requirement to obtain additional planning or environmental approvals. Intensive
farming is characterised by high levels of capital and labour relative to land, and can resultin heightened public concern about environmental impacts (chapter 3) and animal welfare(chapter 5). It can be difficult to draw the line between intensive and traditional agriculture,especially as the intensity of a particular activity can vary over time due to drought. The
definition of intensive farming varies between jurisdictions (box 2.10).
Participants identified the current arrangements in Victoria as being especiallyproblematic. For example, the Australian Food Sovereignty Alliance said:
The current definition [of intensive animal husbandry] in Victoria is based on importing 50% ofanimals’ nutritional needs. This is clearly inadequate, and does not helpfully distinguishbetween different systems and their impacts, be they environmental, social or welfare impacts.
In Queensland, the definition for pigs is 21 standard pig units (SPU) – again divorced from
actual land capacity assessments. (sub. 27, pp. 4-5)

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Similarly, Australian Dairy Farmers said:
Australia’s dairy industry is largely, but not exclusively, based on animals grazing pasture forall or part of the year. Different state definitions for ‘intensive’ or ‘extensive’ farming create
different triggers for permit requirements and regulatory compliance burdens. Some of thesedefinitions (for example in Victoria) are particularly restrictive for what current agriculturalbusinesses would classify as normal dairy production practices. (sub. 63, p. 3)

Box 2.10

Differences in the definition of intensive farming

Victoria
In Victoria, intensive animal husbandry is defined as ‘land used to keep or breed farm animals,
including birds, by importing most food from outside the enclosures’. In Yarra Ranges SC v
Happy Free Range Pty Ltd, the Victorian Civil and Administrative Tribunal determined that therelevant ‘food’ was the overall food needs of all the livestock on the land, bearing in mind the‘real and substantial purpose for which the land is used’. Also, the proportion of imported foodshould be determined according to the nutritional needs of the livestock, rather than the volume
or weight of the food consumed. (In that case, the imported food was the primary source ofnutrition for the animals and was not used for emergency or supplementary feeding.)

Queensland
The Queensland Planning Provisions defines intensive animal husbandry as ‘premises used forthe intensive production of animals or animal products in an enclosure that requires theprovision of food and water either mechanically or by hand’. These provisions form the standard
planning scheme provisions for all local governments in Queensland. In contrast to Victoria, thisdefinition ties intensive farming to how food and water is provided, rather than its source.
Sources: Yarra Ranges SC v Happy Free Range Pty Ltd [2015] VCAT 1053; QDILGP (2016).

In support of this, in a report to the Yarra Ranges Council, Ag-Challenge Consulting said:
The definition of intensive animal husbandry may be too broad to reflect the different
environmental and amenity impacts that would occur with different levels of intensity that are
implemented in these enterprises. The definition should be reviewed to reflect the differingsystems … (2014, p. 42)

The Victorian Government acknowledges that ‘the current land use definitions for animalhusbandry operations are no longer adequate’ (2016, p. 12).
The Victorian Animal Industries Advisory Committee (2016) recently undertook an
inquiry into, amongst other things, the adequacy of the definition of ‘intensive animalhusbandry’ in Victoria. The Committee recommended the adoption of more specificdefinitions for known intensive animal production systems (such as hatcheries, piggeries
and cattle feedlots). Even so, it noted the need to retain generic definitions to coverintensive animal production systems that are not individually defined, and maderecommendations for clarifying these definitions. These recommendations were broadly
supported by the Victorian Government (2016).

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The Committee also recommended developing contemporary Codes of Practice for all
intensive farming systems and intensive supplementary feeding. The Committee said:
Codes provide all parties involved in the design, development, assessment and approval ofintensive farms with a clear set of standards and requirements that aim to mitigate
environmental and social impacts. They serve to provide more certainty and consistency in theplanning assessment and approvals process for new developments, and provide a structured
basis for assessment and verification of the ongoing compliance with appropriate operational
standards. (2016, p. 50)

In response, the Victorian Government has undertaken to develop a general Code ofPractice that will set out general principles applicable to the planning and operation of arange of animal industries. This will be complemented by industry-specific technicalguidelines that detail the planning, design, construction, operation and management
requirements for each relevant animal industry (Victorian Government 2016).

Leading practices should be adopted
The Commission has previously identified a number of leading practices for improving
land use planning regulation. These include:•

clear, consistent and coherent regulatory objectives and policies•

broad and simple land use controls to reduce red tape, enhance competition, help free
up urban land for a range of uses and give a greater role to the market in determining
what these uses should be•

risk-based and electronic development assessment•

statutory timeframes for referrals, structure planning and rezoning•

undertaking periodic reviews to ensure that regulatory agencies have the necessary
governance frameworks, resources, capacity and skills to efficiently administer theirfunctions (PC 2011d, 2012b, 2013a).

Adopting these leading practices would improve transparency, efficiency andaccountability. However, in the area of planning, leadership from state and territory
governments is important, particularly to guide local government planning anddevelopment (and improve consistency in approaches across planning systems). Importantin this regard are strategic land use plans that are integrated across different levels ofgovernment and different government departments and agencies.
Transparency and accountability could also be improved by making publicly available
information on council decisions relating to planning applications. Community confidence
in local government planning decisions and processes could also be improved throughperiodic independent auditing of assessment decisions and processes.
While there is no ‘silver bullet’ for reforming land use planning regulation, these leading
practices address many of the unnecessary regulatory burdens faced by farm businesses —88

REGULATION OF AUSTRALIAN AGRICULTURE

especially in terms of streamlining regulation and processes. Of course, the success ofreform efforts also depends on the way in which reforms are implemented.
However, some regulatory burdens are unique to, or have a greater impact on, theagricultural sector. This includes regulations that fail to meet their regulatory objectives
because they are not sufficiently adaptable or targeted for managing agricultural land uses,
such as building codes and the classification of intensive agriculture (as discussed above).
These issues could be addressed by ensuring that regulation is fit for purpose andoutcomes-based rather than prescriptive.
Fit-for-purpose regulation
Land use regulations and policies affecting farm businesses can be improved by ensuringthat they are fit for purpose. Fit-for-purpose regulation should be:•targeted — the scope of the regulation (that is, who or what the regulation applies to)should be clear and appropriate for addressing the regulatory problem•

evidence-based — there should be an apparent and demonstrable connection between
the content of the regulation and the regulatory objective•

proportionate — the burden imposed by the regulation on government agencies and the
public should not be disproportionate to the regulatory outcome achieved.

Ensuring that regulation is fit for purpose can help confine the incidence of regulation,
reduce unnecessary regulatory burdens and limit unintended consequences. Governments
should also undertake periodic reviews of regulation to ensure that they are, and remain, fit
for purpose over time. As discussed above, participants identified regulations relating torural zones and intensive farming as areas of particular concern.
Outcomes-based regulation
In many cases, the overly restrictive nature of land use regulation affecting farm businesses
could be mitigated by preferring outcomes-based regulation (PC 2013a). This includes
regulations that require farmers to achieve certain performance standards or outcomes,
without prescribing how to do so or proscribing certain land uses or activities. For
example, reforms to zoning regulations in Victoria now allow a broader range ofcomplementary land uses to take place in rural zones, subject to certain standards being
met (box 2.9).
Outcomes-based regulation can also give landholders flexibility and control over how they
use and manage their land, while ensuring regulatory objectives are met. This can allow
regulatory problems to be addressed efficiently and at least cost.
However, outcomes-based regulation may not be appropriate where outcomes are too
difficult or costly to quantify or monitor. For example, the Animal Industries Advisory
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Committee noted that an outcomes-based definition of intensive animal husbandry would
be difficult to implement because ‘it attempts to classify uses based on information that isoften simply not available at the time of the application: the use’s actual impacts’ (2016,p. 44). Similarly, if outcomes-based regulation does not give landholders additional choiceor flexibility (for example, if there is only one way of achieving a regulatory outcome), it
may not be appropriate to regulate based on outcomes.

2.5

Conflicts between farming and residential land use

Conflicts between agricultural and residential land uses have heightened over time by rural
fragmentation, subdivision and urban encroachment, particularly in peri-urban areas(NSWFA, sub. 72; QFF, sub. 32; Western Australian Government, sub. 54). These factors
have led to increased conflict between primary production and residential land use overmatters such as noise, smell, and use of agricultural sprays (PIRSA 2013). The Australian
Food and Grocery Council observed:
Many agri-food plants operate continuously and can therefore produce noise, light, odour andheavy vehicle movements at all times of the day and night. This often results in a conflict
between ongoing operation of the agri-food industry and the amenity sought by new residents.
(sub. 28, p. 11)

Similarly, Canegrowers noted:
We have instances where significant areas of land are becoming unsuitable for farming becauseof urban encroachment and other land use issues. Growers are continually being harassed forburning, not burning (trash), dust, chemical complaints, harvester noise etc. (sub. 22, p. 3)

And Australian Pork Limited said:
Land use conflicts are an increasing concern in peri-urban regions where urban expansion
encroaches on productive farming land. New peri-urban residents often lack an understandingof farming practices, particularly of intensive animal industries. Consequently, intensive farms
like pig farms, that have existed without objection for many years and decades, can findthemselves attracting new or renewed (and at times unwarranted) attention. In particular,
developments requiring local council permits may become a focus for community concerns
unrelated to the development, for example animal rights. (sub. DR282, p. 1)

Land use conflicts can also arise as a result of changes in agricultural production methods,
such as intensification. Sometimes, land use conflicts are accompanied by other issues —for example, intensive farming could raise environmental concerns for nearby residents, ora hobby farm may pose a biosecurity risk for nearby farm businesses. Some examples ofland use conflicts between agricultural and residential uses are discussed in box 2.11.

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Box 2.11

Examples of land use conflicts

Blackmore Wagyu Farm
Established in 1998, the Blackmore Wagyu cattle farm is located in Alexandra, within the
Murrindindi Shire Council in Victoria. Blackmore Wagyu’s beef is exported to 20 countries and ishighly acclaimed locally and internationally.
In 2011, Blackmore Wagyu abandoned the use of feedlots, in favour of grazing cattle on its
150-hectare property. As a result, neighbouring residents and businesses raised complaints
about increased odours, noises and birds in the area. In response to these complaints, theMurrindindi Shire Council required Blackmore Wagyu to apply for an intensive beef husbandry
permit, but ultimately denied the application for a permit. Blackmore Wagyu is currently
contemplating relocating its business.

Manilla Broiler Chicken FarmIn July 2014, Tamworth Regional Council approved Baiada’s $82 million development proposal
for 70 broiler chicken sheds in Manilla. At peak capacity, the sheds would house almost three
million chickens.
Residents in the area appealed to the New South Wales Land and Environment Court to havethe approval struck down. The application cited a number of concerns, including noise, roadsafety, health concerns including respiratory illness, and impacts on water supplies and nearby
farms. In April 2016, the Court refused the application on the basis that the development was‘acceptable on its merits’, saying that concerns about emissions would be satisfactorily
addressed by the proposed mitigation measures outlined in the conditions of consent.
Sources: ABC (2015a, 2015c, 2016).

How farm businesses are affected
While agricultural land use can affect the amenity of nearby residential areas, urban
encroachment can also negatively impact farm businesses. For example, the Australian
Chicken Meat Federation said:
Urban and lifestyle block encroachment onto traditional (or zoned) rural areas createssignificant problems for the chicken meat industry, which to remain viable needs to operate in‘clusters’ of a sufficient number of growing farms supplying to a processing plant that is withina reasonable transport distance of the plant. (sub. 40, p. 4)

Some participants said that land use conflicts were often resolved in favour of residential
land users (Alan McKenzie, sub. DR.114; Australian Chicken Growers’ Council, sub. 51;
Australian Chicken Meat Federation, sub. 40; NT Farmers, sub. 8; Voice of Horticulture,sub. 42). Voice of Horticulture pointed out the following example of regulatory measures
affecting output:
Some councils, like Yarra Valley in Victoria, have imposed limits on the use of tree crop
netting that is visible from roads as it is perceived to decrease the rustic amenity of

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91day-trippers. However, netting is an essential risk mitigation measure and it is unreasonable forcouncils to impose these types of restriction. (sub. 42, p. 6)

However, proximity to population centres can also benefit farmers as it improves access to
infrastructure, labour and amenities, as acknowledged by the Australian Food and Grocery
Council:Intensive agriculture such as feedlots and horticulture operations are often located close topopulation centres due to access to labour, energy (electricity, gas), water and transport links.
Food processing facilities are often located close to population centres for the same reasons.
(sub. 28, p. 11)

NT Farmers also noted that population growth in farming areas brought ‘increased focus… on the north through initiatives such as the Federal Government’s Northern Australia
development agenda’ (sub. 8, p. 1).

The ‘right to farm’
A number of participants expressed support for a ‘right to farm’ (Australian Chicken
Growers’ Council, sub. 51; Australian Chicken Meat Federation, sub. 40; Canegrowers,
sub. 22; Canegrowers Innisfail, sub. DR119; Grain Producers Australia; sub. DR201; NSW
Farmers, sub. DR161).
Some participants emphasised the economic importance of farm businesses in supporting
nearby residential areas. For example, the Australian Food and Grocery Council said:
The agri-food sector is often a key employer and driver of economic activity in an area,
particularly a regional area. As a key economic asset in an area, established agri-food facilities
should have priority in local planning policies. (sub. 28, p. 11)

Some participants also argued that purchasers who had notice of nearby agriculturalactivity should be given less opportunity for complaint. The Australian Chicken Meat
Federation said:
The expectation should be that if you buy into these areas, they are for genuine agri-business,and there should be reduced opportunity for complaint against established and reasonableindustry practice. (sub. 40, p. 4)

However, participants had differing views about how regulation or regulators should
support the right to farm.
•Some participants considered the right to farm to be a form of social licence, on the partof regulators and the community, in favour of agricultural production (Centre for
Ecosystem Science, sub. DR200; VFF, sub. DR189).

•

Others saw value in implementing the right to farm in legislation (Canegrowers
Innisfail, sub. DR119; NSWFA, sub. DR161), although there was no consensus about
what form that regulation should take.

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The right to farm can also be expressed in government policies that specifically express
support for agricultural production. For example, the NSW Department of Primary
Industries recently released a Right to Farm Policy, which expresses support for producers’
right to farm, to the extent of what is lawful, echoing the Right to Farm Policy put forward
by the Greater Hume Shire Council in 2012 (Greater Hume Shire 2012; NSW DPI 2015b).
‘Nuisance shield’ laws
Where agricultural activity affects the amenity of residential areas, a private mechanism
for resolving these conflicts is through civil lawsuits. A claim of nuisance, for example,
could result in a farmer being banned from engaging in or being required to pay damages
for certain activities.
In Northern America, a common type of legislation designed to protect the right to farm is‘nuisance shield’ laws, which are intended to protect farmers from nuisance complaints
related to the continuance of their existing activities. With the exception of Tasmania, suchlaws have not gained much traction in Australia (box 2.12). In Tasmania, the Primary
Industries Activities Protection Act 1995 protects farmers from law suits in nuisance forcertain activities that are incidental to efficient and commercially viable primary
production.
Box 2.12

Prevalence of right to farm laws

Nuisance shield laws
Laws barring nuisance actions originated in the United States, with the first laws passed in 1963
in Kansas. The main purpose of these was to grant immunity to farmers from nuisance lawsuitsbrought by neighbours who were adversely affected by agricultural activity. By 1994, all statesin the United States had enacted right to farm laws and similar laws are in place in all Canadianprovinces.
In Australia, only Tasmania has ’nuisance shield’ legislation. Like its Northern Americancounterparts, the Primary Industries Activities Protection Act 1995 (Tas) was introduced to:… specifically stop the common law action of nuisance being used to prevent farmers pursuing thenormal, legitimate and statutorily authorised activities which form a necessary part of good agricultural
practices. (TDPIPWE 2014b, p. 9)

Other approaches to ‘right to farm’
In Western Australia, an Agricultural Practices Disputes Board was instituted by the Agricultural
Practices (Disputes) Act 1995. The legislation was subsequently repealed due to the very
limited number of disputes to resolve.
In Victoria, the Sale of Land Act 1962 previously provided a general warning to purchasers
about amenity impacts of surrounding agricultural activities. In 2014, this section was deleted,
and replaced with a checklist that real estate agents must make available to buyers.
Sources: Griffith (2015); TDPIPWE (2014b).

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93Very few participants expressed support for laws barring nuisance actions from beingbrought against farmers specifically (NSWFA, sub. DR161; TFGA, sub. DR281). The
majority of respondents acknowledged that such a law would not be a panacea for land use
conflicts and that it would be difficult to formulate a single law that did achieve a ‘right tofarm’ (NFF, sub. DR216; NSWFA, sub. DR161; VFF, sub. DR189). The Tasmanian
Government also said:
Tasmania’s ‘right to farm’ legislation is only one of the regulatory mechanisms through which
the Tasmania Government seeks to protect agricultural activities from encroachment.
(sub. DR287, p. 2)

Participants to this and other inquiries also questioned whether right to farm legislation
addresses a legitimate economic, environmental or social concern, or delivers a net benefit
to the community. Ag Institute Australia said, ‘the terminology of “right to farm” isinflammatory and is often used to promote farming ahead of all other uses’(sub. DR182, p. 5). Voiceless said:
Voiceless opposes the implementation of ‘right to farm’ laws or other regulations that seek tobypass community consultation, participation and objecting in the planning system, and moregenerally elevate the status of farming above other lawful land uses. (sub. DR166, p. 2)

And NSW Young Lawyers Animal Law Committee said:
The Committee appreciates that agricultural activity is important to both the Australianeconomy and local economies. However, this general proposition is (i) true of many industries
in Australia and (ii) not necessarily true in respect of every instance of agricultural land use.
(sub. DR284, pp. 3–4)

Similarly, in its submission to the review of the Primary Industry Activities Protection Act
1995 (Tas), Environmental Defenders Office Tasmania argued that the law ‘elevates the
economic value of farming above all other considerations’ (TEDO 2014, p. 1). Prioritisingincumbent land uses is not appropriate because, as the Western Australian Government
said, ‘the “appropriateness” of land use can change over time’ (sub. 54, p. 5).
There is also little evidence to demonstrate the prevalence of nuisance actions resulting
from land use conflicts. In its submission to the Review of the Primary Industry Activities
Protection Act, the Tasmanian Environmental Defenders Office stated that it was only
aware of one instance where the legislation had been applied: Williams Davies v
Devonport City Council [2002] TASRMPAT (TEDO 2014). (Although, as noted by the
NSW Farmers’ Association (sub. DR161), the paucity of legal actions may result from thedeterrent effect of the laws themselves.) Similarly, between 1995 and 2011, an Agricultural
Practices Disputes Board was in place in Western Australia, but had very few disputes toresolve (eight in total) (Griffith 2015; NSW DPI 2015b).

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It is also unclear whether restrictions on nuisance actions reduce the number of claims
relating to agricultural land use conflict, given the availability of other forms of legal
redress. As the Tasmanian Environmental Defenders Office observed:
Given the availability of other legal actions that are not restricted by the [Primary Industry
Activities Protection] Act, including civil enforcement proceedings for an environmental
nuisance under the Environmental Management and Pollution Control Act 1994, nuisanceactions under the Local Government Act 1993 and common law trespass, it is questionable thatthe [Primary Industry Activities Protection] Act has any significant impact in reducing claims
in relation to farming activities. (TEDO 2014, p. 2)

Land conflicts should be addressed through the planning system
In principle, an effective regulatory regime would see land go to its highest value use. The
highest value land use will depend on the circumstances of each case, such as thecharacteristics of the farm business and the residential area, and the magnitude of thenuisance. A policy that seeks to protect a certain land use by virtue of its incumbency risks
generating a net cost to the community. This is especially the case if the magnitude of thenuisance changes over time (for example, due to new methods that enable an increase in
the volume or intensity of production). In these instances, the highest value land use couldchange.
Nuisance actions protect the ‘right of private enjoyment’ from disturbance from many
types of land uses — including business, manufacturing and other residential uses — andthere is no principled reason why agricultural activity per se should be exempted. The
availability of nuisance actions also does not prevent farm businesses from negotiatingwith neighbouring residents to allow the nuisance to occur. This could involve negotiatingcompensation or measures (by either party) to mitigate the nuisance.
In general, regulation that directly targets the regulatory problem is preferable to regulationthat indirectly implements policy objectives. This helps reduce any unintended
consequences of regulation and promotes regulatory transparency. For this reason, theCommission considers that nuisance shield legislation is not an appropriate mechanism for
managing land use conflicts, as its function is to preclude a legal remedy, rather than toaddress the source of the conflict. As such, the Tasmanian Government should repeal thePrimary Industry Activities Protection Act 1995.

RECOMMENDATION 2.3

The Tasmanian Government should repeal the Primary Industry Activities Protection
Act 1995.

The Commission also considers that these land use conflicts would be more effectively
addressed through improvements to the planning system (section 2.4). (Similarly, where

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land use conflicts are accompanied by other issues — such as concerns about
environmental impacts, biosecurity and animal welfare — these issues should be regulated
directly, rather than through the vehicle of land use regulation.) Planning tools for
managing land use conflicts could include:•

the development of clearly defined, forward looking land use plans that are tailored todifferent regions, which may help to manage rural fragmentation, avoid land use
conflicts and mitigate the need for regulation (Griffith 2015; QFF 2015b)•

buffers between different land uses, in the form of separation distances or physicalbarriers (box 2.13)•

programs to educate prospective purchasers of rural living allotments about the realities
of farming practices so as to avoid nuisance complaints at a later date (PIRSA 2013).
Box 2.13

Buffers

One way of managing land use conflicts is through buffers between different land uses, in theform of separation distances or physical barriers (such as vegetation). Buffers can be used to
manage a variety of land use ‘spillovers’, including chemical spray drift, odour, noise, dust,
smoke and ash, and sediment and water run off (QDNR and QDLGP 1997). Ordinarily, thelandholder undertaking the new or encroaching land use is responsible for providing the buffer(SA EPA 2007; WA DoH 2012).
Many state and local governments have guidelines for recommended buffers, which provide
technical guidance for determining the appropriate size and nature of a buffer for different typesof emissions (NSW DPI 2007; QDNR and QDLGP 1997; SA EPA 2007; WA DoH 2012).
However, it is not appropriate (or effective) for regulation to prescribe minimum buffer
requirements for all situations, so as to allow the nature, frequency and magnitude of therelevant emissions to be taken into account (Australian Food Sovereignty Alliance, sub. 27).
Buffers are not a panacea for managing land use conflicts and should be used in conjunction
with other planning tools (such as land use strategies and zoning) and regulations relating to
the source of the emissions (NSW DPI 2007; SA EPA 2007). This is because buffers are costly
to implement (for example, separation distances can waste productive land) and may not be themost appropriate or efficient mechanism for addressing particular land use conflicts.

Calls for a right to farm arise from broader concerns
In many cases, calls for a ‘right to farm’ arise from broader concerns about land use regulation.
For example, the Victorian Farmers’ Federation said:
Farmers are frustrated by increasing regulation that impacts on their ability to farm sustainably
and profitably. ‘Right to farm’ as a concept is born out of this frustration. (sub. DR189, p. 5)

In the main, these concerns are related to frustrations with planning and zoning regulation,
which can be overly-prescriptive, poorly targeted, and not appropriately adaptable ortargeted for managing agricultural land uses (section 2.4). These problems can arise from,and be exacerbated by, inadequate resourcing, capacity or skills on the part of local
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government. As the Commission has previously found, many local governments lack theresources to undertake their regulatory functions effectively, with high vacancy rates inlocal government for town planners and building inspectors (PC 2012b).
Participants also raised concerns about how land use regulation is implemented andregulator attitudes towards agricultural land use, especially on the part of local
government. For example, Alan McKenzie pointed to a lack of understanding about theneeds of rural communities.
[I]t is almost impossible to build new modern premises … outside a town area because TOWN
planners see it as their duty to protect every square metre of farming country from inappropriate
development. (As judged by them.) In many cases it has to be said that these enterprises need tobe situated outside town areas due to the size of the machines they are handling in cropping
areas. Once again we see URBAN trained planners having no idea about the needs of the ruralcommunities and more particularly farming. (sub. DR114, p. 1)

Nillumbik PAL raised concerns about biases against farm businesses on the part of local
government.
The process of peri-urbanisation is poorly understood and policy and planning initiatives are
not underpinned with a solid theoretical basis. In the Nillumbik area this lack of theoreticalunderstanding is compounded by a reluctance to meaningfully consult with the community.
Council action borders on the negligent in its pursuit of an ideology which is based heavily on
its own personal desires for this peri-urban area to remain unchanged in their image of it as arural oasis for wildlife and tourists. (sub. DR159, p. 4)

Similarly, the Victorian Farmers’ Federation said that discretionary powers were exercisedin a manner that was adverse to farm businesses.
The VFF is aware of a recent example where a Local Council issued a litter abatement notice(s45ZB of Environment Protection Act) due to a complaint about mud on a local road in winter.
The farm was an operating dairy and there had been significant rain over the preceding fourweeks. A litter abatement notice is discretionary and should consider whether the litter was an‘unavoidable consequence of a lawful activity’. At the same time there was extensive mud onan urban road near the Council offices. (sub. DR189, p. 5)

Local government decisions relating to agricultural land uses can be problematic if they
conflict with state-level strategic plans or land use policies. As noted above, coordinationand consistency between state, regional and local plans is essential to good governance inland use planning (PC 2011d). But it is also important that state and local governments are‘on the same page’ about broader land use policy and priorities. This is particularly crucial
where the success of those policies depends on how they are implemented at the local
level.
To this end, state governments have an important role to play in:•considering what responsibilities should be devolved to local government and how
those responsibilities should be framed

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97•

ensuring that local governments are adequately resourced to perform those regulatory
functions•clearly communicating with local government about land use policy and priorities.

2.6

Conflicts over land access for resource explorationand extraction

In recent years, high global demand for resources has led resource companies, particularly
gas companies, to seek access to agricultural land, sometimes in conflict with farmers.
In 2013, the COAG Standing Council on Energy and Resources endorsed the Multiple
Land Use Framework as a response to current and emerging land access and use issues. Its
principles include coexistence and the maximisation of the social, economic andenvironmental values of land use (SCER 2013b). Although the framework specifies several
guiding principles to promote a consistent approach to planning and policy development bystate and territory governments, it is ‘at the complete discretion of jurisdictions todetermine the scope of their individual framework and the nature in which they will
implement it’ (SCER 2013a, p. 2).
In recent years, governments have also sought to take greater account of environmental,
public health and agricultural risks when considering exploration and extraction licences.
In 2015, the Australian Government released its Domestic Gas Strategy to provide aframework for responsible development of gas resources, ensuring that decisions are basedon science and research (Department of Industry and Science 2015). It also contains
principles for coexistence with agriculture and protection of farmers’ rights (box 2.14).
Box 2.14

Domestic Gas Strategy: principles for coexistence with
agriculture

1. Access to agricultural land should only be done with the farmer’s agreement and farmers
should be fairly compensated.
2. There must be no long-term damage to water resources used for agriculture and local
communities.
3. Prime agricultural land and quality water resources must not be compromised for future
generations.
Source: Department of Industry and Science (2015).

Participants raised concerns about laws that prioritised mineral and gas exploration overagriculture, with many stressing the importance of ensuring that resource exploration andextraction is not undertaken at the expense of the agricultural industry (Agforce, sub. 17;
Andrew Rea, sub. 9, sub. DR309; Cotton Australia, sub. 23; EDOs of Australia, sub. 60).

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How farm businesses are affected
In Australia, mineral rights are held by the Crown rather than privately (box 2.15). As aresult, the Crown can grant exploration or extraction licenses to companies without alandholder’s consent, subject to compliance with regulatory requirements and prohibitedareas (Chen and Randall 2013; Hepburn 2011). When it does so, it authorises the licensee
to exercise certain rights held by the Crown, including the right to access those minerals. In
her submission to the Senate inquiry into the Landholders’ Right to Refuse (Gas and Coal)
Bill 2015, Professor Hepburn explained:[T]he rights of the resource title holder may be accompanied by an express or implied accessentitlement to access the resource by crossing the land. The private landholder is bound to
uphold this entitlement and cannot deny the rights of the State in this context. The state is theabsolute owner of the land. The state has reclaimed ownership of the resource. The tenure
framework gives the State the power to disaggregate those resources and reclaim them. Accessto the resource is a necessary consequence of resource ownership. Access entitlements may beconstructed as an express requirement of the resource title or, pursuant to expressly conferredancillary rights or, as a right which is implied and necessary. (Hepburn 2015, p. 5)

Box 2.15

Property and mineral rights in Australia

Ownership of resources
In many common law jurisdictions, there is a presumption that all minerals on or beneath thesurface of the land belong to the landholder, with the exception of royal metals (gold and silver)(Commonwealth v New South Wales (1923) 33 CLR 1). In Australia, this rule has been modified
by legislation in each of the states and territories, which vests the ownership of minerals in the
Crown. By contrast, mineral rights in the United Kingdom and the United States are generally
held in private ownership.
The ownership of resources by the Crown ‘is grounded in the core assumption that the state is
the appropriate owner of the resources because it has the capacity to ensure that thoseresources are properly utilized for the common benefit of all citizens’ (Hepburn 2015, p. 2).

Allocation of exploration and production rights
A claim, lease or licence that grants the holder the right to explore for resources or undertake
production is referred to as a ‘tenement’. The three main forms of tenement are exploration
licences, retention leases and production licences. A tenement is usually limited in time, andmay be renewed or relinquished at its expiry (subject to certain rules and requirements).
In Australia, three main mechanisms are used to allocate exploration licences.
•

First come first served: Exploration rights are allocated to the first party to apply.

•

Cash bidding: Rights are granted to the party offering the highest cash bid.

•

Work program bidding: Interested parties specify the activity they intend to undertake andthe relevant authority decides which to accept based on how well the work programs meet
regulatory and other policy objectives.

Sources: SECLC (2015); Hepburn (2015); PC (2013b, 2015c).

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The effect of resource extraction on the land
Resource exploration and extraction can be intrusive and cause degradation of the surface
land and underlying water sources. Peter Flanagan said:
It is about crop and pasture farmers versus coal seam gas miners. The government and the law
say they can coexist, the farmers say they cannot. The issues are about pollution to or excessive
use of water supplies and degradation of the land. The farmers say they do not wish to lose
their land and the miners say they only want access to a bit of it. Neighbouring farmers say if
the aquifers are damaged by too much water being removed or pollution introduced, then theirlivelihoods are at stake. (sub. DR107, p. 4)

Similarly, the Victorian Farmers’ Federation said:
Whilst mining, unlike urbanisation, does not take the land permanently out of production, amineral extraction licence may have short- to long-term impacts on productivity (ability tofarm) or on the productive quality of the land post-mining (has the soil quality, aspect, drainage
changed?). (sub. DR189, pp. 6–7)

In some instances, this can cause ‘irreparable damage to the long-term productive capacityof the land’ (NSW Farmers’ Association, sub. DR161, p. 8). For example, in New South
Wales, opal mining at Lightning Ridge resulted in collapses and serious structural
instability of the surface land, leading to concerns by landholders about stock welfare,safety and damage to the environment (NSW DPI 2013b). In response to environmental
and health concerns, the Victorian Government recently announced a permanent ban on the
exploration and development of all onshore unconventional gas in Victoria, including
hydraulic fracturing and coal seam gas (Andrews 2016). A five-year moratorium(beginning 2015) on hydraulic fracturing is also in place in Tasmania (Tasmanian
Government, sub. DR287).
Land access negotiations
Nevertheless, licence holders must negotiate land access agreements with the landholder,sometimes involving payments of compensation. This is because:
Landholder rights relate to the use of the surface of the land. However access to those mineralrights often means infringing on the rights of the landholder. Therefore negotiation between theowner of the mineral rights and the landholder rights takes place such that the infringement on
the rights is appropriately compensated. (AMEC 2013, p. 8)

In practice, most conflicts between agriculture and resource companies are resolved
through negotiated agreements about the conditions of access, with compensation payable
to the landholder (PC 2013b). However, negotiations can be costly for both parties.
Resource companies are reported to have purchased pastoral leases to maintain access
options for their activities, which would otherwise require them to consult withlandholders. Rio Tinto, for example, has leased and managed the Karratha cattle station in
the Pilbara from 1966 and recently subleased it to the Ngarlama Aboriginal Corporation(Rio Tinto 2015).
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In many cases, rural landholders are at some disadvantage when undertaking access orcompensation negotiations (PC 2013b, 2015c). In part, this stems from an asymmetry ofexperience and knowledge, as landholders are likely to have limited experience with suchnegotiations and have less knowledge about how prospective resource projects will impact
agricultural land.
A further source of imbalance is the involuntary nature of the negotiations. That is, while alicence holder has to negotiate a land access agreement with the landholder, the latter party
does not have a right to refuse access (St John 2014). A number of participants in this andother processes have argued that this power imbalance could be mitigated by allowing
farmers to refuse land access by resource companies (SECLC 2015).

Compensation
In most jurisdictions, landholders have a statutory right to compensation for resourcecompanies accessing their land. Participants emphasised the importance of ensuring thatcompensation arrangements are fair and adequate (Andrew Rea, subs. 9 and DR309;
Cotton Australia, subs. 23 and DR262).
The Commission has previously identified shortcomings in the compensation provisions
across jurisdictions and identified ‘scope for improvements to legislated compensation
criteria to better reflect the costs to landholders from negotiating land access agreements
and from the decline in the value of their properties’ (PC 2015c, p. 77).
One shortcoming is a lack of explicit compensation for the cost of obtaining professional
advice (PC 2013b, 2015c). In Victoria and Western Australia, for example, the landholder
is not explicitly entitled to compensation for the cost of obtaining legal advice. In New
South Wales, compensation is only available for legal advice, but not financial or otherexpert advice. The NSW Farmers’ Association expressed concern that compensation inthat state for legal costs was capped and limited to the initial stages of the negotiation of anaccess agreement (PC 2013b).
Landholders have also argued that the time and stress of dealing with resource companies
seeking access should be compensable (PC 2013b). In this vein, Andrew Rea said:[Y]ou have to deal with them in your own time. Most Resource Companies will not pay you foryour time. Everyone has the right to be paid for their time. I do not have the right to refuse toprovide my time free of charge. (sub. 9, p. 2)

Previously, the Commission recommended that state and territory governments should
ensure that reasonable legal and other costs incurred during land access negotiations arecompensable by resource companies. The Commission also emphasised the importance ofmaking sure that landholders are aware that such compensation is available (PC 2013b).

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A right of veto
In recent years, a number of federal members of parliament have expressed support forgiving farmers a right of veto over coal seam gas operations (Chan 2015; Sprague 2015).
In 2015, a Senate Committee inquiry relating to the Landholders’ Rights to Refuse (Gasand Coal) Bill 2015 (which would have given effect to a right of veto) expressed
in-principle support for such a right:
The committee supports the principle that an agricultural landholder should have the right todetermine who can enter and undertake gas or coal mining activities on their land. Landholders
who provide access should be fairly compensated for doing so and shown respect when entry
on their land takes place. (SECLC 2015, p. 51)

However, the Committee ultimately recommended against passing the Bill on the basis thatthe drafting of some provisions created uncertainty or meant that they were impractical to
implement. (For example, it would be virtually impossible for a resource company to know
for certain that it had obtained written authorisation for access from every person who hadan ‘ownership interest’ in land.)The Committee also noted agreements between landholders and resource companies could
improve landholders’ rights. For example, in the Agreed Principles of Land Accessbetween NSW Farmers’ Association, Santos and AGL, the latter two parties undertook to
not enforce arbitration for land access for coal seam gas activities in New South Wales,effectively giving landholders a right of veto (Sprague 2015).
Regulation should facilitate efficient land use
The overriding objective of land use policy is to facilitate the efficient use of land. In
principle, property rights that are clear, secure and freely tradable will be acquired by those
who value them most, resulting in an efficient allocation of land rights. In many cases, thisis true regardless of who initially holds the property right, because the right can be sold toany person who is willing to pay more for it. However, this outcome may not be reached if
transaction costs are prohibitive (Coase 1960).
Some participants expressed concern about how the most efficient (or highest value) use ofland is determined (Ag Institute Australia, sub. DR182; Australian Food Sovereignty
Alliance, sub. DR211; Centre for Ecosystem Science, sub. DR200; VFF, sub. DR189).
This included concerns that assessments of ‘value’:•

did not include non-monetary value (including environmental and social benefits)•

did not take a long-term view or overvalued short-term gains.

In particular, participants pointed to the long-term sustainability of agriculture. For
example, the Victorian Farmers’ Federation said:
Land value / willingness to pay or short-term returns that prejudice long-term production
should not be viewed as ‘highest and best use’ … Agriculture is a sustainable industry which
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contributes to the economy in the long term. Ensuring the ability of farmers to produce foodand fibre close to markets should be seen as an imperative and as delivering the highest andbest use of the land. (sub. DR189, p. 6)

The value of a land use comprises both monetary and non-monetary benefits and should beassessed on a long-run basis (box 2.1). And in many instances, agricultural production is
the highest value use of land. However, the highest value use of land varies from case tocase and agricultural production is not always the highest value use of land. Any policy
intervention should be designed with the objective of facilitating the highest value land use
and should not seek to predetermine what activities would constitute the highest value use.
A right of veto is inconsistent with facilitating the highest value land use
At present, the right to compel land access for the purpose of resource exploration andextraction is held by the Crown (on behalf of the community), who may grant licences toresource companies to exercise this right. This right is complementary to the Crown’s
ownership of subsurface minerals.
A right of veto would shift the power to make land access (and hence land use) decisions
from the Crown to the landholder. This represents a transfer of decision-making powers
from the community as a whole to individual landholders. Individual landholders areunlikely to be better placed than government to make land use decisions in the interests ofsociety as a whole.
Additionally, a right to refuse access to land is a de facto right to refuse access to minerals,
encumbering the Crown’s ability to exercise its ownership of subsurface minerals. (Bycontrast, a landholder’s permission to access land would not by itself grant access tominerals, given that ownership of minerals vests in the Crown.)
On this basis, the Commission considers that land access rights for resource explorationand extraction should vest in the Crown, given that it also owns subsurface minerals. Thisis because the right to access those minerals cannot be exercised without a right to accessland, meaning that, if those rights are held by separate parties, additional transaction costs
will be incurred when allocating and exercising exploration and production rights.
A right of veto is also inconsistent with the tenet that land title does not grant absolute
ownership and the Crown’s general power to compulsorily acquire property. In particular,
there is no reason why an exception should exist for agricultural land vis-à-vis resource
exploration and extraction.
Insofar as a right of veto is aimed at preserving agricultural land per se, such a policy risks
generating a net cost to the community if land is not put to its most efficient use(PC 2015c). Also, any distributive justice considerations relating to land accessnegotiations should be addressed through compensation arrangements, rather than througha transfer of land rights from the community to individual landholders.

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FINDING 2.1

Regulation and policies aimed at preserving agricultural land per se can prevent land
from being put to its highest value use.
A right of veto by agricultural landholders over resource development would arbitrarilytransfer property rights from the community as a whole to individual landholders.

Calls for a right of veto may be symptomatic of other concerns
Several participants suggested that calls for a right to veto arose from other concerns about
the regulatory arrangements governing the allocation of resource exploration andextraction rights. For example, the National Farmers’ Federation said:
The call from many farmers for a ‘right of veto’ for a development is symptomatic of two key
concerns. The first is that Governments are not adequately assessing the risks of a project, andthe cumulative risks of multiple projects on the land and water resources on which agriculture
relies. The second is the imbalance that exists between farmers and resources companies in thenegotiation of land access agreements, and the view that farmers are not fairly compensated forland access during exploration and development. (sub. DR216, pp. 17–18)

Similarly, the NSW Farmers’ Association said:
We agree with the Commission in that a legislated ‘right to say no’ could mean that importantresource development projects could be prevented by a small number of landholders (or evenan individual landholder). For these reasons, we believe that more important than landholder
veto is a) strengthened landholder rights, and b) a strategic approach to exploration licence
allocation by the appropriate government. (sub. DR161, p. 6)

WAFarmers also expressed concerns about the lack of a strategic approach in allocating
resource rights:
The call for policies to protect agriculture are in effect an alternative for the strategic land use
planning that take into account longer term values for land use … We continue to see
project-by-project assessment, rather than strategic land use planning dominate the approach of
government to resource sector development. The community is increasingly concerned that thisapproach does not adequately address the values that are important to them. (sub. DR226, p. 4)

There is scope to make better use of strategic assessments, particularly where considering
the cumulative effects of development on the environment are likely to deliver superior
environmental and regulatory outcomes to those achieved under other processes. Where
strategic assessments are not in place (for whatever reason), it is especially important thatthe allocation of exploration and production rights is rigorously and transparently assessed(PC 2013a).

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3

Environmental regulation

Key points•

Efforts to preserve our biodiversity depend in large part on the actions of farmers becausearound half of Australia’s land is used for agriculture.

•

There are clear public benefits in conserving native vegetation, biodiversity and threatened
species, and ensuring that there is healthy soil and clear air and water. But environmental
regulations are complex, and there are many potentially overlapping international, federal,state and (sometimes) local requirements. There are also international environmental
agreements to which Australia is a signatory.

•

While native vegetation and biodiversity conservation regulations aim to protect threatened
species and prevent land degradation, they also affect the ability of landholders to manage
their land, sometimes with serious adverse effects and perverse incentives. The regulations:– may limit farmers’ capacity to respond to changes and to use new technologies– impose considerable costs on some farm businesses (farmers bear a disproportionate
share of the financial burden of conservation for the benefit of all Australians)– often involve complex and costly processes (including the need to obtain and pay fordetailed specialist advice about the presence of protected species on a property)– may in some cases be administered in a very bureaucratic and inflexible way– do not always result in improved environmental outcomes, and in some cases may evenreduce environmental outcomes.

•

To improve the current arrangements, Australian governments should continue to reduce
regulatory overlap and duplication. Governments should also:– ensure that all native vegetation and biodiversity conservation regulations consider
environmental, economic and social factors; account for the impact of proposed activities
on the landscape or the region (not just the impact on individual properties); and are
based on a thorough assessment of environmental risks– continue to develop market-based approaches to native vegetation and biodiversity
conservation — this could include buying environmental services (such as native
vegetation retention and management) from private landholders, to ensure that thecommunity is willing to pay to achieve particular environmental outcomes– review the administration of environmental regulations, including the way regulators
engage with landholders. Governments need to improve the advice and support they
provide to landholders, and explain how different regulatory requirements interact.

•

These changes could reduce the burden imposed on farm businesses by native vegetation
and biodiversity regulations while maintaining, or even improving, environmental outcomes.

•

While regulations relating to noise, odour, air emissions, waste discharge and other forms ofpollution address negative spillovers, when applied in an agricultural setting they can havean adverse impact on efficiency and productivity. Full assessments of the impacts ofapplying regulations designed for unrelated industries, such as manufacturing, to theagricultural setting are essential for preventing such impacts.

ENVIRONMENT105

As around half of Australia’s total land area is used for agriculture (ABS 2016b),
successful environmental management and the conservation of biodiversity depend in largepart on the actions of the agricultural sector. Farmers and graziers play a vital role asenvironmental stewards and land managers, and contribute to many conservation efforts.
Australia’s current levels of biodiversity and other environmental assets are the result of
this stewardship over multiple generations.
This chapter looks at how environmental regulations affect farm businesses. Section 3.1
describes the role of governments in environmental protection, while section 3.2 provides
an overview of current environmental regulations. In section 3.3, the impacts of native
vegetation and biodiversity conservation regulations are examined. Section 3.4 discusses
strategies for improving native vegetation and biodiversity conservation regulations, andreducing the regulatory burden on landholders and farm businesses. The aim is forregulation to impose the minimum burden necessary, while ensuring that the agricultural
sector is efficient in its use of resources and that it develops in a way that is ecologicallysustainable. Section 3.5 looks at ways to improve other environmental regulations.

3.1

Why are governments involved in environmental
protection?

Farmers have a clear incentive to preserve and care for the land, its native vegetation andbiodiversity, where this maintains or improves productivity or delivers private benefits interms of environmental amenity. As Property Rights Australia told the Commission:… farmers do things to help the environment under their own steam all the time. They are thetrue environmentalists. (trans., p. 485)

Retaining native vegetation (combined with careful stewardship of cleared land) is one of
the main strategies farmers use to protect the environment and promote conservation.
Sustainable management practices can also contribute to property values, as awell-managed and maintained farm will command a higher price than one that has been
overexploited. Landholders also value native vegetation because it can provide a range of
inputs to the production process (such as fodder and shelter for stock, timber for fencing or
reduced soil erosion), thereby contributing to agricultural productivity.
But while farmers cover many of the costs of conservation (including reduced availabilityof land for grazing and cropping), conservation provides benefits not just to farmers but
also to others in the community.
•

Some benefits extend to neighbours and others in the broader region, including visualamenity, prevention of soil and water degradation, reductions in salinity and theprovision of habitat for fauna that provide pest control and pollination services.

•

Other benefits extend more widely to all in the Australian community (and in somecases globally). These include the protection of threatened species and their habitats,

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REGULATION OF AUSTRALIAN AGRICULTUREcarbon sequestration and biodiversity. In fact, the benefits from the continued existenceof species, habitats and ecosystems largely accrue to the wider community (PC 2004a).
The National Parks Association of NSW and the Nature Conservation Council of NSW
pointed out that providing habitat for native birds and animals is particularly important inAustralia, because it is:… one of just 17 mega-diverse countries with a high proportion of endemic species, possessing
two global biodiversity hotspots, being the only developed nation to be identified as one of
11 global deforestation fronts and having lost 27 mammal species from the mainland since
European settlement … (sub. DR209, p. 3)

Protecting riparian vegetation is also a component of Australia’s long-term sustainability
plan for the Great Barrier Reef (Australian Government and Queensland
Government 2015). Native vegetation protects the reef by, among other factors, ‘reducing
soil loss and consequent water pollution in the rivers which flow into the Reef’(WWF Australia, sub. 85, att. 3, p. 3).
Because individual landholders cannot capture the public benefits, their incentive will be tounderinvest in conservation from the perspective of the Australian community as a whole.
As such, there is a potential role for government to be involved in native vegetationconservation and environmental protection, provided there is a net community-wide
benefit.
Governments can (and do) directly provide native vegetation and biodiversity conservation
services, including in national parks, state parks and other public reserves. But this can be
costly and may not result in the level of conservation that the community is willing to pay
for, for several reasons.
•Certain types of native vegetation are not well represented in public reserves, and there
are often irreversible limits to the supply of land for public reserves.

•

Conservation outcomes in public reserves partly depend on sound management
practices on adjoining private land (and the reverse is also true).

•

Native vegetation conservation can be provided at lower cost on private land than in
public reserves, provided the private land can continue to be used for commercial
purposes as well as for public-good conservation (Clarke 2002).

Government intervention to promote native vegetation and biodiversity conservation on
private land, and natural resource management (NRM) more broadly, is justified where thebenefits to the Australian community exceed the costs (both to private landholders and tothe community in general). To achieve these benefits, governments have typically relied on
regulation. Regulatory approaches for native vegetation and biodiversity conservation areused in most countries. The current stock of environmental regulations is also, in part, theresult of significant changes in Australian society’s views about how natural resources
should be managed for current and future generations (box 3.1).

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Box 3.1

Changing attitudes and environmental policies

Government policies have not always been geared towards environmental protection. From the1850s onwards, vast areas of forest and scrub were cleared for grazing and cropping. For many
years government requirements to clear areas of native vegetation, or to demonstrate use of
the land by maintaining certain stock levels, were conditions in allocating freehold andleasehold land for farming.
The wish to provide land for soldier settlers after both World Wars led to the subdivision of large
properties into smaller blocks, many of which proved to be too small to provide viable incomes once
commodity prices declined, and were consequently overstocked. (McKeon et al. 2004, p. 22)

These policies had strong social support, but were not particularly successful in economic or
environmental terms. Land clearing was significant and widespread, and intensive grazing andcropping was required to ensure even a subsistence level of return for labour. An
over-expectation of the carrying capacity of the land, and a physical and/or economic inability toquickly destock the land during periods of drought, also contributed to environmental
degradation.
Between 1970 and 1990, tax incentives and cheap government loans made land clearing
financially attractive to farmers. There was also a view that society would benefit if more young
people were settled on the land and took up farming, exemplified by the establishment oforganisations such as the Young Farmers’ Finance Council in Victoria in 1979.
More recently, governments have put in place legislation that restricts the ways in which farmbusinesses use their land, with an emphasis on sustainability. This reflects a shift towards theview that ‘open slather on native vegetation removal is completely unacceptable for so manyreasons’ (Richard Nankin and Rosemary Cousin, sub. DR248, p. 14). It also mirrors aninternational trend: the stringency of environmental policies has been increasing across OECD
countries over the past two decades (Albrizio et al. 2014).
Sources: Albrizio et. al (2014); DEWHA (2010); Dore, Binning and Hayes (1999); Finlay (2014);
McKeon et al. (2004); PC (2004a).

Governments also have in place regulations that limit businesses’ effects on air and water
quality, and their emissions of odour, noise and waste. Where the costs of these emissions
are not fully and directly borne by the businesses that cause the costs, they are known as
negative environmental externalities, or ‘spillovers’. Human health risks and ecosystemdamage arising from pollution are examples of the negative environmental externalities
that environmental regulations seek to limit. These externalities can also be a factor inconflicts over land use, particularly in the context of the interface between residential
developments and established agricultural and pastoral activities in rural and regional areas(chapter 2).
The challenge for governments when developing environmental regulatory frameworks
and policies is to achieve a balance between the benefits of agricultural production and thepotential environmental costs, as well as to ensure that the frameworks and policies haveclear and measurable objectives. The task for the regulators is to efficiently administer
those frameworks and policies in line with their objectives, in the face of rapid change in
the agricultural sector and in regional communities.

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3.2

Environmental regulations: the current state of play

Governments in Australia have in place a wide range of environmental regulations.
Estimates of the number of environmental laws vary, but according to the Australian Law
Reform Commission, at a minimum ‘there are approximately 60 Commonwealthenvironment-related statutes in force’ (ALRC 2015, p. 224). There are also international
environmental agreements to which Australia is a signatory, including the Convention on
Biological Diversity and the United Nations Sustainable Development Goals.
State and territory governments are the main regulators of environmental matters, and haveregulations to control clearing of native vegetation on private land, protect threatened
species or biodiversity, and protect the environment more broadly.
Local governments also have a variety of plans and schemes that, while focused on land
use planning, often cover aspects of environmental protection or management (chapter 2).
Local government planning schemes are also used to give effect to state environmental
priorities in many cases. In addition, local governments in most states have developed local
laws to address local environmental issues. Local governments are also land managers, andso are affected by state and federal environmental regulations in the same way as otherlandholders.
While some of the environmental regulations introduced by each level of government wereadopted after a thorough assessment of regulatory options and impacts, others wereintroduced in a more abrupt fashion as a reaction to environmental incidents that attracted
public concern. The development of these regulations often lacked sufficient considerationof the nature of the problem to be addressed and the costs and benefits of the regulation
relative to other approaches, including less prescriptive regulation (PC 2004a).

State and territory laws protecting native vegetation and biodiversity
State and territory regulations to control clearing of native vegetation on private land andto protect threatened species or biodiversity more broadly are relatively new — South
Australia and Victoria were the first to regulate the clearing of native vegetation, in 1985
and 1988 respectively, with other jurisdictions following during the 1990s (Bricknell 2010;
Tasmanian Government, sub. DR287).
There are notable differences between jurisdictions in the approach and coverage of native
vegetation regulations. These variations allows differences between regions to be taken
into account. But despite their differences, laws governing the clearing of native vegetationin each jurisdiction generally contain five main features (box 3.2). In some cases there arealso differences within jurisdictions in the way in which native vegetation regulations are
implemented and enforced. This is discussed in section 3.3.

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Box 3.2

Common features of native vegetation regulations

Laws governing the clearing of native vegetation in each jurisdiction generally contain five mainfeatures.
4. A definition of native vegetation. Native vegetation is usually defined to include not only
vegetation in its original state but also single trees, regrowth and/or patches of remnant
vegetation.
5. A requirement to obtain approval to remove native vegetation. Approval processes vary
within and between jurisdictions depending on one or more of the following factors:– the type of vegetation to be cleared– the size of the area to be cleared– the purpose of the clearing (with different rules applying to clearing for agriculture versus
clearing for mining, for example)– the proposed clearing action (for instance, lopping a branch may be regulated in adifferent manner to complete destruction of a stand of trees. In some states, grazing of
livestock is considered to be ‘clearing’ as it may damage vegetation in the grazed area)– land tenure arrangements (such as pastoral lease or freehold land)– whether the native vegetation was planted for harvest.
6. Exemptions to the approval processes. Certain types of clearing activities (such as
keeping roads and fire trails clear, taking wood for personal use, removing vegetation close
to buildings for bushfire prevention or removing regrowth that is less than a certain age) andclearing on certain tracts of land (such as land designated for community infrastructure) do
not always require approval.
7. Systems for assessing vegetation offsets. Offsets are undertakings to protect andmanage native vegetation (box 3.3).
8. Monitoring programs to keep track of changes in the quantity or quality of native
vegetation, often using satellite imagery. For example, in the Northern Territory, ‘regularmonitoring, including aerial photography and satellite image analysis and on groundinspections ensures compliance with the [native vegetation] controls’ (NT DLRM 2016).

While the stated objectives for restrictions on the clearing of native vegetation vary
between jurisdictions, most aim for no net loss in the contribution made by native
vegetation to biodiversity and healthy environments. Victoria’s native vegetation clearing
regulations, for example, have the objective of ensuring that ‘permitted clearing of native
vegetation results in “no net loss” in the contribution made by native vegetation toVictoria’s biodiversity’ (VDEPI 2013b, p. 24). Some jurisdictions mention ‘ecologicallysustainable development’ — though there are diverging views on what ‘ecologicallysustainable development’ entails and how it should be operationalised (PC 2013a).

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Box 3.3

About offsets

Offsets are designed to increase the flexibility of conservation policies by allowing unavoidable
environmental impacts from various activities to be counterbalanced by implementing measureselsewhere that improve or maintain overall environmental conditions.
The Australian Government and all states and territories except the Northern Territory haveoffset policies (though the offset policy in New South Wales only applies to major projects, andso rarely applies to agricultural projects). While offset policies vary, they generally:•

have the objective of ensuring either ‘no net loss to the environment’ or environmental gain
— an example of the latter is the Significant Environmental Benefit in South Australia’s
Native Vegetation Act 1991 (and associated Regulations)•must be used as a last resort, applied only after appropriate efforts have been made to avoid
adverse impacts and to minimise and mitigate unavoidable impacts.

Offsets can either be direct (measures that directly improve, create, or avert the loss of habitat,on either public or private land) or indirect (measures that indirectly benefit the environment
such as research funding for revegetation techniques).

There are also industry-led programs being used to achieve conservation outcomes, where
doing so can also improve farm productivity. For example, the Queensland Farmers’
Federation said that its member industries have developed Best Management Practice(BMP) or Farm Management System (FMS) programs that assure accredited farmers they
are delivering both market and public policy outcomes in one process, including bestpractice native vegetation and biodiversity conservation outcomes (sub. DR217).
In other jurisdictions, the objectives in the native vegetation and biodiversity conservation
legislation have the potential to be in conflict. For instance, in New South Wales the Native
Vegetation Act 2003 aims ‘to provide for, encourage and promote the management of
native vegetation on a regional basis in the social, economic and environmental interests of
the State’, but also to protect native vegetation of high conservation value, to improve thecondition of existing native vegetation and to encourage the revegetation of land.
There have been a number of reviews of native vegetation and biodiversity conservation
laws at the national level (for example, HoRSCE 2014; PC 2004a; SFPARC 2010). The
Australian, state and territory governments are also working together on joint reviews.
•

A review of Australia’s Biodiversity Conservation Strategy 2010–2030 commenced in2015, and has been prepared for consideration by Environment Ministers in 2016
(MEM 2015).

•

The National Review of Environmental Regulation published an interim report inMarch 2015 (DoE 2015c). It identified areas for reform, including implementing acommon assessment method for listing threatened species (section 3.4).

Native vegetation laws and policies are also under review in many states (box 3.4). In
addition, Western Australia amended its Environmental Protection (Clearing of Native
Vegetation) Regulations in 2013. The changes increased the area in which certain
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prescribed clearing activities are permitted without a clearing permit from one to
five hectares each year, and extended the exemption timeframe for maintaining previously
cleared areas from 10 years to 20 years (DoE 2015c).
Box 3.4

States’ reviews of native vegetation laws and policies•

In New South Wales, the Independent Biodiversity Legislation Review Panel found that thecurrent laws in New South Wales are complex, difficult to navigate, and impose unnecessary
regulatory burdens (Byron et al. 2014). The review recommended replacing current lawswith a new risk-based Biodiversity Conservation Act. In response, the NSW Government has
proposed reforms to the legislative framework for native vegetation management, private
land conservation, threatened species and other protected native animals and plants (NSW
Government 2016).

•

Victoria amended its native vegetation permitted clearing regulations in 2013 to reduce theburden on landholders and provide them with more information about the biodiversity valueof native vegetation on their land. The native vegetation clearing regulations are again underreview and the outcomes of the review will be released in late 2016 (VDELWP 2016c). In
addition:– the Flora and Fauna Guarantee Act 1988 (Vic), which aims to ensure that all flora andfauna ‘can survive, flourish and retain their potential for evolutionary development in the
wild’, is being reviewed– a new Biodiversity Strategy has been released in draft form — its proposed goals are toencourage more Victorians to value nature and to ensure that Victoria’s naturalenvironment is healthy (VDELWP 2016b).

•

Changes introduced in Queensland in 2013, designed to reduce red tape and regulatoryburden on landholders, included allowing cattle grazing in national parks; removing theprohibition on large-scale clearing for agricultural, horticultural or pastoral purposes; andchanging the onus of proof for vegetation clearing offences (towards a presumption in favourof the innocence of the landholder) (Cripps 2013). These changes led to a significant
increase in the rate of land clearing in Queensland — three times as much land was clearedin 2014-15 as in 2009-10. A Bill to reintroduce many of the abolished regulations, including
the prohibition on clearing for high-value agriculture and irrigated high-value agriculture, wasput before the Queensland Parliament in March 2016. The Bill ‘polarised views … withenvironmental and conservationist groups supporting the Bill, while landholders and theirpeak bodies strongly opposed the Bill’ (QAEC 2016, p. vii). The Queensland Parliament’s
Agriculture and Environment Committee was unable to reach a majority decision as towhether the Bill be passed (QAEC 2016). Proposed amendments under the Bill were notagreed to by the Parliament, and ‘will not be implemented at this time’ (QDNRM 2016).

•

The South Australian Government is conducting a review of its native vegetation
regulations, ‘with the aim of reducing the regulatory burden for landholders and toestablishing a stronger focus on the value of native vegetation in achieving biodiversity
conservation priorities’ (sub. 57, p. 15).

•In Tasmania, a review of the Permanent Native Forest Estate Policy has been underway
since mid-2015. Broad scale clearing is one of the issues being considered by the review.
Broad scale clearing (of up to 40 hectares per year per property) was due to be phased out
in Tasmania by 1 January 2016, but this has been deferred until 1 July 2017 (Tasmanian
Government, sub. DR287; TDSG 2016).

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The Environment Protection and Biodiversity Conservation Act
While state and territory governments are the primary regulators of environmental matters,
the Environment Protection and Biodiversity Conservation Act 1999 (Cwlth) (EPBC Act)
also affects the agricultural sector. It provides a legal framework for protecting nationallyand internationally important flora, fauna, ecological communities and heritage places —collectively termed ‘matters of national environmental significance’. These matters are:•world heritage values (underpinned by the Convention Concerning the Protection of theWorld Cultural and Natural Heritage)•

national heritage values•

listed threatened species•

listed migratory species•

listed ecological communities (for example, lowland subtropical rainforest or
grasslands of the Victorian volcanic plain)•

wetlands of international importance (sometimes called ‘Ramsar’ wetlands after theinternational treaty under which such wetlands are listed)•

nuclear actions (including uranium mines)•

Commonwealth marine areas•

the Great Barrier Reef Marine Park•

water resources impacted by a coal seam gas development or a large coal mining
development. (Commonly called the ‘water trigger’, this matter was introduced into the
EPBC Act in June 2013.)

Landholders who plan to undertake actions that would have a significant impact on amatter of national environmental significance are required to follow the EPBC Act’s‘referral, assessment and approval’ process. For farm businesses, this situation typicallyarises when the business plans to clear native vegetation or undertake development that
could affect plants, animals or ecological communities that have been listed as threatened
under the EPBC Act.
Certain activities undertaken before the commencement of the EPBC Act in July 2000 andthat have been undertaken on a continuing basis since that time are permitted under a‘continuing use’ exemption. Examples include routine grazing activities, continuing
cropping and crop rotation, and maintenance of existing dams, roads and fences(Department of the Environment 2013).
The EPBC Act process comprises the following stages:•

Referral. The EPBC Act places the onus for referring a proposed action on the person
proposing to take the action (although in certain cases the Minister may deem thereferral to have been made). When a proposed action is referred to the Environment
Minister, the Minister (or delegate) has 20 business days to decide whether it is likely
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to require approval under the EPBC Act. If a significant impact on a matter of national
environmental significance is considered by the Minister (or delegate) to be unlikely,
further assessment is not required and the proponent can proceed to take the referred
action with certainty in respect to Commonwealth laws.
•

Assessment. If the Minister considers that the proposed action has a high likelihood of
having a significant impact on a matter of national environmental significance, then theaction is deemed to be a ‘controlled action’. It requires Ministerial approval, and theapplication proceeds to the assessment stage.

•

Approval. The Minister decides to either grant approval, to grant approval withconditions, or to deny approval for the action.

The number of agriculture referrals is low. The Department of the Environment said that:
There are fewer referrals from the farming sector than in any other sector. Agriculture andforestry made up just 2% of all referrals received under the EPBC Act from 1 January 2000 to
4 March 2013. (sub. 80, p. 6)

And agricultural projects are rarely required to proceed to assessment. In the period 1999
to 2014, there were 54 agriculture-related projects referred for assessment, of which eightprojects were subject to conditions (Australian Government 2014a).
The outcomes of the referral, assessment and approval process under the EPBC Act do notaffect any state or local government approvals that may be required, so actions that are
permitted under the EPBC Act may be prohibited by state or local governments, and viceversa.

Other environmental regulations
Other environmental regulations affecting farm businesses include pollution control, feral
animals, weeds and other pests, and those concerning native animals (box 3.5).
Pollution control legislation affects farm businesses in different ways. For example:•

requirements to contain and reuse effluent, and to prevent it from leaving a property orentering waterways impact on intensive livestock industries such as feedlots, dairy
farms and piggeries, as well as processing facilities such as abattoirs (chapter 4)•

noise limits and curfews affect the operation of chicken farms, by limiting the time
periods during which chickens can be harvested•

air quality regulations limit the dust that can be emitted by cotton gins and grain silos•

odour and waste regulations affect abattoirs, where there are many potential sources ofodour (NSW EPA 2013a). On-farm composting, particularly on a commercial scale, isalso a potential odour source (Tasmanian Government, sub. DR287). Odour and waste
regulations also affect the feedlot industry, as ‘odour and waste are inevitableby-products of feedlot and intensive finishing systems’ (MLA 2015).

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Box 3.5

Other environmental regulations affecting farm businesses

Pollution control regulations
Pollution control regulations seek to deliver the:•prevention, control and abatement of pollution and environmental harm•

conservation, preservation, protection, enhancement and management of the environment.

Pollution control legislation typically cover air quality, odour, noise, water quality (including
effluent discharge) and waste and resource recovery.

Regulation of weeds
A plant is considered to be a weed when it grows where it is not wanted (that means that a plantthat is viewed as a weed in one place may not be considered as such in other places). States
and territories have a range of laws and regulations relating to weeds. For example in South
Australia, if ‘a pest is spreading from a property to other areas where it is causing negative
impacts, the Minister may “declare” provisions that require a landowner to take action to destroy
or control an animal or plant’ (South Australian Government, sub. 57, p. 14).
Many biosecurity regulations also aim to limit weed incursions and to control the spread ofweeds — these are considered in more detail in chapter 8.

Regulations relating to native and feral animals
State and territory governments typically require people seeking to undertake actions thatinvolve, or may involve, native and/or feral animals to obtain a permit or licence. For example, insome states the regulation provides that snakes can only be relocated by a person with a snake
catcher’s permit or reptile removal licence. In south eastern Queensland, clearing of certain
species of trees must be undertaken under the guidance of a koala spotter (Queensland
Government 2015c).
State and territory regulations also govern the way in which landholders are permitted to control
native or feral wildlife that is causing property damage. For instance in Tasmania, crop
protection permits for the control of fallow deer are only issued outside of hunting season(TDPIPWE 2011). In Queensland, commercial crop growers may obtain a ‘damage mitigation
permit’ that allows them to control some (but not all) species of flying foxes provided the permit
holder adheres to the Code of practice: ecologically sustainable lethal take of flying-foxes forcrop protection (QDEHP 2015).

Many of these issues are considered by agricultural businesses as part of supply chain
quality assurance programs, and by state governments and local councils as part of land
use planning processes (chapter 2). Farmers can also face requirements for minimum
separation distances to ensure that incompatible land uses are located in a way thatminimises impacts caused by noise, odour, air emissions and/or waste discharge(especially for intensive agriculture — chapter 2). Additionally, many state governments
require intensive industries, including sugar mills, piggeries and poultry farms, to belicenced by the EPA or relevant state government department.
There are also industry-specific guidelines, which provide a common framework for
managing the environmental issues that arise in certain intensive agricultural industries.
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For example, there are guidelines for the management of effluent on dairy farms in
Victoria (VDEPI 2008). In the pork industry, relevant guidelines include ‘the National
Environmental Guidelines for Piggeries … , the National Environmental Guidelines for
Outdoor Production … and the Piggery Manure and Effluent Management and Reuse
Guidelines’ (Australian Pork Limited, sub. 37, p. 2).
Operators of intensive agricultural facilities are also required to report information to the
National Pollutant Inventory (NPI) if the facility reaches certain prescribed thresholds. The
thresholds relate to the quantity of fuel used, and NPI substances used, generated oremitted by, the facility.
Facilities that meet the threshold are then required to estimate their emissions annually andreport these to a state or territory environment agency, which checks the data and forwards
it to the Australian Government Department of the Environment for inclusion on the NPI.
Information in the NPI is freely available and accessible to the public.
Any business that uses agricultural and veterinary (agvet) chemicals is also required tocontribute, via a levy, to agvet chemical container recycling programs (ACCC 2014e). In
addition in Queensland, regulations designed to protect the Great Barrier Reef place limits
on the application of nitrogen, phosphorus and agvet chemicals by certain cane farmers andgraziers in the Wet Tropics, Burdekin and Mackay Whitsundays catchments (Queensland
Farmers’ Federation. sub. DR217).

3.3

What effect do the regulations have on farmbusinesses?

This section looks first at the benefits of native vegetation and biodiversity conservation
regulations, before looking at the costs that the regulations impose on farm businesses andthe scope to remove any unnecessary costs.

What do we know about the benefits of native vegetation andbiodiversity conservation regulations?
Assessing the effectiveness of native vegetation and biodiversity conversation regulations(including measuring and valuing the benefits that flow from conserving native vegetation
and biodiversity) is difficult, for several reasons.
•First, while the link between native vegetation and the benefits can sometimes be
straightforward (for example, providing shade or fodder), the link is often indirect andnot easily measurable. The nature of the connection between native vegetationconservation and climate, for example, is very complex and not fully understood.

•

Second, even if measurement difficulties could be resolved, many of the benefits ofconserving native vegetation and biodiversity do not have a market value. While there

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are several non-market methods that can be used to value environmental benefits, thesemethods have drawbacks.
– The validity of revealed preference methods is widely accepted, but there are many
circumstances where they cannot provide the estimates needed for environmental
policy analysis.
– Stated preference methods can be used to estimate virtually all types ofenvironmental values, but their validity is more contentious (Baker andRuting 2014, p. 2).
– The Australian Conservation Foundation considered that ‘appropriate frameworks
and measurement are not yet in place to truly value Australia’s natural environment’(sub. DR252, p. 12).
•

Third, it is inherently difficult to measure the additionality of conservation activities(discussed below).

Also, because the natural landscape varies widely between different geographic locations,
there is a wide degree of variation in the benefits provided by retaining native vegetation
and biodiversity in different locations. These differences, combined with the variations
between jurisdictions in the approach and coverage of their regulations (as well as thereviews and changes that are underway in many jurisdictions (box 3.5)), add to thedifficulty of obtaining a national picture of the benefits derived from native vegetation andbiodiversity conversation regulations.
Despite these challenges, many inquiry participants spoke about the benefits of native
vegetation and biodiversity conversation regulations (box 3.6).
In light of the benefits they identified, some participants suggested that native vegetation
and biodiversity conversation regulations need to be strengthened. For example, EDOs ofAustralia said that there is ‘strong evidence that the current legal frameworks are notproviding adequate protection for native vegetation and biodiversity’ (sub. DR241, p. 2,
see also sub. DR248, p. 3).
Some participants pointed to declines in the annual rate of land clearing, particularly since
the adoption of the Native Vegetation Act 2003 in New South Wales, as evidence of thesuccess of the regulations in that state. But the rate of native vegetation clearance under aparticular regulatory regime it is at best only a partial indicator of the effectiveness of that
regime. In particular, the rate of clearing does not provide any information on the quality
or environmental value of the vegetation being cleared. And it gives no indication of theregime’s effectiveness in achieving other environmental objectives, such as biodiversity
conservation or prevention of soil and water degradation. In addition, the rate of land
clearing can be affected by many other factors, such as exchange rates, commodity prices
and developments in land-clearing technology.

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Box 3.6

Participants acknowledged the benefits of native vegetation
and biodiversity conservation regulations

Department of the Environment and Energy:
Well designed and implemented environmental regulation creates social benefits and economic value
for the community through the maintenance or improvement of environmental standards.
Environmental regulation can build community and market confidence and provide a social licence toproducers to use natural resources. This can increase productivity and increase access to markets andpremium prices. (sub. DR274, p. 1)

WWF Australia:… a large body of scientific research shows that regulation of native vegetation clearing actually
benefits agriculture. (sub. 85, p. 1)

EDOs of Australia:
Regulation of land clearing is necessary, proportionate and critical to the long-term viability ofagricultural productivity in Australia. (sub. 60, p. 2)

The Centre for Ecosystem Science said that regulations governing the management of natural
resources such as native vegetation, soils and water:… ensure against wasteful and destructive short-term exploitation of Australia’s natural resources that
preclude future benefits for other stakeholders and generates costs (mostly as liabilities for taxpayers)
for rehabilitation. (sub. DR200, p. 4)

Many quoted WWF Australia’s claim that ‘an average of 116 000 native mammals havebeen saved from agricultural clearing each year since the introduction of the [NSW Native
Vegetation] Act’ (sub. 85, att. 1, p. 14). However, the protection of individual animals is
not the same as the preservation of threatened species, and evidence that native vegetation
regulations contribute to species preservation is more limited. Indeed, the only
conservation activity that has been clearly shown to be associated with stabilisation or
recovery of threatened species in Australia is expansion of strictly protected areas such as
reserves (Taylor et al. 2011).
But to the extent that native vegetation and biodiversity conservation regulations prevent
land clearing, they also avoid costs associated with clearing, which can be considerable. As
the Centre for Ecosystem Science said:… clearing of native vegetation destroys the dependent plants and animals, increases risks towildlife from introduced predators, impacts surface and groundwater-dependent ecosystems,
and fragments habitat so that individuals are unable to move through the landscape. It reduces
the resilience of biodiversity to cope with a climate change … and has a long-term legacy ofongoing adverse impacts on biodiversity … (sub. DR200, p. 5)

William Blackburn also said that ‘the ongoing and long-term cost to the Australiancommunity of excessive land clearing is very high (especially when factoring in[greenhouse gas] emissions)’ (sub. DR196, p. 1).
But as noted earlier, farmers retain native vegetation for many reasons. As such, thepreservation of areas of native vegetation cannot always be counted as a ‘benefit of118

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regulation’ because though being required by regulation, it often would have beenconserved anyway (so the conservation is not ‘additional’). Indeed, the additional
conservation attributable to native vegetation and biodiversity conservation regulations islikely to be low, given the benefits that healthy environments and ecosystems provide interms of agricultural productivity. As the Wilderness Society said:
Agricultural productivity is highly dependent on the maintenance of ecosystem services
provided by healthy native vegetation and associated biodiversity. These include healthy
riparian zones, maintaining soil stability and biota, reducing erosion and salinity, and assisting
pollination and nutrient cycling. Protecting biodiversity thus protects the productivity and valueof that agricultural land. (sub. DR207, p. 6)

Many inquiry participants also pointed to the contribution made by native vegetation
regulations towards meeting other environmental goals, particularly those related toclimate change (box 3.7). Maria Riedl (sub. DR219) noted that restrictions on land clearing
in Queensland help to protect the Great Barrier Reef.
Box 3.7

Carbon, climate change and native vegetation

Participants highlighted the interactions between native vegetation regulations and Australia’s
goals for carbon emissions reduction and climate change adaptation.
… native vegetation laws significantly contribute to carbon storage and greenhouse mitigation
objectives and targets. (EDOs of Australia, sub. DR241, p. 10)
Forests and woodlands mitigate global warming by absorbing and retaining greenhouse gasses. By
protecting native vegetation, land clearing laws have made an important contribution to greenhousegas abatement efforts. They were the primary reason Australia was able to meet its Kyoto Protocolcommitments. (National Parks Association of NSW and the Nature Conservation Council of NSW,
sub. DR209, p. 6)

Others pointed to the perceived contradiction between recent changes to native vegetation
regulations in some states and the Australian Government’s initiatives to reduce carbon
emissions.
What has native vegetation clearing regulation achieved? It has allowed Australia to meet its carbon
obligations under the Kyoto protocol by sequestering 73 [million] tonnes of carbon. At zero cash costand acceptable political cost, these regulations were probably the most effective and efficient way toachieve this outcome. (Bruce Gardiner, sub. DR101, p. 2)
It makes little sense to reduce protections to existing native vegetation, only to then have to undertake
revegetation … This represents a double hit to taxpayers: not only has the [Emissions Reduction Fund]investment been entirely wasted by ill-conceived state regulation changes undermining federal efforts,
but these emissions will have to be reduced again in order for Australia to meet international
obligations. (National Parks Association of NSW and the Nature Conservation Council of NSW,
sub. DR209, p. 7)… the public are currently paying private interests subsidies to avoid polluting activities through the[Emissions Reduction Fund], while weak legislative settings, such as those in Queensland actively
encourage the erosion of existing stock of land sector carbon through, what would otherwise be,
avoidable and controllable broad scale land clearing. (Australian Conservation Foundation,
sub. DR252, p. 6)

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119A number of participants, including the Wilderness Society (sub. DR207) and the National
Parks Association of NSW and the Nature Conservation Council of NSW (sub. DR209),
drew attention to CSIRO’s finding that despite projected changes to the climate,
Australia’s total output of food and fibre can increase in coming years, even in scenarioswith significant increases in land use for conservation and carbon sequestration. However,projected future improvements in agricultural productivity do not demonstrate whether or
not current regulatory settings are optimal — productivity could improve even in thepresence of poorly designed or unnecessarily onerous regulations, but that improvement
would be smaller than it would have been had the design or implementation of theregulations been better.

Costs of native vegetation and biodiversity conservation regulations
The costs to landholders of native vegetation and biodiversity conservation regulations
were highlighted by many participants. GrainGrowers surveyed its members and found thatenvironmental law (especially land clearing and native vegetation laws) was the mostconsistently raised regulatory issue. Comments from members ‘centred on environmental
regulations being too restrictive, illogical and overlapping/duplicative’ (sub. 73, p. 22).
The Australian Farm Institute, commenting on native vegetation laws in New South Wales,
said also that they ‘ … created a cumbersome and tangled web of productivity-sapping
regulations, and tasked an ill-equipped bureaucracy with making decisions that even
Solomon in all his wisdom would have found impossible’ (Keogh 2014).
Regulations restrict what farmers can do
Native vegetation and biodiversity conservation regulations can restrict how farmbusinesses can operate by:•limiting the amount of land that can be used for agricultural production•

preventing diversification of farm business operations, or the adoption or full
exploitation of new technologies (which could, if adopted, lead to efficiency gains)•preventing effective management of weeds, vegetation regrowth and woodland
thickening.

Participants raised concerns in all three areas.
Farm representatives said that restrictions on land clearing limited farmers’ ability torespond to increases in demand for their products. One farmer of tropical fruits in northern
Queensland, for example, reported that ‘ … 55% of our land has been conserved [asoffsets] so that we can farm 17% of our land (Property Rights Australia, sub. 45, p. 13).
And Queensland grazier Larry Acton described land clearing rules as ‘impracticalregulation … that is stifling production’ (sub. 55, p. 2). In New South Wales, the Native
Vegetation Act 2003 applies to native grasslands, even when those grassland are of low
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conservation value. Byron et al. (2014, p. 19) argued that this places ‘particularly
inappropriate’ restrictions on the use of native grasslands for pasture.
The Commission also heard that restrictions on clearing isolated trees or small patches ofvegetation limit the efficiency of farming operations and opportunities to adopt precision
farming (Karen Baines, sub. 13; VFF, sub. DR189). Where this occurs, it reduces the
productivity benefits that innovative spatial technologies can provide in terms of reduced
soil compaction and reduced water and fertiliser use.
Excessive red tape can impact routine improvements on sugarcane (and other) farms, such as
clearing a small area for installing a new irrigation system (for example a centre pivot), withpotentially significant financial implications. (ASMC 2014, p. 2)

Similarly, in the Bordertown region of South Australia, ‘scattered trees on development
paddocks were an issue of concern when landholders were planning to install large centre
pivot irrigation systems … land clearing restrictions were impeding development plans,potentially affecting returns to investment in centre pivot irrigation’ (Mallawaarachchi and
Szakiel 2007, p. 2).
Other barriers to the adoption of new machinery and innovative technologies by farmbusinesses, including inadequate access to the internet, are discussed in chapter 6.
There was also concern that native vegetation clearing laws impede the ability of producers
in regions affected by woody weeds (such as western New South Wales) to control those
weeds, limiting their capacity to address this threat to farm productivity (for example,
NSW Farmers’ Association 2012). In particular, the order on clearing invasive native
species made under clause 38 of the NSW Native Vegetation Regulation limits landholders
to clearing no more than 80 per cent of area covered by invasive native species. As notedby Bartel:
Although woody weeds cause land degradation these invasive native species have beenprotected by land clearance legislation. Permits are required to be obtained and offsets
negotiated before they can be removed … The woody weeds protections are seen tocompromise the feasibility of the law in achieving its stated environmental objectives, and are
thereby also undermining the legitimacy of the law and of government. (2014, p. 900)

And in the context of weed control, the Aerial Application Association of Australia said:
Often, by trying to comply with the regulatory requirements placed on landholders to manage
noxious weeds on their properties, there is the potential for collateral damage on native
vegetation co-located with the noxious weeds. Aerial application is often the most efficientmeans of application of chemicals, but it cannot be undertaken due to native vegetation
protection requirements, resulting in significantly lower productivity of significant swathes ofagricultural land. (sub. 12, p. 3)

The effect of regulations relating to weed control is discussed further below.

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The financial burden on landholders
Where landholders are required to preserve trees or parcels of vegetation, it is not a matterof simply ‘locking up and leaving’ that land — ongoing involvement of the landholder isrequired (COAG SCEW 2012). The natural ecological succession of native vegetation
communities means that active management is required to keep them in preferred states.
This can involve significant direct costs for landholders. As the NSW Farmers’
Association said, ‘biodiversity conservation requires active and adaptive management andthat in turn, requires human effort and resources’ (2014, p. 15). And the Tasmanian
Farmers and Graziers Association said that farmers ‘too often, [they] are expected toundertake conservation measures that carry with them considerable costs but where thebenefit is to the wider community’ (sub. DR281, p. 3).
While farmers can benefit from conserving vegetation and biodiversity on their land, they
will not necessarily capture all the benefits, or the benefits to them may not outweigh thecosts. There is also the cost of reduced incomes (and lower property values) for
landholders — in the absence of the native vegetation and biodiversity regulations, the land
covered by native vegetation or habitats could have been put to more profitable uses (NFF,
sub. 61). A number of inquiry participants claimed that native vegetation and biodiversity
conservation regulations curb development. For example, AgForce said that vegetation
management laws are seen as:… onerous, stifling of profitability and not proportionate to risk … These laws were seen towork to suppress ecologically sustainable development that could support ongoing profitability… and imposed significant real and opportunity costs. These costs were borne largely bylandholders, rather than the urban community which also benefits from such
public-good-directed policy making. (sub. 17, p. 5)

West Wimmera Shire Council said the protection of the red-tailed black cockatoo imposes
costs on farm businesses in the Wimmera region of Victoria including ‘ … damage tomachinery, reduction in cropping area and therefore yield and chemical wastage’(sub. 49, p. 2). The NSW Farmers’ Association said that ‘farmers in New South Walesbear a multi-million dollar opportunity cost each year in the interest of conserving
environmental assets for the people of New South Wales’ (sub. 72, p. 9).
Being able to get approval to clear land by purchasing offsets may also not reduce thefinancial impact on landowners (though it does provide additional opportunities forbusinesses to earn income by selling offsets to others). Several participants commented on
the burden imposed by offset requirements.
Offset requirements are also onerous if the clearing involves endangered or of-concern regional
ecosystem or threatened plant species. This has the ability to impede potential cane industry
expansion in Northern Australia. (Canegrowers, sub. 22, p. 4)
A cash payout is sometimes given as an option in lieu of offsets but the sums asked for are in
the realms of fantasy and could never be paid off by most agricultural businesses. (Property
Rights Australia, sub. 45, p. 5)

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Not only do landholders incur direct costs in maintaining land that cannot be cleared or inpurchasing offsets, and forgo any income that could be generated from land that cannot becleared, they do so without compensation. As Finlay put it:
The clear problem with the current framework of environmental protection is that it imposes
substantial restrictions on land use, but fails to provide any compensation to land owners whopurchased their land before these restrictions were put in place and who can no longer realize
the true productive value of their property. (2015)

While the Commonwealth is required to provide compensation ‘on just terms’ for property
it acquires (s. 51(xxxi) of the Australian Constitution), the compensation guarantee does
not extend to the States, and does not cover restrictions to property rights (as opposed toacquisitions of those rights) that are imposed by government policies, regardless of thesignificance of the restrictions (Finlay 2015).
One of the consequences of loss of productive land is lower property values. Whileattributing any observed changes in property values to the effects of regulations and toother factors can be difficult, lower farm returns resulting from land clearing regulations
would be expected to roughly translate into a fall in property values. According to theAustralian Farm Institute, the introduction of native vegetation laws in New South Wales‘decimated the property values of farmers in many regions’ (Keogh 2014). Where
landholders are required to protect native vegetation on their farm, ‘the losses [in land
value], or potential increases that cannot now be realised, are common, widespread andoften large’ (Sinden 2004, p. 222). Pat Carmody described the effect that the protection of
the growling grass frog has had on the value of his land and business (box 3.8).
Box 3.8

Protecting growling grass frog: one winegrower’s experience

Pat Carmody owns and runs Craiglee Vineyard in Sunbury, north-west of Melbourne. In 2013,
he discovered that 85 per cent of the vineyard — including 100 metres on either side of a creekthat winds through the property — had been included in a growling grass frog conservation
area. Communication about the change, according to Mr Carmody, was poor:… we have never been formally told by the government that our place is in category 1 Growling
Grass Frog habitat. If you didn’t find it on the website you didn’t know about it. (trans., p. 160)

And the rationale for including the property in the conservation area was not clear. Mr Carmody
said:
We have never seen a frog. There’s other frogs along the creek, there’s a Southern Marsh Frog,
there’s other frogs, there is no — we have never heard a Growling Grass Frog. We have never seen afrog in the vineyard … (trans., pp. 162–3)

Mr Carmody said that being included in the conservation area has substantially reduced thevalue of his property, ‘basically the place is worthless’ (trans. p. 159). According to the relevant
department of the Victorian Government however, it has ‘no effect on landowners’ abilities tocontinue to use their land within the area as they have done historically’ (Wallace 2015).

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In contrast, where remnant native vegetation improves the aesthetic value of a farm, thiscan lead to an increase in property values (Mallawaarachchi and Szakiel 2007). For
example in north-central Victoria, the presence of native woody vegetation was estimatedto increase property values, relative to the values of similar properties without any native
vegetation, by up to 16 per cent (Polyakov et al. 2014).
The bottom line is that landholders are required to bear the cost of providing many
community-wide benefits from better environmental outcomes. While the community may
demand better environmental outcomes, because the costs fall on landholders thecommunity is not necessarily aware of the cost of achieving those outcomes. Such anarrangement is likely to encourage the Australian community to continue to demand
greater levels of environmental protection simply because they are not paying for (or not
paying the full cost of) that protection. Potential strategies for addressing this are discussed
in section 3.4.
Perverse incentives and outcomes
The Commission heard that native vegetation and biodiversity conservation regulations
lead to some perverse outcomes, including discouraging or prohibiting landholders fromadopting practices that benefit the environment. These concerns can be exacerbated whenenvironmental actions are time sensitive (box 3.9).
The National Farmers’ Federation (NFF) claimed that the regulations can prevent ‘farmers
from changing land use, even where there may be a net environmental benefit resulting
from the desired practice change’ (NFF 2014a, p. 40). The Victorian Farmers Federation(VFF) said that the difficulty with current regulations in Victoria ‘ … is that they focus ona tree-by-tree assessment of a complex ecosystem. The focus is on one piece of a jigsaw
puzzle rather than what role that piece has in solving the puzzle’ (sub. DR189, p. 13).
Another perverse incentive created by native vegetation and biodiversity conservation
regulations is that they impose the greatest costs on landholders who, by choice or chance,
have substantial native vegetation remaining on their properties. Past actions that resulted
in native vegetation being well managed are not rewarded.
… a landholder who may have degraded native vegetation can be rewarded over the landholder
who previously managed vegetation well. (NSW NRC 2014a, p. 2)… it has been a constant feature of environmental legislation that good environmental
stewardship, rather than being rewarded, is often targeted for acquisition at no advantage to thelandowner. (Property Rights Australia, sub. DR254, p. 2)

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Box 3.9

One farmer’s experience when trying to improve
environmental outcomes

The owner and operator of a large cotton farming business on the Macintyre River in southern
Queensland told the Commission about his experience dealing with regulatory agencies andlocal councils when trying to improve environmental outcomes on his property. A recent flood
event led to frog spawning and an increase in the water bird population on the farmer’s
property. The farmer sought to prolong this natural event by adding water from his farm to thenatural flow. Timing was critical because, in order to benefit the bird population, the water fromthe farm needed to arrive before the natural flow dried up.
It took the farmer six weeks to negotiate with multiple agencies (at considerable cost) before
permission was granted to supply water for this ecological application. The lengthy delays
reduced the effectiveness of the water flow. According to the farmer, each agency was focused
exclusively on its area of responsibility and they were unable to work together. For example:•

the authority in charge of stock routes initially rejected the proposal due to its potential tocause erosion, while the local council was concerned with flood risk•

the farmer had to build a pipeline under a main road to reduce the risk of erosion as well as
increase the capacity of the culvert (to allow water flow) that was already in place•a temporary weir was built at the head of this pipeline to make it more effective, but had tobe removed following a complaint from a local resident.

The farmer reported that he had to convince an environment authority of the merits of the
proposal. He hired a zoologist to monitor bird species before and after the flow. The farmer was
required to design the activity to fit within the regional irrigation management plan, and to gain
permission from other landholders. He was also required to test the water quality before andafter the flow.
According to the farmer, the environment agency insisted that the project be labelled as a ‘pilot’
so that it did not form a precedent committing them to similar projects in future. The farmer,
however, would like to do similar projects more efficiently in future.
Although the flow did eventually take place, its biological effectiveness was reduced by thedelay. The experience left the farmer with a sense that regulatory agencies exist to inhibit rather
than enable innovative projects.
Source: Productivity Commission case study interview (appendix C).

The regulations can thus reduce the incentives for landholders to conserve or re-establish
native vegetation (for its own sake or to provide habitat for threatened species), because
they fear that changes to that vegetation may be prohibited in the future (NSW Farmers’
Association 2014). The VFF said that current policies make farmers ‘less likely toundertake regular revegetation as this is not counted in a future “offset”’(sub. DR189, p. 14). In some cases, landholders opt to plant exotics instead of native
vegetation, so that they can be certain of retaining the authority to remove, harvest or prune
those plants in the future (SFPARC 2010).
Fears of future changes to native vegetation regulations can also encourage pre-emptive
clearing, in which landowners clear vegetation as insurance against future policy changes.
This was recently reported to be occurring in Queensland (Ludlow and Greber 2016),
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ahead of foreshadowed changes to the laws in that state (section 3.2). When moratoriums
on clearing were in place in the Douglas-Daly River catchment in the Northern Territory(between 2002 and 2009), reported clearing rates accelerated rather than slowed, with over
80 per cent of clearing conducted without the required permits (Lawes et al. 2015).
Concerns about perverse outcomes can be compounded when regulations do not allow
decision makers to take into account relevant local factors. A report published by theOECD highlighted the:… inflexible application of targets and guidelines across regions [of Australia] with differingcharacteristics such that perverse environmental outcomes sometimes result. (Pannell andRoberts 2015, p. 18)

Perverse outcomes also arise when native vegetation regulations limit landholders’ ability
to control invasive native species. This is the case for bracken in South Australia, forexample, which can only be cleared in limited circumstances without the consent of the
Native Vegetation Council, even though it ‘has limited biodiversity value, can reduce theproductive capacity of cleared land and, in some seasons, may be toxic to stock’(SANVC 2013, p. 1).
In addition, native vegetation regulations can conflict with other important community
goals, such as bushfire prevention. Property Rights Australia said that ‘many of thelegislated guidelines for fire breaks and fire mitigation are inadequate to protect life andproperty’ (sub. 45, p. 8). Echoing this concern, Karen Baines (sub. 13) and Steve andJoann Chamarette (sub. DR148) said that the 20 metre perimeter of clearing allowed
around homes and farm infrastructure is inadequate. Nillumbik PALS expressed concern
about the requirement to obtain a permit to remove burgan, ‘a highly flammable native
tea-tree’ that is a ‘native weed’ (sub. DR159, p. 7), and suggested that by increasing fire
danger, these types of restrictions ‘endanger property and citizens as well as … the very
bio-diversity they claim to be protecting’ (sub. DR159, p. 8). Another participant said ‘bypreventing effective vegetation fuel management to reduce a major fire risk to at least
moderate, and by preventing compliance with fire management guidelines’ the current
planning and environment laws result ‘in increasing the risk of major fires occurring andwhen they do occur, increasing their devastation’ (Name withheld, sub. DR291, p. 2).
Perverse incentives can also arise when the costs borne by farmers as a result ofconservation laws are larger than the penalties they would incur for breaching those laws.
This was the case for a farmer in Victoria who contravened the EPBC Act by clearing
close to 450 trees on his property without obtaining approval to do so. Under a settlement
reached with the Department of the Environment, he was required to pay $70 000 (oraround $150 per tree) (Department of the Environment 2014). However, the Victorian
Farmers Federation estimated that each tree can cost farmers up to $354 per year (in both
direct costs and foregone opportunities) (VFF 2016b).

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Similarly, if the steps that landholders must follow to obtain approval to undertake aparticular action are too burdensome, the landholder may decide to proceed without
approval. The NFF noted that:… many farmers are reluctant to go through the process of changing their existing land
practices as the regulatory steps that they must undertake are deemed to be too onerous andtime consuming … in some circumstances, this has regrettably placed pressure on farmers totake land use decisions into their own hands, with instances of poor judgement leading toconvictions or poor environmental outcomes. (sub. 61, p. 11)

Rigid administration
Concerns were also raised about the approach taken by the government departments andagencies charged with administering these regulations. While states’ native vegetation
legislation typically seeks to promote the environmental, social and economic interests ofthe state, in some states the administration of native vegetation regulations is delegated toregulators who take a lexicographic approach to environmental protection — that is, they
are unwilling to approve trade-offs between environmental, social and economic outcomes,
even when small amounts of environmental harm result in much larger social or economic
benefit.
On this note, the Tasmania Farmers and Graziers Association said that:
There seems to be a mindset within some parts of government that they must set the highest
regulatory standards anywhere in the world regardless of the science and the impact on farmbusinesses. (sub. 16, p. 3)

This approach also reflects a view expressed by some inquiry participants. For example,
Peter Taylor said that ‘any regulation must protect biodiversity and penalise destruction of
biodiversity’ (sub. DR157, p. 1). Chris Tallentire considered that ‘there should be an
overall environmental benefit as a result of any development proposal’ (sub. DR142, p. 3).
Concerns about the rigid interpretation of native vegetation regulations were supported bya survey of broadacre and dairy farmers conducted by ABARES in 2011, which found that
42 per cent of farmers considered that native vegetation regulations lacked flexibility
and/or clarity (Harris-Adams, Townsend and Lawson 2012).
The lack of clarity surrounding native vegetation regulation is exacerbated when theinformation upon which decisions are based is not sound. The Commission heard thaterrors in native vegetation mapping are not uncommon. For example, Andrew Rea said:
Our family purchased land in the Whitsunday Shire of which areas were heavily infested with
noxious weeds. We had to engage a consultant at a cost of $10 000, plus $10 000 of our time
because the PMAV (Property Map of Available Vegetation) was grossly wrong. $20 000 down
the drain for permission just to clear noxious weeds through no fault of our own. (sub. 9, p. 2)

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Johnathan Pavetto also raised concerns about the accuracy of vegetation mapping inQueensland:… if we look at our maps and they’re inaccurate and we do something on our farm that shouldbe legal and should be allowed on farm, but it doesn’t comply with the mapping, we’re the ones
to blame and we could face imprisonment. If we want to correct the maps, it’s not up to thestate government to correct the maps, we have to hire our own consultants to prove to the state
government that, in fact, their information’s incorrect, which is really quite extraordinary.
(trans., p. 652)

And in New South Wales, a recent analysis of the vegetation mapping in the Upper Hunter
Valley found that the majority of vegetation types ‘are mapped with such a low level ofaccuracy as to not satisfy the requirements of local planning for development, conservationand offset initiatives’ (Hunter 2016, p. 43). Similar concerns were expressed in relation to
the vegetation mapping of the south coast of Western Australia, with South Coast NRM
reporting that much of it is ‘outdated, nonexistent or inadequate’ (sub. DR229, p. 4). The
VFF (sub. DR189) deplored the absence of mapping of red-tailed black cockatoo habitat inwestern Victoria.
The Australian Centre for Agriculture and Law said that ‘native vegetation control is anarea of regulation that often involves cumbersome administration, where attention to
reducing the avoidable bureaucracy could result in more efficient laws without
undermining the purpose of those laws’ (sub. 2, p. 2).
In a similar vein, inquiry participants noted an absence of trust between landholders andregulators (box 3.10).
Many also expressed concerns about the enforcement of native vegetation and biodiversity
conservation regulations (box 3.11).
In response to such concerns, the Department of the Environment and Energy said that it‘is committed to conducting compliance and enforcement activities in accordance with theprinciples of procedural fairness’ and ‘applies a range of administrative, civil and criminal
sanctions to ensure the most appropriate response to breaches of the legislation’(sub. DR274, p. 3).

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Box 3.10

An absence of trust between landholders and regulators

When it comes to natural resource management, some rural landholders rarely trust
government agencies and staff — an underlying distrust of government information andassistance has been reported in many situations (Meadows, Emtage and Herbohn 2014). The
National Parks Association of NSW and the Nature Conservation Council of NSW suggested
that there is ‘vocal minority of farmers who oppose any form of regulation whatsoever —including regulation on clearing and compliance’ (sub. DR209, p. 9). While such entrenchedviews would contribute to distrust, there are also other factors at play. In particular, Curtis et al.,for example, found evidence that government staff engaged in natural resource management‘ … have different values (i.e. much greener) than the rural landholders they are attempting toengage and this difference in values is likely to lead to distrust unless acknowledged andaddressed’ (2014, p. 189).
The lack of trust in local regulators is a recurring theme:
Many do not trust their [Local Land Services] officers enough to ask for advice and preferred to ‘keep
under the radar,’ believing that their properties would be watched even more closely if any contact was
made. [Local Land Services] staff also commented on the lack of trust and how difficult their job was,given the adversarial and inflexible nature of the Act. (Evidentiary 2014, p. 23)
Many farmers have a very poor relationship with Native Vegetation regulators and this has made it
hard [for] the NRM (natural resource management) groups to establish supportive, productive
relationships with farmers and land management. (Karen Baines, sub. 13, p. 2)

The NSW Farmers’ Association suggested that it is the native vegetation regulations
themselves that reduce farmers’ willingness to seek external advice.
… farmers’ reluctance to engage with advisory services or even in explicit conservation management
for fear of locking up land which may be … better utilised in production have origins in the impositions
created by the [Native Vegetation] Act. (sub. 72, p. 11)

Inquiry participants emphasised the need to build the capability of, and trust in, regulators.
The fundamental injustice of [native vegetation laws], in addition to uncertainty about the future
direction of native vegetation laws, fosters a distrust of government and any associated conservation
or ecological outcomes … the current context is one of distrust, unwillingness, disconnect andconfusion. (NSW Farmers’ Association, sub. 72, pp. 9–10).
Good public policy requires ownership by those that it impacts, failure to achieve that goal results inpoor policy outcomes. (Tasmanian Farmers and Graziers Association, sub. 16, p. 3)

Several participants questioned whether or not they could influence the outcomes of processes
that affected them. One submission stated that ‘the green decision was already made’ (Ronda
and Allen Harmer sub. 15, p. 1). Other participants echoed this concern, and noted that
regulators in many jurisdictions are inclined to prohibit every action that could possibly affectbiodiversity, regardless of the potential benefits of those actions. The perception thatgovernment agencies favour environmental outcomes over agricultural production can becompounded by the dual role of those agencies: in many cases agencies must balance two
conflicting roles.
While cooperative approaches are appropriate, regulators must enforce legal obligations where
cooperation and collaboration has failed to protect land. (EDOs of Australia, sub. 60, p. 3)

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Box 3.11

Different views on enforcement of environmental regulations

Not rigorous enough?
GrainGrowers expressed ‘concerns with how environmental regulations are enforced, including
problems with some farmers getting away with non-compliance’ (sub. 73, p. 22). William
Blackburn said that ‘while current State regulations may sometimes be inconsistent or not
perfectly efficient, by and large they are too weak and too poorly enforced’ (sub. DR196, p. 1).
Environmental Justice Australia said that in Victoria, ‘monitoring, evaluation and enforcement ofland clearing has been very poor’ (sub. DR221, p. 7), and EDOs of Australia (sub. DR241)
highlighted the limited resources that are available for monitoring and enforcement activities.
In many instances smaller lifestyle farms and ‘tree changers’ close to urban areas are a sourceof weed infestations and feral animals that reduce productivity on adjacent commercial farms.
Such poor land management practices often arise from ignorance (Luck, Race and Black 2011)or through the absence of financial incentives (if landholders are not engaged in agricultural
production, they do not reap the productivity benefits of controlling invasive plants and animals).
However, there may also be a reluctance on the part of local councils and other government
agencies to undertake enforcement actions in such cases.

Or overly rigorous?
In contrast, other participants said that governments take an overly punitive approach toenforcing native vegetation and biodiversity conservation regulations.
Strict enforcement and penalty provisions have created an adversarial climate between landholders
and government and eroded landholder goodwill. (NSW Farmers’ Association, sub. 72. p. 12)
There have also been ill advised and/or malicious prosecutions of landowners which have had nochance of success but left the defendants broke and broken. (Property Rights Australia, sub. 45, p. 2)

A commonly cited case is that of Peter Swift of Manjimup, Western Australia, who faced aprolonged and expensive legal battle after he was accused by the former Department ofEnvironment and Conservation (Western Australia) of illegally clearing 14 hectares of native
vegetation in 2007–09. Mr Swift was not convicted.
AgForce said that in Queensland, ‘ … the rapid reversion from non-coercive policy instrumentsfor vegetation management (information, extension, education), to coercive policy instruments(legislation, compliance, enforcement) has impaired the relationship between State Government
and landholders’ (sub. 17, p. 13). Also, its members expressed concern that they had:… applied for and in many cases received permits to clear High Value Agricultural (HVA) land. The
Compliance Division in the Federal Department of Environment sent a letter to many of the HVA permit
holders enquiring into their recognition of and need for compliance with the EPBC Act. The letter
mentioned the severe penalties for breaches of the EPBC Act. (sub. 17, p. 24)

The House of Representatives Standing Committee on the Environment also found:… [cases] where federal environmental laws were administered in a perhaps more punitive fashion
than may have been necessary, particularly when communicating with the farming community when
there is a breach of the EPBC Act. (HoRSCE 2014, p. 84)

There were also concerns about the accuracy of the mapping data used to monitor compliance.

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Complex, confusing, duplicative and narrowly focused
Many landholders also consider native vegetation and biodiversity conservation laws to be:•

overly complex and process driven (NSW OEH 2015)•

confusing and cumbersome (NFF 2014a, p. 16)•

focused on micro-management of individual plants and properties (NSW Farmers’
Association 2014, p. 4).

Burdekin Shire Council (Queensland) said that ‘ … the overall legislative framework isvery restrictive and expensive. It is difficult to understand for investors’ (sub. 35, p. 2). The
Consolidated Pastoral Company considered that there is a need for ‘rationalisation of themaze of environmental laws’ (sub. 71, p. 4). Gingin Private Property Rights Groupsuggested that ‘because of the complexity of the Environmental Legislation, very few if
any from the Ministers down, understand the law’ (sub. DR194, p. 3). And, according to
Byron et al., in New South Wales, native vegetation laws:… create a complex system that is difficult for the community to navigate, has imposed
unnecessary regulatory burdens, especially in certain regions and sectors across the state, isprocess driven and not fulfilling current objectives in the most effective and efficient way.
(2014, p. 4)

However, the Goulburn Broken CMA warned that ‘in aiming to reduce burden, regulatory
processes which are highly complex, can become oversimplified and not effective inreaching the objectives for which they were originally intended’ (sub. DR198, p. 2).
Farming organisations (including the Pastoralists and Graziers Association of Western
Australia (sub. 70) and the Queensland Farmers’ Federation (sub. DR217)) said that
landholders’ awareness of environmental regulations is low. The NFF noted that:For farmers, awareness of their specific responsibilities under any environmental law is around30 per cent, with this awareness level focused on state-based regulation. There is confusion thatis generated by a lack of harmonisation between State and Commonwealth laws. Despite any
good intentions farmers might have to comply with the regulation, awareness and confusion
often results in inadvertent non-compliance with the law. (sub. 61, p. 10)

Primary Producers South Australia considered that native vegetation regulation in that stateis ‘regarded by the majority as expensive and bureaucratic’ (sub. 41, p. 2). This perception
arises because permit applications must typically include a description of the type andamount of native vegetation to be cleared, an aerial photo or site plan illustrating where thenative vegetation exists, which sections are proposed for removal, methods proposed tominimise the amount that needs to be cleared, and actions proposed to offset the clearingthat goes ahead (Bricknell 2010). AgForce (sub. 17) provided the example of a 16 000
hectare property north-west of Charters Towers, where the owners spent over $50 000(including the costs of obtaining expert advice) to obtain approval to clear less than a tenthof the property.

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Many inquiry participants also commented on the duplication that exists in environmental
regulations (box 3.12).
Box 3.12

Duplication of environmental regulations

Duplication was a source of considerable concern for many inquiry participants. GrainGrowers
said that ‘ … there remains problematic overlaps and duplication in the environmental
framework (including Federal, state and local government restrictions) that grain farming
businesses operate in’ (sub. 73, p. 23). Similarly, the Consolidated Pastoral Company said that
it is ‘required to comply with, or take account of, at least 46 separate environmental Acts andregulations across four legal jurisdictions in the management of its properties’(sub. 71, p. 4). The NSW Farmers’ Association expressed concern that:… there is no certainty that low risk, potentially self-assessable and ‘code of practice’ based activities(such as those proposed in NSW) do not require referral at the Commonwealth level. This means thata farmer could have his clearing activity ‘certified’ [as authorised under a pre-approved plan] by the
Local Land Services and yet still be in breach of the Commonwealth legislation, when undertaking theactivity. Not only is it procedurally unfair it isn’t logical to regulate the same species or native habitat
twice and differently. (sub. DR161, p. 11)

Similar concerns were raised by the NFF (sub. DR216) and WAFarmers (sub. DR226).
However, the Australian Network of Environmental Defenders Offices cautioned that claims of
duplication are not accurate because federal and state laws address different issues.
In some cases, [federal and state laws] are assessing the same projects but they are not necessarily
assessing it from the same angle or for the same reasons. State processes do not assess projects
from the perspective of World Heritage protection. (HoRSCE 2014, pp. 26–27)

To the extent that the goals of different regulations differs, having separate systems to deliveron those goals may be reasonable. This was highlighted by several participants, including
Wimmera CMA (sub. DR147). The Goulburn Broken CMA said that there is not undue overlap
between EPBC Act and state native vegetation regulations because ‘both regulatory processes
operate at different scales and purposes’ (sub. DR198, p. 3).
However there is scope for governments to work together to implement regulations in ways thatminimise duplication (and the perception of duplication).

Overlap and duplication in native vegetation and biodiversity conservation regulations
contribute to slow decision making timeframes. While many of the decisions made under
the EPBC Act must be made within six months, there is no set timeframe for decisions
under many state native vegetation laws. This can compound the effects of the regulations
on farm businesses, as ‘seasonal production cycles are broken or missed because of
uncertainties arising from complex and unclear legislative requirements’ (NFF 2015c,
p. 7). For sheepmeat producers, the ‘regulatory uncertainty and time delay in getting
approval for vegetation and water management activities were significant costs to theirbusiness’ (Sheepmeat Council of Australia and Cattle Council of Australia, sub. 88, att. 1,
p. 28). Similarly, the Limestone Association of Australia said that environmental
regulations can delay ‘proposals for new and expanded mines and quarries which service
agriculture such as limestone and gypsum’ (sub. 48, p. 2).

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Other concerns relating to the EPBC Act
Awareness of the requirements of the EPBC Act

There are issues around the extent to which farm businesses are aware of the requirements
imposed by the EPBC Act, which ‘like most important legislation, … is long and can bedifficult for the lay reader’ (Law Council of Australia 2014, p. 5). The House ofRepresentatives Standing Committee on the Environment, for example, said that there havebeen ‘ … cases where members of the farming community were not well informed of their
obligations under federal [environmental] regulations’ (HoRSCE 2014, p. 84). The NSW
Farmers’ Association agreed that ‘knowledge of the EPBC Act is extremely low amongst
farmers’ (sub. DR161, p. 10). The Australian Government Department of the Environment
also acknowledged that:… some farmers may not refer actions that should be referred. Typically this is due to a lack ofknowledge about requirements under Commonwealth environmental law. (sub. 80, p. 7)

In addition, according to the NFF, even those landholders who are aware of the EPBC Act
can struggle to keep up with ongoing changes.
… as the footprint of environmental laws is extended with new listings — an activity that does
not require consent today may require approval if a new listing comes on line. This results inconsiderable confusion for farmers. (sub. 61, p. 10)

AgForce said that ‘following recent changes to Queensland vegetation management
legislation, the [Australian Government] Department [of the Environment] failed to engage
with producers and communicate risks of not complying with the EPBC Act, rather sat andspeculated over what might unfold on-ground and then commenced complianceinvestigations when it became apparent that producers were failing to implement thelegislation correctly’ (sub. DR246, p. 2).
As discussed in chapter 2, jurisdictions could consider programs to educate prospective
land purchasers about the realities of farming practices. This could include providing
information about the ways in which environmental regulations (including the EPBC Act
but also state and territory native vegetation and biodiversity conservation regulations) can
restrict those practices. (Other strategies to improve awareness of environmental
regulations are considered below.)
Burden imposed by the EPBC Act referral process

As noted above, the EPBC Act primarily affects farm businesses when they plan to clear
native vegetation or undertake development that could affect plants or animals that havebeen listed as threatened under the EPBC Act. Under the Act, landholders must refer
proposed actions (such as land clearing, construction or changes in land use) to theAustralian Government Department of the Environment if those actions could affect any
matters of national environmental significance.

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When deciding whether or not to refer a proposed action, landholders must determine
whether the changes they want to make are likely to have a significant impact on any
species and ecological communities listed under the EPBC Act (there are hundreds listed),or could otherwise affect a matter of national environmental significance (for example, anincrease in the runoff of fertilisers or pesticides could affect the Great Barrier Reef or alisted wetland). As the NFF said:
In essence, the [EPBC] Act requires a farmer to self-assess whether the proposed activity will
have a significant impact. (sub. 61, p. 10)

Some guidance is provided by farm organisations (for instance WAFarmers 2014), and theDepartment of the Environment has created an internet search tool that provides details ofmatters of national environmental significance for each postcode, catchment or local
government area (DoE 2015d). But according to landholders, the available information isoften not sufficient for them to fulfil their obligations under the EPBC Act.
At present a catchment level report can be generated which gives a list of species which ‘may
be present’. In the Wimmera, this report lists 300 matters of national environment significancewhich requires the land holder to read over 300 documents and attempt to determine if they
have any vegetation listed. (VFF, sub. DR189, p. 17)

This large volume of information is often of little practical assistance. As an example,
knowing that the critically endangered Regent Honeyeater’s habitat includes themunicipality of Ararat in Victoria does little to assist a landholder in Ararat when thehoneyeater’s habitat extends over much of south-eastern Australia, and the land in question
may not contain any of the species that honeyeaters use for food or nesting. Farmers
therefore typically need to engage specialist advice in order to complete the‘self-assessment’. The VFF said ‘farmers are required to self-assess whether actions will
have a significant impact on listed matters that often only a very select number of specialist
scientists would even be able to identify’ (2014b, p. 28).
In addition to their cost, consultants’ reports can easily run to dozens of pages, even when
the proposed action is relatively minor (for example, clearing five trees, box 3.13).
Both the NFF (sub. 61) and GrainGrowers (sub. 73) considered that this example illustrates
the need for a more streamlined process for seeking formal advice about whether a
proposed activity is significant and what will trigger the EPBC Act. In contrast, EDOs ofAustralia said that the example demonstrates ‘the appropriate application of a risk-based
assessment: the risk of impacts on a threatened species were identified, assessed against
relevant criteria and determined to be low enough to allow the clearing to proceed’(sub. DR241, p. 4).

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Box 3.13

Hurdles faced by a proposed blueberry farm in New SouthWales

The National Farmers’ Federation provided an example of the actions a farmer must take to be
confident that they are acting legally under the Environment Protection and Biodiversity
Conservation Act 1999 (Cwlth) (EPBC Act):… a detailed referral process must be completed to ascertain whether their actions will significantly
impact a listed matter. This detailed referral process requires providing independent technical reports
and a period of public comment on the proposed activity.
An example of this is of a landholder seeking to clear 1.2 hectares of land near Coffs Harbour NSW fora blueberry farm. The clearing was considered to be clearing of ‘regrowth’ under State native
vegetation laws, and as such no state approval required. However, the proposed clearing area
included one EPBC listed threatened plant species and potential habitat for six EPBC threatened
animals or birds. The proposed clearing action was going to remove 5 plants in the 1.2ha area, and it
was estimated that there was 6270 plants on the total property.
The landholder did the ‘right thing’ referring the development to Commonwealth to determine whether
Federal Environmental approval was required. This referral required the following details:•

19 pages of application information•

an independent expert report on proposed environmental impacts — which included 22 pages ofdetailed text, 18 [geographic information system] maps, 19 pages of detailed lists of potential
species on site and likelihood of occurrence site•a period of public comment.

The outcome of the referral was that the action was ‘not controlled’ and as such Commonwealthapproval was not required.
Source: NFF (sub. 61, p. 10).

The burden imposed by the referral process — and the need for consultant’s advice —depends on the number of listed species and geographic areas. The Tasmanian Farmers andGraziers Association said:
There is an implicit assumption in the EPBC [Act] that threatened species and/or ecologicalcommunities can and should be protected, no matter the cost or the consequences. Recent
scientific debate suggests that this assumption requires much more rigorous testing; and it isimportant to recognise that such aspirations are not always desirable or attainable.
(sub. 16, p. 6)

The Tasmanian Farmers and Graziers Association therefore considered that ‘there are anumber of significant failings’ with the EPBC Act (sub. 16, p. 6).
The National Irrigators’ Council (sub. 18, p. 4) expressed concern that the listing of the
Murray River and the Macquarie Marshes as ‘critically endangered’ under the EPBC Act
occurred without community consultation or a clear rationale. (However, the listing ofthese areas was subsequently disallowed by the House of Representatives.) It advocated‘amendments to the EPBC Act that guarantee that, prior to any new listings being made,key stakeholders … are consulted at the commencement of the process’ (sub. 18, p. 4).

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3.4

Improving environmental regulations

Native vegetation and biodiversity conservation regulations could be improved by:•building on efforts to reduce regulatory overlap and duplication•

fundamentally changing some jurisdictions’ regulations•

improving the administration of the regulations and changing the way that regulators
work with landholders and the community•

making more use of market-based approaches to native vegetation and biodiversity
conservation.

Costs could be reduced and effectiveness improved if regulatory regimes followed good
regulatory practices. This includes considering the community-wide costs and benefits ofenvironmental policies before adopting the policies, as part of regular policy reviews, andwhen circumstances change (including climatic circumstances, which may makepreviously attainable goals unattainable).

Reducing regulatory overlap and duplication
Not all overlap and duplication is wasteful — some degree of overlap and redundancy is an
important and unavoidable part of reliable systems. But in many cases, complex andoverlapping regulations place an undue burden on landholders and can limit theeffectiveness of the regulations. As Byron et al. said:… too much ‘red tape’ alienates the very people whose cooperation is essential for great
biodiversity outcomes. (2014, p. iv)

Where different regulatory requirements are inconsistent, or are perceived to beinconsistent, and the inconsistency cannot be removed, regulators need to provide guidanceon how to reconcile the (perceived) inconsistency, and what actions are permitted under all
relevant regulations (regardless of which level of government imposes them). AgForcerecommended ‘that the Queensland Government and Australian Government divisions
responsible for vegetation management legislation communicate more effectively and alignrequirements for information from landholders to enable more streamlined assessment andcompliance with respective regulatory frameworks’ (sub. 17, p. 25).
Several initiatives are already underway to remove red tape and streamline processes,
including:•consistent assessment processes for the listing of threatened species•

one-stop shops for environmental assessments and approvals.

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Consistent assessment processes for the listing of threatened species
In July 2015, the Environment Ministers of the Australian, state and territory governments
agreed to progress an intergovernmental memorandum of understanding to implement a
common assessment method for listing nationally threatened species, and where agreed,
ecological communities (DoE 2015c). Memoranda of understanding have since beensigned between the Australian Government and the governments of Western Australia, theAustralian Capital Territory, Northern Territory and Tasmania, with other jurisdictions
expected to follow (Department of the Environment, sub. 80). Aligning assessment
processes is meant to reduce duplication and increase consistency between jurisdictions’threatened species lists.
While the principle of using common methods to assess species for listing is sound,aligning regulatory methods can be complicated, administratively costly and politicallydifficult, and progress has been slow. The method that is agreed on should achieve areasonable balance, and should only result in convergence to the highest standard wherethat standard is scientifically robust and is justified on cost–benefit grounds. The latter
point was emphasised by the Tasmanian Farmers and Graziers Association:
Humans will continue to undertake activities that have adverse environmental impacts – and ofcourse they should seek to avoid and mitigate these wherever possible. However,pragmatically, it is also important to accept that some level of residual adverse environmental
impact is unavoidable and a part and parcel of our existence as a species … listings need to bereviewed regularly to ensure that they bear up under contemporary scrutiny and community
expectations. (sub. 16, p. 6)

Governments need to focus on the efficiency of governance and decision-making processes
relating to threatened species (including appropriate analysis of regulatory impacts, costs
and benefits), regardless of the degree of scientific agreement on methods, or the level ofdata available at a point in time.
One-stop shops for environmental assessments and approvals
Since 2013, some of the duplication in environmental assessment and approval processes
has been removed through the creation of ‘one-stop shops’. Under the one-stop shop
system, the Australian Government and state and territory governments enter into bilateralagreements for the assessment and/or approval of ‘an activity [that] is being managed by astate or territory government and is likely to have an impact on a matter of national
environmental significance’ (Department of the Environment, sub. 80, p. 11). The intended
effect is to create a single assessment and approval process for most project proponents.
The Commission has previously found that one-stop shops offer ‘significant potential toreduce coordination costs and provide greater certainty and clarity about the regulatory
framework’ (PC 2013a, p. 154), while recognising that they will not be suited to every
circumstance. But despite their general benefits, current one-stop shop arrangements arelikely to have little tangible impact for most farm businesses, given the small number of
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agricultural projects that proceed to the assessment stage of the EPBC Act (a point notedby Australian Pork Limited (sub. 37) and the Wilderness Society (sub. DR207)).
Several participants (including AgForce, sub. DR246; GrainGrowers, subs. 73 and DR247;
NFF, sub. 61) suggested that one-stop shops should be extended to cover on-farm activitiesor the initial stages of project assessment (such as the referral stage of the EPBC Act).
While this proposal could have benefits to farm businesses, those benefits will depend on
one-stop shops being fully established and operating effectively. Waiting for this to occur
before including other activities in the one-stop shops would therefore be sensible.
Other proposals to improve environmental regulations
The Wilderness Society argued that ‘Australia should have an independent national
environmental agency to administer national environment law, coordinate national nature
conservation strategies and provide publicly available evidence-based assessment andmonitoring of environmental issues to all sectors’ (sub. DR207, p. 12). Environmental
Justice Australia also suggested that improvement in agriculture and environmental
management ‘likely requires a fundamental rethinking of the relationship of national andState and Territory governments on these issues so that there is greater scope for federal
leadership, for example, around legislated standard‐setting, and sub‐national
implementation’ (sub. DR221, p. 11).
The benefits that could arise from revisiting the role of states and territories as primary
regulators of environmental matters are not clear. There would be significant challenges indeveloping a national approach that takes into account the differing interests andcircumstances of all jurisdictions, and the costs of doing so are likely to be substantial.
There are also a range of other options for improving the effectiveness of native vegetation
and biodiversity conservation regulations, and pursing these options would be worthwhile
before considering broader reforms to federal and state responsibilities in this area.
Vegan Australia took a different approach to conservation issues, and suggested that ‘thephasing out of animal agriculture would be of great benefit to the environment’(sub. DR115, p. 9), as it would promote revegetation and contribute to ‘restoring habitat,
increasing biodiversity and reducing species extinctions’ (sub. 25, p. 5). Peter Taylor(sub. DR157) suggested that regulations should be redesigned to mandate the biologicalhealth of the soil.

Some principles for environmental regulation
Some of the concerns about native vegetation and biodiversity conservation regulations
reflect problems that are inherent in any regulation where the benefits are difficult toquantify and extend far into the future.

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However, in the Commission’s view, conservation regulations should:•

be risk-based•

involve assessing the impact of proposed activities on the landscape or the region (notjust the impact on individual properties)•

consider economic and social factors, as well as environmental impacts.

These principles could work in conjunction with greater use of incentive- andmarket-based mechanisms (discussed below).
Risk-based regulation
Risk-based approaches to regulation are designed to ensure that applicants’ obligations areproportionate to the expected impacts of their proposed actions. In the context of native
vegetation and biodiversity conservation regulations, this means setting regulations that are
sufficiently flexible to be applied on a case-by-case basis in ways that focus onenvironmental outcomes.
Some jurisdictions have adopted a risk-based approach to native vegetation clearing
regulations. In Victoria, an application for a permit to remove native vegetation iscategorised into the low, moderate or high risk pathway, based on the extent and locationof proposed clearing and the potential impact on the habitat of Victoria’s rare or threatened
species (VDEPI 2013a). The risk to biodiversity of a proposal to remove native vegetation
is assessed:… based on whether the removal could significantly impact on habitat for Victoria’s rare or
threatened species. This is determined by assessing the proportional impact of the proposed
removal of native vegetation on rare or threatened species habitat. Proportional impact is ameasure of the relative importance of the species’ habitat to be removed in relation to the totalremaining habitat for that species. (VDEPI 2013a, p. 1)

The South Australian Government noted that its proposed Native Vegetation Regulations
2016 ‘explicitly include reference to a risk assessment approach to be applied when
considering application to clear native vegetation’ (sub. DR295, p. 6).
Other jurisdictions are working towards a risk-based approach to native vegetation clearing
regulations (DoE 2015c).
•

Western Australia is improving its satellite data to ‘enable more precisely targeted
environmental regulatory activity to areas where maintenance of land condition
requires this attention’ (WA Government, sub. 54, p. 16).

•

The recent review of biodiversity legislation in New South Wales recommended that arisk-based approach be taken to regulation, one ‘that emphasises education andvoluntary compliance while still giving regulators the tools to take strong enforcement
action against those who do the wrong thing’ (Byron et al. 2014, p. 8).

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•

The Tasmanian Government said that its controls on the removal of wildlife ‘arerisk-based and principally based on consideration of the conservation status of thespecies’ (sub. DR287, p. 6).

Well-designed risk-based approaches have a number of advantages, including that theycan:•improve environmental outcomes, by requiring a more comprehensive assessment ofproposals that could have more significant environmental effects•

help to ensure that the costs and obligations faced by landholders are proportionate to
the environmental effects of each proposed action — this is particularly important
given the wide variation in the type and magnitude of actions covered by native
vegetation and biodiversity conservation regulations•

increase the incentives for compliance with the regulations, through the prospect oflighter-touch regulation•

allow all relevant risks to be considered, and for trade-offs between those risks to be
made. Risks to native vegetation come not just from land clearing, but also from poor
land management (such as failure to control pests and weeds). As such, a system that
focuses on limiting land clearing without giving sufficient regard to the ongoing task ofenvironmental management will fail to achieve its conservation objectives. This
concern applies to both private- and public-sector land managers (and indeed,participants told the Commission that public sector land managers often fail to adhere
to good land management practices)•help to address perverse incentives (such as incentives to undertake pre-emptive
clearing or not to plant native species), contributing to better outcomes for both farmers
and the environment.

However, the benefits of risk-based approaches will not be achieved in the absence ofsound and thoughtful design. As Environmental Justice Australia put it:
Risk‐based approaches to environmental regulation can be appropriate and useful but only ifwell-designed, targeted, principled, enforceable and enforced. (sub. DR221, p. 6)

Achieving this standard requires minimising the potential difficulties associated withrisk-based approaches, which include:•

uncertainty — land managers and regulators have incomplete knowledge of aconstantly changing environment. ‘Ecosystems are not frozen in time and neither isthere complete science about any ecosystem’ (Martin et al. 2007, p. 15)•

bias — on occasion, regulators can place undue weight on risks to regulatory
institutions, to the detriment of environmental, economic or social risks (Rothstein etal. 2006)•

failure to acknowledge competing values and interests — ‘clear articulation of values,
norms or policy goals is an important factor orientating and ordering risk-based
approaches, yet one often obscured and/or contested’ (Lindsay and Riebl 2013, p. 461).

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When adopting a risk-based approach, risks need to be assessed in a robust fashion. As theGoulburn Broken CMA pointed out ‘the approach must be developed and implemented
according to sound processes and underpinned by rigorous scientific data’(sub. DR198, p. 2). A risk-based approach must also be implemented by regulators withthe skills and capabilities to support landholders in undertaking risk assessments (seebelow).
Risks also need to be clearly communicated to stakeholders. Unless communicated clearly,
the complex risk assessment methodologies can be confusing and appear to containanomalies (which could in turn lead to failure to protect areas of environmental
significance, while imposing additional regulatory hurdles by ‘protecting’ areas of very
limited importance). For example, in Victoria, the native vegetation location risk map has
been misinterpreted as a map showing the importance of — rather than the risk thatclearing would pose to — native vegetation (VDELWP 2016d).
It is also important that risk assessment methods apply equally to all landholders, with thesame factors considered regardless of the purpose of the intended action. For example, it is
not good practice to apply different rules to land clearing for the mining, petroleum,
geothermal and exploration activities than would apply if the same clearing were proposed
for agricultural purposes. Similarly, it is difficult to envisage an ongoing rationale fordifferent rules for clearing on pastoral leases and on freehold land, if the form of land
tenure is the only difference between otherwise similar tracts of land.
A risk-based approach to native vegetation and biodiversity conservation regulations canalso mean that regulations can more easily adapt to changing circumstances. This isimportant as:… a fundamental feature of ecosystems and species populations is that they are highly dynamic
and change in unpredictable ways both with and without human intervention. Essentially, thismeans that biodiversity conservation is a ‘moving target’. (Murtough, Aretino andMatysek 2002, pp. 14–15)

Risk-based approaches have been adopted in other related areas of regulation such as
biosecurity, where newly modernised legislation provides a more flexible risk-based
approach to compliance (chapter 8).
Landscape scale
Landscapes (or bioregions) are an important scale to address threats to biodiversity and to
consider the cumulative impacts of development proposals. At the landscape scale,geophysical patterns, the distribution of flora and fauna, and environmental processes that
influence the functions of entire ecosystems can be considered in a way that is impossible
at a smaller scale. There are approximately 130 bioregions across Australia.
Planning for biodiversity at this scale recognises the significance of these natural processes andgives us the greatest opportunity to conserve biodiversity in sufficient numbers and distribution
to maximise its chance of long-term survival. (NSW OEH 2011)
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One of the strengths of taking a landscape or bioregional approach is that it involves
looking proactively at biodiversity conservation issues in order to establish a frameworkfor future environmental management (Pope and Moore 2013). A landscape approach canalso allow for the heterogeneity between regions to be better taken into account inregulatory decisions, which is essential as ‘landscape needs and appropriate management
practices vary from region to region’ (Byron et al. 2014, p. 23).
A number of inquiry participants (including Steven and Joan Chamarette, sub. DR148;
Johnathan Pavetto, trans., p. 651) supported a landscape approach.
Environment regulations need to be landscape based and focus on activities with significant
environmental effects. As an example, an approach to enhance the recovery of threatened
species that focuses only on individuals rather than populations is too simplistic as it does notaddress the key issue of the health of the species at the landscape level (and across tenures).
(Australian Forest Products Association, sub. 11, p. 8)
Enabling a process that incorporates a range of supporting evidence can help to ensure that
landholder’s obligations are proportionate to the impacts at site, landscape and regional scale
and that the decision making is equitable. (Goulburn Broken CMA, sub. DR198, p. 2)

Since 1999, taking a landscape-scale approach to biodiversity conservation has beenendorsed in successive Australian biodiversity strategies (DoE 2015c). However, native
vegetation and biodiversity conservation regulations sometimes only permit or requireassessments of individual proposals, and so involve consideration of environmental
outcomes at a smaller, local level. This can mean that cumulative impacts of proposals on
the environment, and cumulative impacts of regulations on landholders, are not sufficiently
addressed.
Many participants (including the Wilderness Society, sub. DR207) emphasised theimportance of considering cumulative impacts on the environment. Chris Nadolny said:… since clearing is cumulative, keeping account of what is happening at the individual
property scale is important for achieving targets at a landscape scale. (sub. DR118, p. 1)

The Centre for Ecosystem Science said that species loss ‘ … is occurring at small spatial
scales, not landscape scales. Cumulative loss can be considerable due to the small
decisions made. It is critical to implement local actions to sometimes effect global
sustainability for some species and ecosystems’ (sub. DR200, p. 5). Birds Queensland said:
We believe that biodiversity protection is important at an individual property level as well as alandscape level. For example, what seem to be small and relatively insignificant areas ofwetland often support a diversity of wildlife, some of which can be regionally rare.
(sub. DR108, pp. 2–3)

Others pointed out that in some cases, properties may be so large that landscape andproperty scale are very similar.
Landscape scale assessments are the same as property assessments when you consider the sizeof pastoral leases. (Environmental Farmers Network, sub. DR174, p. 3)

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And conversely, ‘large properties in Australia may contain more than one ecologicallandscape, with quite different issues related to land management, requiring a different
process of assessment and approval for development’ (Centre for Ecosystem Science,sub. DR200, p. 11).
The National Parks Association of NSW and the Nature Conservation Council of NSW
cautioned that while the proposed management zones for vegetation in New South Wales
are inappropriately large, and ‘therefore do not reflect bioregional boundaries and theecological considerations that are implicit in bioregionalisation’ (sub. DR209, p. 11).
The effective implementation landscape-scale approaches requires data at the landscape or
region scale (Western Australian Government, sub. 54). But regardless of data availability
and quality, assessment at a landscape scale is desirable because species and ecosystems
function at a landscape scale.
Economic and social factors also need to be taken into accountOnce the environmental impacts of a proposed action have been assessed (using methods
that are commensurate to the level of risk posed to the environment), it is also important totake into account the economic and social benefits and costs of the proposed action.
Endorsing Australia’s Native Vegetation Framework, COAG agreed that all governments
would consider economic and social factors.
Native vegetation management should adopt an integrated approach that considers both
long-term and short-term environmental, economic and social considerations consistent withthe principles of ecologically sustainable development. (COAG SCEW 2012, p. xiii)

However, in some jurisdictions the native vegetation and biodiversity conservation
regulations do not require, or in some cases even permit, economic and social factors to beconsidered alongside environmental ones. For example in New South Wales, Byron et al.
found that:
While the planning system [for urban and infrastructure development and extractive industries
such as mining] considers social, economic and environmental factors to inform decisions, thenative vegetation laws are based on a ‘command and control’ system that stifles innovation andforces landholders to absorb the costs of public goods delivered by biodiversity conservation on
private land. (2014, p. 18)

Property Rights Australia also said that in Queensland, recent legislative changes have:… restored the ‘conservation of nature’ as the sole object of the Nature Conservation Act 1992.
The additional matters that are to be removed from the object are references to social, culturaland commercial uses; community use and enjoyment; and the involvement of Indigenous
people in management. (sub. DR254, p. 2)

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Other participants, however, expressed concern about possible trade-offs between
economic and social factors and environmental concerns.
What is needed is a decision‐making process that gives more consideration to environmental
factors, not less. (Dominique Thiriet, sub. DR136, p. 2)
We do not agree with equal weighting on social, environmental and economic factors. The
natural resource base is the primary resource … the other two logically flow from these values.
(Environmental Farmers Network, sub. DR174, p. 3)

Friends of the Earth Australia considered that in attempts to balance economic, social andenvironmental factors, ‘inevitably the environment loses’ (sub. DR125, p. 2). Others
thought that the phrase ‘economic, social and environmental’ could imply that economic
and social factors would take preference over environmental ones.
The Commission does not agree that environmental considerations should automaticallytake precedence over economic and social factors. To the extent that policy makers andregulators ignore the economic and social consequences of their decisions, they can forgo
potential environmental benefits; that is, economic benefits can be used to purchase greater
environmental benefits. By focussing exclusively on environmental harms and benefits, thecommunity could be losing out on potential environmental benefits paid for by improved
economic outcomes.
The Australian Sugar Milling Corporation suggested that an assessment of cumulative
impacts needs to apply to economic factors as well as to environmental ones, as:… environmental regulations might be considered to have a relatively minor implication on a
farm by farm basis, however have a significant cumulative impact at the market or processing
scale, such as a sugar mill. (sub. DR234, p. 3)

In cases where economic and social factors are not fully and routinely considered as part ofassessments made under native vegetation and biodiversity conservation regulations, theregulations should be changed so they do. While economic and social factors are
considered in some jurisdictions and circumstances, this may not always occur in aconsistent manner (as evidenced by the perverse incentives and outcomes described in
section 3.3).
In part, failure to fully consider economic and social factors may be because it is difficult
to make trade-offs between competing objectives, and because there is little guidance on
how decision makers should undertake the complex task of weighing those objectives. In
many cases, markets can provide a means of resolving uncertain trade-offs between
competing objectives. In other cases, community-based NRM organisations (box 3.14) can
provide a forum for making these trade-offs at the regional or local level, particularly once
regulatory frameworks enable risks to be considered at a relevant scale.

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Box 3.14

Regional natural resource management organisations

There are 56 regional natural resource management (NRM) organisations across Australia,
most of which are community based. There is considerable variation in the role and function ofthese organisations in different states and territories, and the advisory versus management
roles of these bodies has varied between states and over time (Pittock, Cork andMaynard 2012). Despite these differences, there are also some commonalities. In broad terms,
most aim to ‘strengthen the intrinsic motivation of community members to contribute voluntarily
to NRM initiatives’ (Curtis et al. 2014, p. 190). This translates into goals such as:•

keeping soils, agricultural landscapes and ecosystems healthy•preserving native vegetation and promoting revegetation•

safeguarding native animals•

managing groundwater and river catchments.

They do this by:•determining regional NRM priorities and setting those priorities out in a plan or report•

receiving Landcare funding from the Australian Government•

allocating funding (from Landcare and other sources) towards the regional NRM priorities,
often through grants to local landholders or community groups. For example, in thesix months to 30 June 2014, the 14 regional NRM bodies in Queensland provided funding to
112 Landcare and community groups•

focusing on obtaining community input. For instance, Victoria’s catchment management
authorities (CMAs) are designed to maximise community involvement in decision-making•

employing a (generally small) number of paid staff, and making use of volunteers (either
directly or through funded programs).

Regional bodies are seen as knowing more about the local area, and what is practical andachievable in that area, and thus are viewed by landholders as having greater legitimacy thanother government agencies.
Sources: Bartel (2014); Curtis et al. (2014); National Landcare Programme (2014); QDNRM (2014);
VDELWP (2015a).

Summing up
Native vegetation and biodiversity conservation regulations should be based on anassessment of environmental risks, consistently consider and balance environmental,
economic and social factors, and account for the impacts of proposed activities on thelandscape as well as the individual property. A broad range of participants 2 supported
basing conservation regulations on these principles.

2 Participants supporting the idea included: the Australian Sugar Milling Council (sub. DR234);
Canegrowers (sub. DR169); the Department of the Environment and Energy (sub. DR274); Livestock SA(sub. DR303); the Queensland Farmers’ Federation (sub. DR217); Queensland Regional NRM Groups

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To achieve this, governments will need to make changes to laws, regulations and policies
in many cases (though the nature and scope of the changes needed will vary between
jurisdictions). And in accordance with good policy-making practices, a thorough regulation
impact assessment should be undertaken before making regulatory changes.
Considering long-term, as well as short-term effects, is a key component of good policy
making and is essential for promoting dynamic efficiency.

RECOMMENDATION 3.1

The Australian, state and territory governments, in consultation with natural resource
management organisations, should ensure that native vegetation and biodiversity
conservation regulations:•are risk based (so that landholders’ obligations are proportionate to the impacts of
their proposed actions)•rely on assessments at the landscape scale, not just at the individual property
scale

•

consistently consider environmental, economic and social factors.

Making better use of market-based approaches
Markets provide a way to value environmental factors (so that they can be consideredalongside economic and social factors) and they increase transparency about the cost–benefit trade-offs involved in providing environmental services.
Market mechanisms for protecting native vegetation and biodiversity can take many forms
including private conservation efforts, markets for environmental offsets and paying
landholders for conservation and environmental services. They have both advantages anddisadvantages. Importantly, market mechanisms are a complement to, rather than acomplete substitute for, regulation — a point emphasised by a number of participants(including the Department of the Environment and Energy (sub. DR274), Peter Flanagan(sub. DR107) and Bruce Gardiner (sub. DR101)).
What are the advantages of market-based approaches?
Market-based approaches to native vegetation and biodiversity conservation have several
advantages.

Collective (sub. DR130); SouthCoast NRM (sub. DR229); the Tasmanian Government (sub. DR287);
Tully Cane Growers (sub. DR170); and Vegan Australia (sub. DR115).

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They give landholders incentives to retain and manage native vegetation. As the
Department of Environment put it, ‘farmers taking extra responsibility forenvironmental management deserve recognition of the costs involved, as well as theirtime and expertise in delivering sound frontline land care’ (sub. 80, p. 13). Paying those
who know the land best gives them greater scope to deliver environmental outcomes ininnovative and cost-effective ways.

•

They enhance community welfare, because the conservation activity only occurs if thebenefits to those paying for the conservation activity exceed the costs.

•

To the extent that market-based approaches involve payments to landholders for
public-good conservation, they facilitate increased scrutiny of costs and benefits ofpolicy intervention. A requirement to fund conservation from within the budget would
act as a discipline on governments’ demands for conservation on private land. Without
such a requirement, demands for conservation on private land can quickly grow. As
James Beale put it, ‘the majority believe more trees are wanted’ and that those trees canbe provided ‘without apparent expense to the populace’ (sub. DR275, p. 4), so there isno natural restriction on demands for conservation on private land.

•

Well-designed market-based policies can be better than environmental standards at
promoting dynamic efficiency, as they provide businesses with more flexibility in theway they adapt to changes in environmental policies (Albrizio et al. 2014).

•

Market-based approaches can account for differences in the cost of conservation indifferent regions, or be targeted to better meet a particular conservation objective.
Because environmental values, project feasibility and project costs are not evenly
distributed across the landscape, there are potential gains from targeting opportunities
to preserve native vegetation where benefit–cost ratios are highest (Davidson etal. 2006). Careful targeting of environmental investments can also increase theirenvironmental value (Pannell and Roberts 2015). In particular, using auctions canlower the cost of achieving the environmental objectives sought by the community.
Through the auction process, landholders reveal information that would otherwise be
costly for the government to obtain. The process for assessing bids can (and should) be
designed to help decision makers to take into account any interdependence of theenvironmental benefits of different bids at the landscape scale.

The benefits of market approaches were acknowledged by many inquiry participants. 3 For
example:3 Participants who acknowledged the benefits of market approaches included: the Australian Lot Feeders’
Association (sub. DR294); the Australian Sugar Milling Council (sub. DR234); Canegrowers(sub. DR169); the Department of the Environment and Energy (sub. DR274); Goulburn Broken CMA(sub. DR198); the Institute of Public Affairs (sub. DR164); NFF (sub. DR216); Queensland Farmers’
Federation (sub. DR217); Queensland Regional NRM Groups Collective (sub. DR130); South Coast
NRM (sub. DR229); Tasmanian Government (sub. DR287); Tully Cane Growers (sub. DR170); and theWilderness Society (sub. DR207).

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Market-based solutions to environmental objectives are critical because they will bring the costof regulation back on to the balance sheets of, in this case, state governments. (Institute of
Public Affairs, sub. DR164, p. 7)
We believe it is critical that environmental regulators have some ‘skin in the game’ rather thanrequiring land holders to provide environmental outcomes for the wider community at theexpense of their productivity and viability. (VFF, sub. DR189, p. 15)… the Government should be discouraging ‘productive’ use of vast areas of inland Australia.
Best use is probably biodiversity conservation and carbon sinks. Government could be paying
existing land managers to ‘farm’ the land for these two purposes. (Environmental Farmers
Network, sub. DR174, p. 3)

The NFF (sub. DR216) and WAFarmers (sub. DR226) pointed out that the adoption ofdigital technologies and the increasing use of spatial information by farmers will increase
potential options for designing market structures.
Governments in Australia have also endorsed market-based approaches.
Although putting a price on the value of biodiversity and ecosystem services is difficult,well-designed markets are one of the most effective policy instruments for attributing economic
value to biodiversity and can be very effective in encouraging investment in biodiversity
conservation. (Natural Resource Management Ministerial Council 2010, p. 41)

The Department of the Environment and Energy said that ‘paying for voluntary action isparticularly appropriate where the community is seeking environmental benefits that go
beyond reasonable community expectations of landholders’ (sub. DR274, p. 2).
New South Wales, Victoria (box 3.15), South Australia and Tasmania have trialled or
operated market-based native vegetation conservation programs at various times (though
there is limited publicly available information about the outcomes of many of these
programs). International experiences suggest that the use of auction mechanisms canimprove program efficiency, but that they ‘still require further refinement to maximize
environmental benefits and minimize transaction costs associated with such complex
programs’ (DUC 2009, p. 7).
Offsets (box 3.3) can also lead to the creation of markets. For instance, the South
Australian Government said that offset arrangements that came into effect in that state in
December 2015:… allow for the trading in environmental benefits. This provides new opportunities forclearance proponents to offset their clearance activities and allows for the establishment of amarket in environmental benefits. This will be supported by a Register that will be publicallyavailable. This will provide a means for landholders to generate an income from managing theirnative vegetation. (South Australian Government, sub. DR295, p. 6)

The Commission has previously recommended that the role of market-based offset
approaches be examined as part of an independent and public national review ofenvironmental offset policies and practices (PC 2013a).

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Box 3.15

Tender-based ecomarkets in Victoria

The BushTender program was trialled in Victoria from 2001 (alongside a similar program called
EcoTender). Both programs were designed to improve native vegetation management or
secure revegetation on private land, with the aim of achieving improved environmental
outcomes at both the local and catchment scale.
Both programs operated using a tender approach. Landholders submitted bids to improve thequality or extent of native vegetation on their land. The benefit offered by each tender wasassessed according to a range of environmental outcomes, including terrestrial biodiversity,
reduced saline land and riverine health (water quality and quantity). Carbon sequestration was
also considered as part of the assessment of revegetation tenders.
Successful tenderers were paid to enter into an agreement with the Victorian Government tomanage their land differently for a period of time (typically five to ten years). BushTenderagreements covered over 35 000 hectares. Changes undertaken by landholders included:•

fencing to address grazing impact by domestic stock•

adopting grazing practices to maximise habitat quality outcomes•

weed and pest animal control above current responsibilities•

retaining standing/fallen timber•

supplementary planting of existing patches of vegetation.

Sources: VDEPI (2014a); VDSE (2011).

Market-based approaches can be used to increase the involvement of the private andnot-for-profit sectors in biodiversity conservation. There are already a range of privately
managed conservation reserves — for example, Arid Recovery runs a 123 km2 fenced
reserve in South Australia (Arid Recovery 2015) and Bush Heritage Australia owns andoperates private reserves in every state. The National Parks Association of NSW and the
Nature Conservation Council of NSW suggested that ‘previous allocations of funding tosupport private land conservation have dwindled’ (sub. DR209, p. 9). The continued
creation and maintenance of conservation reserves is important, given the demonstrated
effectiveness of reserves for threatened species protection in Australia (Taylor et al. 2011).
And, as discussed in box 3.7, markets are also being used as a way to achieve reductions incarbon emissions, and carbon markets can have clear advantages for farm businesses.
New markets and policy settings that enable carbon farming would allow many rural
landowners to diversify their incomes, particularly from less productive land, even while they
benefit from the projected higher prices for agricultural commodities. (CSIRO 2015a, p. 11)

Some challenges using market-based approaches
While market-based approaches to native vegetation and biodiversity conservation haveclear advantages, they also have limitations and involve many challenges.

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First, given the degree of scientific uncertainty with many aspects of native vegetation andbiodiversity conservation, market creation can be difficult. This can manifest in several
ways.
•

There can be a trade-off between market liquidity and scientific certainty. For example,
because of the uncertain impact of offsetting land clearing in one area against land
rehabilitation in another distant area, it is desirable to limit a native vegetation offset
scheme to a particular landscape or bioregion. But limiting a scheme in this way
reduces the number of potential buyers and sellers, which affects the functioning of themarket.

•

The high probability of new scientific discoveries means that property rights traded in
the market may need to be changed in the future. This means that markets forecosystem services, like a range of other markets, are subject to considerable risk ofpolicy change. This risk can diminish the value of the property right and hence thelikelihood that market will operate effectively (Murtough, Aretino and Matysek 2002).
Also, where there is a high degree of scientific uncertainty and property rights arelocked in through a market-based system, there is a risk that a constituency of asset
owners could resist policy change even if it might be in the community interest.

Second, landholder heterogeneity means that a given market-based approach could be
effective for only a subset of landholders. For example, Race and Curtis noted that:… landholders with a farming background and lengthy experience as land managers may beseeking support with the cost of materials, rather than seeking land management expertise or
additional labor. On the other hand, landholders who are nonfarmers with limited experience asland managers, and with high levels of off-farm income, may prefer one-to-one extension
support rather than cash or materials. (2013, p. 1052)

Third, transaction costs can be substantial, which can limit participation in environmental
markets (Harris-Adams, Townsend and Lawson 2012). This complexity was highlighted
by Environmental Justice Australia:… market based mechanisms for the funding (‘purchase’) of environmental management on
private (including agricultural) land can require complex and sophisticated regulatory tools,
whether operating under contract or statute or both. (sub. DR221, p. 6)

There is also the risk that policies that provide payments for conservation services reduce
farmers’ intrinsic interest in undertaking conservation programs (Farmar-Bowers andLane 2009) and lead to short-term changes in behaviour that do not persist after programs
cease. This risk was highlighted by participants:
The current approach is to punish land users if they do bad things, while the new approach is to
reward them if they do good things. The trend will be to do bad things if there is money in it
and only do good things if they get paid. (Peter Flanagan, sub. DR107, p. 4)[Market-based] approaches require strong governance, including transparency andaccountability in the system; and testing in a market to ensure that the instrument does provide
an incentive for an efficient cost. (Goulburn Broken CMA, sub. DR198, p. 3)

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Taken together, these challenges mean that market-based approaches will not be a suitable
solution in every situation. Market mechanisms may be useful when the market and policy
setting align (e.g. when there is profit in protection), but this can be the exception, not therule.
Market-based approaches also need to interact successfully with policy approaches tocarbon emissions. Land clearing contributes significantly to carbon emissions, and sonative vegetation conservation can be considered as a form of carbon abatement. For
example, some of the activities funded by the Emissions Reduction Fund include
vegetation sequestration projects (Australian Government 2015a). As the Australian Forest
Products Association said:… agriculture and forestry, has the potential to make a major contribution to meeting
Australia’s carbon emission reduction targets. The first and second Emission Reduction Fund
(ERF) auctions were dominated by land use projects, such as avoided vegetation clearing ofagricultural land and new tree planting in degraded landscapes. (sub. 11, p. 4)

Native vegetation offsets also have their own challenges (box 3.16).
Box 3.16

Challenges with offsets

One of the key challenges for offset markets is that proposed losses of native vegetation arelargely immediate and certain, but predicted gains from restoration efforts take time to achieve
and are uncertain, as the science of habitat restoration is still developing and there aresubstantial limitations in the scientific knowledge of our ability to restore ecosystems.
Other common challenges with offsets include:•

identifying net loss — regulators must make judgments about how environmental impacts
and gains are measured, and the duration of impacts and gains — the time lag between
offsets implementation and outcome makes it difficult to monitor and verify the actual net
loss•

fungibility — ecosystems are not perfectly replaceable and regulators must decide howmuch dissimilarity between the primary and offsetting environments can be tolerated•

additionality — uncertainty about future activities makes it difficult to determine if the offset
activity would have been undertaken anyway•

accounting for risk — information constraints regarding future events increase the risk ofimpermanence and reduce the certainty of environmental outcomes.

Source: PC (2013a).

The Peri Urban Group of Rural Councils pointed out that:… native re-vegetation projects planted to offset native vegetation clearing are only achieving a
40% survival rate rather than the expected 80%. This is due to the impacts of invasive pests
including deer and kangaroos whose numbers have exploded due to cost cutting in culling
programs on crown land and red tape involved in culling on private land. (sub. DR220, p. 3)

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Other participants who expressed concern about the effectiveness of offsets included
William Blackburn (sub. DR196) and Friends of the Earth Australia (sub. DR125). And the
National Parks Association of NSW and the Nature Conservation Council of NSW(sub. DR209) suggested that:… a best-practice offset regime must include ‘red flags’ (species or ecosystems that cannot becleared); must avoid the use of supplementary measures, must ensure like for like offsets, musthave legal protection and must follow the hierarchy avoid, limit, offset. (sub. DR209, p. 11)

The bottom line is that while there are challenges involved in the design andimplementation of market-based approaches to native vegetation and biodiversity
conservation, they also have some clear advantages. They provide a way of ensuring thatthe community bears the costs of providing the public good native vegetation andbiodiversity conservation services that it has sought. Purchasing these services fromlandholders is also more equitable than some of the current regulatory approaches, and byencouraging and rewarding the efforts of landholders, would be more efficient andeffective in achieving environmental outcomes that the community desires.

RECOMMENDATION 3.2

The Australian, state and territory governments should continue to develop
market-based approaches to native vegetation and biodiversity conservation.
Governments could achieve desired environmental outcomes by buying environmental
services (such as native vegetation retention and management) from private
landholders.

Administrative improvements
Even where efforts to reduce regulatory overlap and duplication are successful, there isalso scope to improve governments’ interactions and relationships with landholders andwith each other (both within and between governments). This includes improving
information flows and building trust, especially with those affected by native vegetation
and biodiversity conservation regulations. It also includes ensuring that environmental
extension services and the organisations that administer environmental regulations are
sufficiently resourced to effectively perform their functions. These directions were
supported by a broad range of inquiry participants. 4

4 Participants supporting administrative improvements included: the Australian Sugar Milling Council(sub. DR234); Canegrowers (sub. DR169); Chris Nadolny (sub. DR118); NFF (sub. DR216);
NSW Farmers’ Association (sub. DR161); Queensland Farmers’ Federation (sub. DR217); Queensland
Regional NRM Groups Collective (sub. DR130); South Coast NRM (sub. DR229); the Tasmanian
Government (sub. DR287); Tully Cane Growers (sub. DR170); and the Wilderness Society (sub. DR207).

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Improving information flows
Good regulation is clear, simple, and practical for users (chapter 1). However, as many
landholders have argued, native vegetation and biodiversity conservation regulations are socomplex that understanding them is neither simple nor practical.
There is clear role for farming organisations to provide information and assistance about
native vegetation and biodiversity conservation regulations to their members (in the same
way they do for workplace health and safety, employment and other complex laws). As
discussed earlier, many organisations already provide detailed information to theirmembers (for example, QFF 2015a; WAFarmers 2014). Farming organisations also
provide a channel of communication from their members to governments.
Governments have made some efforts to produce user-friendly information and tools, suchas websites, fact sheets and plain English guides to native vegetation and biodiversity
conservation legislation. For example, the Department of Environment and Energy
produced information sheets on a range of threatened ecological communities (such as the
Eucalypt Woodlands of the Western Australian Wheatbelt (DoEE 2016)), which may assist
landholders to identify, assess and manage those communities. (Though, if governments
rely solely on these forms of communication they deprive themselves of the knowledge
that can be gained from more participatory approaches.)
Despite the efforts of industry and governments, farm businesses’ awareness andunderstanding of the requirements of native vegetation and biodiversity conservation
regulations is incomplete at best. Providing information to citizens affected by regulation isa core part of the regulatory task. Unless those affected by a regulation are aware of theactions they must or must not take as a result of that regulation, the objective of theregulation is unlikely to be achieved.
First, governments need to ensure that they provide, or continue to provide, clear guidanceon their native vegetation and biodiversity conservation regulations (including to their own
staff). Participants viewed maps as being an essential part of this guidance. For example
the VFF said that:… it is critical that the regulatory regime be able to be mapped in a single location and allow
for integrated decision making across all levels of government. (sub. DR189, p. 15)

The NFF said that there should be ‘a focus on ensuring that when a landholder needs to makea decision they have ready access to the information they need, collated in a format that covers
the relevant regulation across different jurisdictions and is specific in nature’(sub. DR216, p. 22).
As interactive internet-based technologies become more common in all aspects of people’s
lives (notwithstanding concerns about internet access in rural areas — see chapter 6), there
will be growing expectations for similar technology and convenience to assist incomplying with complex regulations such as these. Technology has been used to goodeffect in related areas. For example, the Grains Research and Development Corporation
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has developed an app called Weed ID: The Ute Guide, which contains photos andinformation to assist growers identify the most common weeds found in paddocks
throughout Australia (GRDC nd). Similar products could be developed for native
vegetation and biodiversity conservation regulations.
Targeted engagement programs may be needed for particular audiences, such as
small-acreage landowners (Meadows, Emtage and Herbohn 2014).
Second, each government needs to acknowledge that its regulations interact with those
imposed by other levels of government, and provide basic assistance to landholders aboutother governments’ requirements. As the Pastoralists and Graziers Association of Western
Australia put it:
If efficiency and effectiveness of regulation is ever to be achieved, government departments
need to talk to each other. (sub. 70, p. 3)

Australian Pork Limited said that ‘in addition to reviewing how they engage withlandholders, all levels of government must also ensure they are engaging and collaboratingwith each other, so environmental regulation delivers outcomes to manage the identified
risks’ (sub. DR282, p. 3). From a landholder’s perspective, it is unhelpful to be told that acertain action (say, clearing dead trees) is permitted under state regulations, without also
being told that Australian Government approval may also be required to clear those trees(because in certain areas dead trees provide important habitat for species that are listed as
threatened under the EPBC Act). Simply mentioning the existence of regulations imposedby other levels of government and providing a link to other governments’ websites (and toother tools, such as apps, once they have been developed) would be a considerable
improvement.
Building capability and trust
Building and maintaining trust is essential not only in maintaining a balanced and robust
system of native vegetation and biodiversity conservation regulation, but also for reform.
However, inquiry participants noted an absence of trust between landholders and regulators(box 3.10).
Concerns about trust were compounded by participants’ concerns about the poor
management practices displayed by some government land managers (particularly in
relation to weed control). Another contributing factor is the steady decline in the deliveryof natural resource management and extension services by government agencies over the
past decade (Meadows, Emtage and Herbohn 2014).

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To be effective, efforts to build and maintain trust must take into account the capabilities oflandholders and environmental regulators, and the relationship between them. As theCommission previously emphasised, ‘policies that fail to engage the cooperation oflandholders will themselves ultimately fail’ (PC 2004a, p. 238). And as the VFF put it:
Successful on ground outcomes require good will and support of land managers and anunderstanding by regulators that a successful control understands that production methods thatsustain farm income are critical to environmental management. (sub. DR189, p. 14)

Similarly, landholders want a trusted and long-term relationship with governments’environmental and natural resource management staff, and the absence of such a
relationship may undermine the effectiveness of markets for environmental services (Raceand Curtis 2013).
A relationship of trust and cooperation between landholders (both individually andcollectively) and regulators can only be achieved when regulators have sufficientunderstanding of farm business practices, and are capable of supporting farm businesses tomake sound decisions about the effect of environmental regulations on their operations. As
South Coast NRM said:
Natural Resource Management and Landcare is just as much about managing people as it ismanaging the natural environment. Farmers have the largest effect on environmental resource
condition and their voluntary participation is essential in getting positive environmental
outcomes. (sub. DR229, pp. 2–3)

Slow Food Australia said that ‘landowner’s expertise should be harnessed and trust built
through better education and more transparent information provision’ (sub. DR278, p. 3).
Sophisticated approaches will be needed to account for heterogeneity of landholders andtheir behaviour, which may not always be exemplary.
… some landholders have extensive knowledge and expertise in land care and management.
However, many others do not and will breach regulations designed to protect biodiversity,
sometimes deliberately. (Birds Queensland, sub. DR108, p. 3)

Indeed, if landholders choose not to adhere to the regulations, this could increase the risks
to native biodiversity that the regulatory system is designed to protect (Mallawaarachchi
and Szakiel 2007).
In the Commission’s view, the likelihood that there will be occasional examples ofdeliberate bad behaviour should not be the basis for system design, and should not be usedby regulators as an excuse not to trust all landholders.
Investment in targeted extension services to build trust and cooperation between
landholders and regulators could reduce the cost of producing environmental benefits on
agricultural land (Harris-Adams, Townsend and Lawson 2012). This will be particularly
important given reductions in state and territory government funding for extension
services. In this context, the Commission has previously noted that where rural activities

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have adverse environmental impacts that cannot be readily attributed to individual
producers, it could be in the community’s interests to contribute to the cost of farm-level
extension services aimed at facilitating practice change (PC 2011e).
Building trust and enhancing cooperation between landholders and regulators will requirechange to the regulatory approach in some jurisdictions, but if risks are communicatedeffectively and the basis of decisions is clear, risk-based decision making can enhance
stakeholder trust in environmental regulation (Gouldson, Morton and Pollard 2009).
Building trust will also require landholders’ concerns about the inappropriate enforcementof environmental policies to be addressed (box 3.11). That is, regulators need to ensure that
their enforcement practices are timely, accurate, reliable and designed to minimise burdens
on business and the community (PC 2015d). An example of the types of improvements thatare possible was provided by the cotton farmer from Goondiwindi who participated in theCommission’s case studies (appendix C). He has been able to work with regulators to swap
land with low conservation but high production value, for land with high conservation andlow production value. This exchange led to increases in both conservation andproductivity.
More resourcing may be required
A further challenge for environmental protection capability is that there are limited
resources for native vegetation and biodiversity conservation, given the large numbers ofspecies and vast areas that are considered to merit protection.
While evidence is limited, there are indications that additional resourcing may be required.
For example, an OECD report found that:… overall, the scale of environmental challenges facing Australian agriculture is much larger
than can be addressed with existing budgets. (Pannell and Roberts 2015, p. 24)

And the need to increased expenditure on extension services, particularly those focused onnative vegetation and biodiversity conservation, was highlighted by inquiry participants(box 3.17), as well as by ABARES.
Managing native vegetation for production and conservation benefits can be challenging andrequires specific skills, tools and knowledge … While farmers have multiple sources of
information, localised or regionally specific information to support native vegetation
management can be lacking. This can mean farmers are unsure of what species are on theirland, their production value and the management actions needed for them. (Harris-Adams,
Townsend and Lawson 2012, p. 19)

More resourcing is also likely to be required in order to address concerns about
inaccuracies in vegetation mapping (section 3.3).

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Box 3.17

Adequacy of resourcing was questioned

Inquiry participants expressed concern about the level of resources provided by governments
for the implementation of native vegetation and biodiversity conservation regulations, as well as
to support the regional natural resource management (NRM) organisations (box 3.15) andcommunity-based programs that underpin landholder engagement in environmental protection.
… improved regulation and administration of environmental matters in relation to agriculture requires
both significantly increased resourcing and channels of broad‐based participation acrossgovernmental, nongovernmental and private actors. (Environmental Justice Australia,
sub. DR221, p. 11)
The value of Landcare and Natural Resource Management offices cannot be understated … westrongly urge the government to increase funding to those organisations in recognition of their role ineducating farmers and implementing cost-effective measures to improve farm productivity andminimise environmental impacts. (EDOs of Australia, sub. DR241, p. 8)

Livestock SA expressed concern that increased funding for NRM boards in South Australia isbeing used for water planning and management costs rather than ‘on-the-ground NRM
projects’, and that ‘this is not assisting in encouraging a good relationship between primary
producers and South Australia’s regional NRM Boards’ (sub. DR303, p. 3).
Several participants suggested that increased resources could be devoted to the creation of
new extension roles. For example, Annette Prehn said:
Further funding is sought from the government to permanently resource the employment of additional
Threatened Species and Wildlife Extension Officer’s across Australia to provide farmers andlandowners with on ground support on ecological sustainable practices on private lands containing
high nature conservation values. (sub. DR173, p. 1)

AgInstitute Australia considered that there would be community-wide benefits in government
funding for ‘ … the deployment of professionally trained agricultural extension officers who havea combined knowledge of farming systems, natural resource management and adult education’(sub. DR182, p. 19).
Instead of government funding, Chris Tallentire (sub. DR142) suggested that conservation
activities be supported by a Bushland Conservation Fund, which could be funded by a levy onunits of agricultural production. He said ‘if there are perceived costs associated with maintaining
healthy bushland these should be borne by the recipients of the many positive effects ofbushland’, and that ‘those who receive the greatest financial gain from the management andconservation of bushland in the landscape are adjacent landholders using land for agricultural
purposes’ (sub. DR142, p. 4).

And to the extent that local governments lack the resources, capacity or skills to effectively
fulfil their role in administering environmental regulations, increased expenditure may be anecessary feature of strategies to address those deficits. The Commission has previously
noted that:
State governments increasingly rely on [local governments] for the on-ground implementationof many of their environmental objectives and yet [local government] skills and resources to do
this are limited. Greater clarity on the availability of state government funding for [local
government] implementation of environmental objectives and ongoing environmental projects
may reduce cost shifting. (PC 2012b, p. 395)

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Concerns about local government resourcing were mirrored in concerns about otherenvironmental regulators in some states. For example in New South Wales, both the
Natural Resources Commission and the Independent Pricing and Regulatory Tribunal haverecommended decreasing the Local Land Services minimum rateable area size from10 hectares to 2 hectares to increase the rate base (and thus the resources available to Local
Land Services) (NSW NRC 2016). Such a change would help to address concerns about
environmental regulator capacity in that state.
In addition, and as noted above, making use of market-based approaches to native
vegetation and biodiversity conservation will facilitate increased scrutiny of costs andbenefits of policy intervention. This could help to increase the rigour with whichconservation proposals are assessed, and free up resources for other conservation
objectives. Alternatively, a clearer statement of the costs and benefits of native vegetation
and biodiversity conservation regulations could strengthen the case for devoting additional
resources to this area.
At the national level, a review of the National Landcare Programme is underway. It is due
to report by mid-2017. The review will provide an opportunity to assess the effectiveness,
efficiency and appropriateness of the programme and its delivery (AustralianGovernment 2016), and could therefore identify priorities for additional conservation
resources.

RECOMMENDATION 3.3

The Australian, state and territory governments should review the way they engage
with landholders on environmental regulations, and make necessary changes so that
landholders are assisted in understanding the environmental regulations that affectthem, and the actions required under those regulations. This would be facilitated bydoing more to:•recognise and recruit the efforts and expertise ofcommunity-based natural resource management organisations•

build the capability of, and landholders’ trust in, the organisations that administerenvironmental regulations (including local governments).

3.5

landholders

andOther environmental regulations

Pollution control regulations and reporting
Pollution control regulations can impact on the efficiency and productivity of certain
agricultural industries, particularly intensive animal industries. The Australian Chicken
Meat Federation, for example, said that chicken businesses are required to provide

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site-specific odour modelling ‘requiring the use of consultants to develop technicallycomplex atmospheric models around site data’ (sub. 40, p. 2).
Engaging environmental consultants to obtain the necessary approvals for pollution control
regulations can be costly for farm businesses. A sandalwood producer in Western Australia
reported that building a new waste water pond cost around $14 000, while consultants’ fees
for the project were over $20 000 (Government of Western Australia 2009, p. 128).
Cotton Australia expressed concern about the effect of air quality regulations on cotton
processing, saying that:… environmental regulations appear to lack the flexibility required for local conditions. One
such example involves the rules around dust emissions coming from cotton gins … The
problem is that the licensing requirements cannot take into account the average dust emission
from all the cyclones [in the cotton gin]. So, if one cyclone has a high reading, and all others
are below the maximum the gin is not compliant. This does not make sense, as the total dust
load out of the gin is below the license requirements, and the very nature of the ginning processmeans some cyclones will have a higher dust load than others. (sub. 23, pp. 10–11).

It also noted that ‘allowed dust limits, which may be entirely reasonable in a coastal city
environment, can be lower than the ambient dust levels in areas where cotton gins arelocated’ (sub. 23, p. 11). This highlights the way in which pollution control regulations are
not always well adapted to the agricultural environment.
On this topic, the VFF said that it:…is aware of a recent example where a Local Council issued a litter abatement notice … due toa complaint about mud on a local road in winter. The farm was an operating dairy and there had
been significant rain over the preceding four weeks. A litter abatement notice is discretionary
and should consider whether the litter was an ‘unavoidable consequence of a lawful activity’.
At the same time there was extensive mud on an urban road near the Council offices. This
demonstrates that merely referencing considerations does not of itself provide information or
knowledge to a regulator to be able to make a common sense decision. (sub. DR189, p. 5)

Pollution control regulations can vary depending on the intensity of agricultural
production, with more stringent regulations applying to businesses that exceed certain
thresholds (chapter 2). The Australian Chicken Meat Federation suggested that pollution
control regulations are rarely designed with agricultural industries in mind. They ‘lump
animal agriculture in with other non-agricultural, industrial pursuits, with little regard forthe inherent differences between these industries, particularly that agricultural industries
are dealing with biological processes’ (sub. 40, p. 5).
Australian Pork Limited suggested that all jurisdictions should revise their legislative
arrangements relating to environmental management ‘to have an overarchingoutcomes-based framework and to formally incorporate national industry guidelines’(sub. 37, p. 2).

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There are also a range of pollution control reporting requirements. The Western AustralianGovernment noted that environmental monitoring, reporting and auditing schemes can be‘cost-intensive’ (sub. 54, p. 16). The Australian Food and Grocery Council (sub. 28)
expressed concern about duplication in environmental and pollution control reporting
requirements. And several participants raised concerns about the public accessibility offarmers’ location and contact details, given the public nature of the NPI. For example, theAustralian Chicken Growers’ Council said that:… [NPI] reporting entities have their farms identified on Google earth with their address andcontact details unless they have nominated their state organisation to represent them whichremoves their contact details but not the farms location on Google earth. This exposes the farmto the possibility of bio-terrorism and unwarranted attention from groups opposed to intensive
farming. (sub. 51, p. 5)

The Commission has previously noted that ‘the geographic basis of reporting need notnecessarily be at the facility level’ and that some aggregation of individual facilities’ data
‘may well be desirable where there are real concerns about the harassment of businesses’(PC 2007, p. 63). That said, aggregation of data risks reducing the value of the information
available to the public and the incentive for businesses to reduce their emissions. Any
trade-offs in information availability should only be made after a full assessment of thecosts and benefits. Other concerns relating to harassment of businesses (such as illegal
trespass) are discussed in chapter 8.

The effect of weed control regulations
Inquiry participants did not raise concerns about the burden imposed by weed control
regulations. In fact, one participant said ‘regulations preventing the spread of weeds are acost-effective approach to managing the damage caused by invasive plant species’ (EDOsof Australia, sub. 60, p. 3). This support is in line with participants’ recognising thebenefits they obtain from Australia’s biosecurity system (chapter 8). The Australian Centre
for Agriculture and Law said:
Regulatory control of agricultural invasive species may impose a cost or constraint on somelandholders, but it reduces economic losses and costs to other landholders as well as producing
public good benefits. (sub. 2, p. 1)

However, the Aerial Application Association of Australia highlighted the tension between
weed control and native vegetation conservation requirements:
Resolution of this tension could be achieved by a clear statement on labels or in control-of- use
legislation that gives primacy to the noxious weeds objective over damage to co-located native
vegetation. (sub. 12, p. 3)

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Others pointed out that the burden of weed control can be exacerbated when government
managers of neighbouring land do not effectively manage weeds. 5 A survey of farmers incentral and western New South Wales also found that:A significant number of farmers felt let down by government and considered its actions were
often hypocritical. To many farmers, the standard of management of public land failed to meetthat required of private land owners. In many instances this public land was seen as infiltrated
by noxious weeds and animals and had insufficient annual hazard reduction burning
undertaken, thereby putting public and private land under threat. (Finlay 2014, p. 254)

The view that governments are failing to meet their responsibilities in relation to control ofinvasive species on public land has been expressed at numerous junctures over many years(for example, in Cocklin, Dibden and Mautner 2003; NSW NRC 2014b; PC 2004a). In
response to such concerns, the Sheepmeat Council of Australia and the Cattle Council ofAustralia said that ‘incentives and sanctions should extend to public land managers’(sub. 88, att. 1, p. 27).

The effect of regulations relating to native and feral animals
Farm businesses control many feral, and some native, animals because doing so isnecessary for the ongoing viability and success of the business. John Cooke (sub. 30)
emphasised that the cost of controlling rabbits and other feral animals can be substantial.
The Department of the Environment gave the example of feral pigs, which:… cause substantial production losses to sugar cane and bananas in north Queensland, costing
hundreds of thousands of dollars to the respective industries. It is estimated that the economic
cost of feral pigs in Australia is $106.5 million per year. Feral pigs also pose a major threat tobiodiversity [through] predation, habitat degradation, competition and disease transmission …
(sub. 80, p. 2)

As discussed in section 3.2, a range of state and territory regulations govern the way
landholders are permitted to control native or feral wildlife that is causing property
damage. When regulations restrict agricultural producers’ ability to control feral animals,
this can have substantial effects on their business. For example in Tasmania:
The population of fallow deer, originally introduced to Tasmania for hunting, has expanded toan estimated 25,000 and is predicted to increase by up to 40% in the next decade. The impactsof the species on agricultural land, in wilderness areas and on other native species warrant
strategic management. However, the species is currently protected under the Nature
Conservation Act 2002 (Tas) and can only be taken in limited numbers under a permit. The
current permitting system does not allow land managers to respond efficiently to the problems
posed by deer. (EDOs of Australia, sub. 60, pp. 13–4)

5 Including Larry Acton (sub. 55); Karen Baines (sub. 13) and Frances O’Callaghan, (trans., p. 641).

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In response, the Tasmanian Government noted that:
The issue of deer management in Tasmania is sensitive with a range of strongly held views in
the community. In Tasmania deer are managed strategically, taking into account their impacts
on agriculture and also their ability to be managed sustainably for hunting. Many landowners
also receive an income from hunters who pay for access to private land to hunt deer.
(sub. DR287, pp. 7–8).

Similar issues are emerging in New South Wales, where a review of pest animal
management found that ‘deer are currently managed under outdated, restrictive
arrangements as a game and livestock animal, yet they are recognised as the mostimportant emerging pest animal threat’ (NSW NRC 2016, p. 72).
Participants also stressed the importance of ensuring that regulators continue to allow themto control native animals. Voice of Horticulture said that it:… recognises that regulation is required to ensure survival of species and habitats but
compromises need to be made to ensure the ongoing viability of fruit and vegetable growers.
Perhaps regulation needs to be re-written to recognise and offset harsh socio-economic impacts
on growers … In Queensland there is a Code of Practice for the control of flying foxes which
underpins access to Damage Mitigation Permits (DMP) and it is vital that continued access to
DMPs remains until a non-lethal alternative is available. (sub. 42, p. 8)

The NSW Small Business Commissioner raised an issue relating to the harvesting of
kangaroos and other macropods:… multiple licences are required and that hunting and processing must be conducted in thesame state jurisdiction. This poses particular issues for businesses operating over state borders
and where the closest processing facilities are located over the border. (sub. 4, p. 3)

Property Rights Australia (sub. 45) also raised macropod quotas as an issue. In Tasmania,
the record-keeping requirements for permitted wallaby culls are so onerous — requiring
farmers to keep up to 600 separate records per year — that ‘it is highly unlikely that theannual figures provided by farmers to the regulator accurately reflect the actual count of
wildlife culled over the previous year’ (DPIPWE Tasmania, sub. 62, att. 1, p. 19).
Another issue raised by participants was access to state and national parks for commercial
honey bee operators (box 3.18).

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Box 3.18

Regulating beehives on public land

An issue of particular concern to the honey bee industry was obtaining sufficient access to stateand national parks in the face of increasing demand. An apiarist from New South Wales said:
Most beekeepers are not prepared to expand their hive numbers to cater for this increased demand byalmond pollination. Primarily because there is a lack of resource to support these extra hives. The lackof resource is due to current state legislation that prohibits beehives being in National Parks and someother crown lands. Beehives are allowed in some very limited areas in some National Parks (a longand complex story). Farmers are clearing eucalypt and mallee trees to supposedly make their farms
more efficient which is reducing the available resource to beekeepers. Most eucalypt trees are foundon public lands. (Stephen Targett, sub. 5, p. 3)

Submissions to the Agricultural Competitiveness White Paper also raised this issue:
About 80 per cent of the honey produced by the Australian beekeeping industry is derived from nativeplants flowering on public and freehold land. Problems of access to some public land tenures and thelong-term sustainability of forests/woodlands are ongoing challenges for the industry. This issue … isarguably the most significant faced by commercial beekeepers. (Wheen Bee Foundation 2014, p. 11)

Thinking about how best to address these concerns, it is important to understand that nationalparks are ‘not national at all but managed according to a wide range of legislative measures,
objectives, priorities and management systems’ (NPAC 2012, p. 5). As such, there could be
scope for jurisdictions to adopt management practices and approaches used successfully inother jurisdictions. But as the Australian Conservation Foundation (sub. DR252) pointed out,
incentives affecting land clearing on private land and the benefits that national parks provide tosurrounding farmland are also important factors that merit consideration when assessing theappropriateness of regulatory structures for beehives on public land.

Reducing the burden of other environmental protection regulations
Many environmental regulations set standards that apply across all sectors of economic
activity. In some cases, this can mean that the particular effects of a regulation on farmbusinesses are not fully recognised before the regulation is adopted. The Australian Sugar
Milling Council claimed that this ‘very narrow perspective’ and ‘lack of rigorous
assessment can lead to perverse outcomes and the negative economic and social impacts
can be disproportionate to the improved environmental outcome that is being sought(sub. 68, pp. 2–3).
Many of the burdens imposed by environmental protection regulations are designed tolimit air, noise, odour and water pollution have arisen because those regulations do
sufficiently take account of the different circumstances faced by businesses in particularindustries or locations. Rigid application of standards (especially standards that arenecessary and efficient in more densely populated areas, but that are neither of those thingson an isolated farm) can impose a significant and unnecessary burden on farm businesses,
without contributing to better outcomes for the environment.
To avoid this, regulations should be designed with enough flexibility so that they only
apply where environmental values cannot be preserved and protected in other ways, and

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where the benefits of protection outweigh the costs. The Australian Sugar Milling Council
highlighted how good regulatory processes can assist in this regard. In 2009:… extensive regulations impacting commercial sugarcane farming and cattle grazing wereintroduced by the Government of the day without any form of regulatory impact assessment. It
resulted in ‘best guess’ regulations that did not consider the vastly different growing conditionsof the different sugar industry regions in Queensland. (sub. 68, p. 3)

The regulatory impact analysis process is an important mechanism for ensuring that thisoccurs.
In relation to weed and feral animal control regulations, the Commission considers thatmuch of the avoidable burden of those regulations arises when they are poorly enforced orwhen public land mangers (local councils, state governments and other government
agencies such as water companies) lack the capacity to properly control weeds across all of
their land holdings. There is some evidence to suggest that government capacity is themain cause of this issue.
The capacity of public authorities to meet their weed management obligations varies
considerably. Most retain a limited weed management capacity ‘in house’ and rely on the
procurement of vegetation management services from contractors, who may not have therequired skills for effective weed management. (NSW NRC 2014b, p. 93)

The earlier discussion on regulator capacity in relation to native vegetation andbiodiversity conservation regulations is also relevant for weed and feral animal control
regulations.

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4

On-farm regulation of water

Key points•

Approximately two-thirds of Australia’s total water consumption is used in agriculture.

•

Australia has a complex regulatory system for water that involves all levels of government,
industry and the community. This inquiry focused on regulations that affect the access, use
and disposal of water by farm businesses.

•

From the perspective of farm businesses, an important focus of water regulation has beencreating markets that allow them to trade water to its highest value uses.

•

Farmers report that water trading has increased the productivity of their businesses by
providing them with the flexibility to buy and sell water in response to changing market andseasonal conditions.

•

Better use could be made of technology to allow real-time trading of water rights.

•

Improving the regulation of groundwater and floodplain harvesting has the potential toenhance the security of water entitlements in some areas.

•

Transaction fees and the way they are administered can be a significant barrier to water
trading.

•

There is no evidence of systemic misconduct or market failure that would justify theadministrative and transaction costs of governments regulating the water broking industry.

•

Lengthy delays in the design and implementation of water-related regulations cause
uncertainty that can undermine the confidence of farm businesses to innovate and invest.
More consultation and community participation is needed to reduce uncertainty andintegrate local knowledge into the design and implementation of regulation.

•

There are significant opportunities to streamline the water-related reporting obligations offarm businesses. A worthwhile first step is to continue adopting the reforms recommended
by the Interagency Working Group on Commonwealth Water Information Provision.

•

The Productivity Commission has taken over some of the responsibilities of the National
Water Commission, and will revisit many of the issues raised in this chapter in its futurewater-related inquiries.

4.1

Water and agriculture

Water is an essential input for farm businesses. Water from streams, aquifers and overland
flows is used to irrigate crops, to provide livestock with drinking water, and to manage
waste in intensive livestock and processing industries. Access to water is fundamental to
improving the competitiveness and productivity of irrigated farm businesses.

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This chapter looks at water use in the agricultural sector and the reasons why governments
regulate water (section 4.1). It then looks in more detail at water use regulations that affectaccess (section 4.2), use (section 4.3) and disposal of water (section 4.4) by farmbusinesses. It also addresses the on-farm reporting requirements of water regulation(section 4.5).
The chapter does not look at the multiple and complex regulatory frameworks associatedwith water planning or the establishment of water markets (figure 4.1). The Productivity
Commission will look into water policy reform in more depth as part of the water-related
functions it acquired following the abolition of the National Water Commission (NWC)(box 4.1).
Figure 4.1

Components of water policy

On-farm regulation is the focus of this inquiry

Water policy
Planning

Markets− Infrastructure development− Property rights− Rural/urban allocation− Pricing− Environmental flows− TradingOn-farm regulation
AccessCompliance

Use+

Reporting

Disposal

Water sources and regulation
The water used on Australian farms comes from waterways, aquifers and from overland
flows during times of flood. Regulations generally specify:•

the amount of water that can be taken from these sources•

the methods and infrastructure that can be used to access water, and the conditions
under which it can be accessed•

what water can be used for (in some cases).

Water and effluent returned to the environment from farms is also subject to a range ofenvironmental and health regulations (chapter 3).

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Box 4.1

Productivity Commission water functions

The Productivity Commission has recently taken over the review functions of the National Water
Commission (NWC).
The Water Act 2007 (Cwlth) requires the Minister administering the Productivity Commission
Act 1998 (Cwlth) (the Treasurer) to refer two inquiries to the Commission — one on the National
Water Initiative (NWI), the other on the Murray–Darling Basin Plan 2012 (Cwlth) (the Basin
Plan) and associated water resource plans.

Inquiry into the National Water Initiative
The Treasurer must refer an inquiry to the Commission into progress towards achieving theobjectives and outcomes of the NWI. The objectives of the NWI include the establishment of ‘anationally compatible, market, regulatory and planning based system of managing surface andgroundwater resources for rural and urban use that optimises economic, social andenvironmental outcomes’ (COAG 2004, p. 3).
This inquiry will replace the NWC’s former triennial assessment of progress toward achieving
the NWI objectives. The first inquiry report must be submitted by 31 December 2017, withsubsequent reports every 3 years.

Inquiry into the Murray–Darling Basin Plan and water resource plans
The Treasurer must refer to the Commission an inquiry into the effectiveness of implementationof the Basin Plan and associated water resource plans. This inquiry replaces the NWC’s
five-yearly audit of the Basin Plan. The first report must be submitted by 31 December 2018,with subsequent reports every 5 years.

Some facts about agriculture and water use
About two-thirds of Australia’s total measured water consumption is used in agriculture. In
2014-15, approximately 110 000 farms used 9.8 million megalitres of water for agricultural
production (ABS 2016l) (compared to total consumption estimated in 2013-14 to be
18.6 million megalitres (ABS 2015g). Farms in New South Wales used the most water(3.4 million megalitres), followed by Queensland and Victoria (2.5 million megalitres).
Approximately 78 per cent of the water used in agriculture in 2014-15 was used for
growing cotton, pastures (mostly dairy), sugarcane, rice and other cereals (figure 4.2).
However, these pastures and crops only accounted for 50 per cent of the gross value of
irrigated production, indicating that other uses of water, especially horticulture, generatemuch higher returns per litre (figure 4.3).
Water used on farms comes from a number of sources, and these sources vary by region(figure 4.4).

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Figure 4.2

Share of water use by commodity
2014-15

Nurseries, cut flowers and turf
Other crops
Vegetables
Grapevines
Fruit and nut trees
Pastures and crops for hay
Cereals
Rice
Sugarcane
CottonPastures for grazing
0

10

20

30

Per cent

Data source: ABS (2015h).

Figure 4.3

Value of water use by commoditya
2014-15

a The value of water use is the Gross Value of Irrigated Agricultural Production (GVIAP) for eachcommodity divided by the volume of water used. GVIAP attributes the gross value of production from
irrigated land to irrigated production, so may overstate GVIAP for farming systems growing multiple
commodities on the same land each year.
Data sources: ABS (2015c, 2015h).

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In 2014-15, 2.1 million megalitres of groundwater was used by over 47 000 farmbusinesses and made up 22 per cent of total agricultural water use across Australia(ABS 2015h). Groundwater is derived from rainfall and surface water that infiltrates soils
and is stored below the earth’s surface in porous sand or gravel layers. About 60 per centof Australia’s agricultural groundwater in 2014-15 was used in New South Wales andQueensland, with 17 per cent used in the Namoi and Murrumbidgee catchments (mainly
for cotton production), and 15 per cent in the Burdekin catchment (used mainly forsugarcane production).
Groundwater is especially important in drier regions of Australia, and provided 38, 45 and78 per cent of agricultural water used in Western Australia, South Australia and theNorthern Territory respectively in 2014-15 (figure 4.4).
Figure 4.4

Sources of water used on farm2014-15

Data source: ABS (2016l).

Groundwater use tends to be higher in dry years, as farmers substitute groundwater forsurface water (PC 2010c). The use of groundwater in Australia has consistently exceeded
2 million megalitres per year in recent years (ABS 2015h, 2016l). CSIRO (2008) foundthat existing extraction rates were likely to be unsustainable in some catchments (seven of
the twenty high-use groundwater areas in the Murray–Darling Basin). The pressure on
groundwater resources was emphasised by NT Farmers:… water in the NT is mainly groundwater, with very minimal above ground water storage. As
such it is critical for planning and allocation of extraction licenses be done in a manner that isfair to existing irrigators, well assessed in terms of new applications and taking a balanced view
over competing needs. (sub. 8, p. 2)
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Australia’s climate is highly variable resulting in uncertain water allocations that add to therisks of agricultural production. Climate change is also predicted to affect the distributionof rainfall and reduce the availability of water (CSIRO 2008).
The Western Australian Government, commenting on the availability of water in that state,said that:
Water rather than land availability could be considered the biggest constraint to agriculturaldevelopment in Western Australia. The ability to deliver water to existing and new agricultural
enterprises is critical to further development. (sub. DR285, p. 5)

Why governments are involved
In the absence of regulation, water can become a ‘common property’ resource for which
inefficiencies arise if individuals have unrestricted access at little or no cost. This featureof water means that markets do not always function effectively, and that water use in theprivate interests of some users can have significant adverse consequences for other users
and the environment. Governments intervene to improve the allocation of this scarce andvaluable resource, and to improve the sustainability of its use.
Governments intervene in water management in various ways, including by:•defining property rights — efficient water markets require clear and enforceable
property rights to water•

overcoming information asymmetries — a lack of information about prices and how to
exchange water rights can result in inefficient levels of trade•

resolving externalities — the use of water for one purpose can have adverse impacts onother users and the environment.

Governments use regulations to develop water markets by establishing property rights overwater, and creating trading mechanisms. Water markets create an incentive for farmbusinesses to allocate water to its highest value uses, and to use it efficiently. Governments
also invest in water infrastructure (such as dams, weirs and pipelines), regulate water
prices and ensure that the environmental goals of water management are met.

Current arrangements
The national component of Australia’s water policy is set out in the Water Act 2007
(Cwlth) (the Water Act) (Commonwealth of Australia 2014). The broad objectives of the
Act are to promote the management of water resources to optimise economic, social andenvironmental outcomes, and to return over-allocated water resources to environmentally
sustainable levels of use. One of the earliest and most important policy strategies forachieving these objectives has been moving from an administrative to a market-based
allocation of water (Connell 2007). Australia has a multi-tier regulatory system for water
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that involves all levels of government, industry and the community (box 4.2). The
complexity of the institutional arrangements for managing water in Australia reflects thediversity of water resources across Australia, and the evolution of locally appropriate
management approaches across states and territories.
Box 4.2

Water management in Australia’s federation

There are four levels of water management in Australia — national, state and territory, regional
and local.
The management of land and water resources is a state and territory responsibility, with eachhaving a number of authorities and utilities involved in water management. Water resources
vary significantly across Australia, and each state and territory adopts a different approach totheir management. This means that regulation can vary markedly between jurisdictions.
The Australian Government provides national leadership and coordination of water issues thatcross state boundaries, including management of the Murray–Darling Basin via the
Murray-Darling Basin Authority, and data via the Bureau of Meteorology. AustralianGovernment agencies involved in water policy include: the Department of Agriculture and Water
Resources; the Department of the Environment and Energy; the Australian Competition andConsumer Commission; and (since the abolition of the National Water Commission) the
Productivity Commission.
Australia has a well-established network of statutory and non-statutory regional natural resource
management groups that support the integrated management of 56 river catchments across thecountry. These groups provide an important link between governments and communities,
enabling community resources and government funding to leverage one another, and theintegration of local and scientific expertise to tackle challenging environmental problems (Curtis
et al. 2014).
Local governments are involved in aspects of water management such as drainage, water use
in public spaces, and water conservation. In Victoria, for example, the management of water isa shared responsibility between the Victorian Government, rural water supply authorities,
catchment management authorities, local governments and land owners (VDEDJTR 2015b).

A sector under review
There have been numerous reviews of Australia’s water sector over the past few decades, 6
and several reviews are ongoing. Few areas of government policy have experienced suchsignificant change over such an extended period of time.
Recent reviews of water arrangements include:•a 2011 inquiry by the House of Representatives Standing Committee on Regional
Australia into the impact of the Murray–Darling Basin Plan 2012 (Cwlth) (the Basin
Plan) in regional Australia (HoRSCRA 2011)

6 See Connell (2007) for a history of water policy in Australia.

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•

a 2014 review of the Water Act undertaken by an independent panel seeking
opportunities to reduce the regulatory burden generated by the Act•

numerous assessments conducted by the NWC (NWC 2014c)•

a review by a Senate Select(SSCMDBP 2016).

Committee on refreshing the Basin Plan

Some recent reforms at the state level include:•changes to water governance in Victoria to provide a more uniform operationalframework for all state-owned water businesses (VDEPI 2014b)•

an improved dam approval process in Tasmania and a new policy on managing water
resources during extreme dry conditions (DPIPWE, sub. 62)•

forthcoming changes in Queensland made by the Water Reform and Other Legislation
Amendment Act 2014 (Qld)•new and updated water plans in many regions.

The Commission has undertaken a number of research reports including: Rural Water Useand the Environment: The role of market mechanisms (2006b); and Market Mechanisms
for recovering water in the Murray–Darling Basin (2010c). More targeted reviews include
Commission reports on: Water Rights Arrangements in Australia and Overseas (2003);
and Australia’s Urban Water Sector (2011a). The Australian Competition and Consumer
Commission (ACCC) also recently undertook a Review of the Water Charge Rules(ACCC 2015f).
Uncertainty created by changes in water policy
A number of participants to this inquiry commented that the degree and pace of change inwater regulation has created uncertainty. For example, the NSW Farmers’ Association saidthat:
We understand and appreciate the need for government action in regulating this highly valuable
and scarce resource, and the move from administrative water policy to market based allocationof water. However, … the constant change in pricing and charging rules coupled with a highnumber of both state based and Commonwealth agencies has amounted to a reduction incertainty for farm businesses and a lack of transparency of, and accessibility to, information
about the market and regulatory context. (sub. DR161, p. 12)

The National Farmers’ Federation (NFF) also said:
Water reform in Australia, particularly in the Murray Darling Basin has been a continual
process since Competition Policy Reform in the early 1990s. The burden of continued water
reform is to drive uncertainty in the business environment for farmers, and uncertainty in thelocal communities that suffer from the flow on effects of reduced production from irrigatedagriculture. (sub. DR216, p. 24)

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Complexity with a multi-tiered system
The changes to water regulation have also added complexity. The New South Wales
Irrigators’ Council, for example, commented on the increase in the number of agencies
involved in water.
… the involvement of Federal agencies, departments and statutory authorities has exponentially
increased since the passing of the Water Act in 2007 and the Basin Plan in 2012. NSWIC
considers this additional layer of regulation to be of significant concern and suggests further
effort should be made to decrease the regulatory overlap and duplication that has resulted fromthis Federal intervention. (sub. DR239, p. 5)

The Tasmanian Farmers and Graziers Association, commenting on arrangements in
Tasmania, also said:
We currently have Hydro, Tasmanian Irrigation, TasWater and the Water Management Branchwithin the Department of Primary Industries, Parks, Water and Environment (DPIPWE). All
have varying degrees of management in relation to our water resources. The TFGA believes thecurrent model is not sustainable and is inefficient and counterproductive to the sector.
(sub. DR281, p. 5)

This complexity can add to the cumulative burden of regulation on farmers.

4.2

Farm access to water

Regulation of surface water
From the perspective of farm businesses, an important focus of water regulation is thedevelopment of water markets. Water markets are created by regulations that establish
property rights and set conditions on trade. Beyond this, regulation of surface water
includes rules governing the charges that irrigation infrastructure operators can levy water
users for capturing, storing and delivering water. Conditions on water trading are regulatedby the ACCC and state counterpart agencies.
Water trading is most developed in the southern Murray–Darling Basin, and the Basin Plan
trading rules came into effect on 1 July 2014 (MDBA sub. DR127, p. 2). Commenting on
the Basin Plan water trading rules, the Murray-Darling Basin Authority (MDBA) said:… [the] water trading rules, through structural and governance changes, enhance thetransparency of trade processes, improve information accessibility and ultimately seeks to build
the confidence of all current and potential water market participants. This in turn provides
greater opportunities for water trade underpinned by informed market participants.
(sub. DR127, p. 2)

The Basin Plan also sets long-term average sustainable diversion limits (SDLs) that reflect
an environmentally sustainable level of water use (or ‘take’). The SDLs act like a ‘cap’ onwater use and the amount of water that can be used for consumptive purposes in the Basin.
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Research commissioned by the MDBA has determined that the Basin-wide long term
average SDL for surface water is 10 873 gigalitres per year, which is 2750 gigalitres 7 peryear below the 2009 baseline level (MDBA 2016b). While significant progress has been
made, the MDBA reported in early 2016 that nearly 800 gigalitres are still to be redirectedfrom existing uses to meet this goal (MDBA 2016a).
Water markets are also being developed in other regions of Australia, including parts ofWestern Australia, as the volume of water entitlements in these catchments approach
allocation limits (WADW 2010). However, in many parts of Western Australia, watercontinues to be allocated via ‘a licensing system rather than the market based methods usedin other jurisdictions’ (WA Government, sub. DR285, p. 5).
In Tasmania in 2014-15, 10 400 megalitres of water entitlements were traded, withpermanent transfers traded at an average price of $1480 per megalitre (Tasmanian
Irrigation 2015). The Commission also heard that informal trade takes place between
farmers operating within the same catchments (Macquarie Franklin, trans., p. 749).
In some regions of Australia, including Tasmania and parts of northern Australia, water
resources are not yet considered to be fully allocated. The motivation for regulation inthese regions is the need to develop these resources sustainably, and establish market
mechanisms that will enable ongoing reallocation of water to its highest value uses. For
example:•in Tasmania, 10 small catchment irrigation schemes have been developed over the past
decade, and a further five schemes are under development (Tasmanian Irrigation 2015)•

the Australian Government has established the National Water Infrastructure
Development Fund to develop water resources mainly in northern Australia,
particularly in the Fitzroy and Mitchell catchments (DAWR 2015s).

Without water trading, farm businesses may not be able to expand their operations or takeadvantage of innovations. For example, the West Australian Pork Producers Association
said that:
A situation exists where landowners have licences for large volumes of water that they are notusing, have never used and have no commercial business plan to use. This prevents producers
with a genuine need and a sound business, from within the same area, expanding due to limited
water availability. (sub. 24, p. 9)

7 A gigalitre is approximately equivalent to the volume of water in 400 Olympic size pools.

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Issues in regulating surface water
Trade within irrigation areas
The benefits to farm businesses of being able to buy and sell water are partly offset by thecosts associated with complying with the regulations needed to establish and operate watermarkets.
Farmers interviewed by the Commission said that being able to trade water has
significantly boosted the productivity of their businesses by providing the flexibility to buy
and sell water in response to changing market and seasonal conditions. Some said that theprocess of trading water is gradually becoming faster and more efficient (box 4.3), but alsosuggested that there was scope to make better use of technology. The NSW Farmers’
Association, for example, said:
Advances in telemetry, automation and cloud data base technology have removed any technicalbarriers to the implementation of an integrated national digital platform for regulation,
allocation and trade in the Murray Darling Basin … The time has come for Australia tocommission a top tier commercial ICT firm to analyse the Basin’s total water informationneeds and build a solution that is fit for purpose. (sub. DR161, pp. 12–13)

Box 4.3

A cotton farmer’s perspective on water trading

The manager of a large cotton farming business west of Goondiwindi in southern Queensland
was generally optimistic about the future of the cotton industry in Australia, and the contributionthat water policy reforms have made to its sustainability. The manager told the Commission that‘water allocations have gone down over time, but this has increased the long-term sustainabilityof our industry’. Water trading has allowed him to expand the business, and to introduce a
flexible management approach that has meant he can adapt to increasingly uncertain
allocations of water.
However, the manager also noted that ‘we can trade everything else almost instantly, but wecan’t yet do intra-flow trades’. He said that the duration of flood events in the area can be as
brief as four to six hours, whereas completing a water trade takes three to five days.
While the manager was generally pleased with the commercial advantages that water trading
has brought, he was also of the view that these advances can go further. He anticipated thattechnology-based refinements will eventually enable water trades to take place much more
rapidly, adding further to the flexibility and productivity of his farm business. An issue he would
like resolved with water trading is the multiple approvals required to trade water — currently heneeds approval from the local water utility as well as the state government to buy water.
Source: Productivity Commission case study interview (appendix C).

Since the Commission’s report on Rural Water Use and the Environment (PC 2006b),
water markets have made a significant contribution to increasing rural water-use efficiency(NWC 2014a). These productivity gains are partly attributable to markets facilitating thetransfer of water entitlements to larger and more efficient farms (Dr John Cooke, sub. 29).
A study by the NWC, for example, showed that between 2001 and 2006, the value of
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agricultural production in the southern Murray–Darling Basin increased by nearly
2 per cent despite a 14 per cent reduction in water use over the corresponding period(NWC 2010). Modelling for the study estimated that water trading in the southern Murray–
Darling Basin increased Australia’s gross domestic product by more than $220 million in
2008-09.
The NWC concluded that surface water trading in the Murray–Darling Basin is providing
irrigators with increased flexibility.
The removal of many unnecessary barriers to trade, the facilitation of interstate trade and theimplementation of better service standards have streamlined water trading, which has become avital tool for giving irrigators the flexibility to respond to variable water availability and market
factors. (NWC 2014b, p. 6)

The challenging task of implementing the National Water Initiative (NWI) acrossAustralia’s diverse water resources has been slow, which inevitably delays improvements
in on-farm productivity that are likely to flow from further regulatory reform. A recent
independent review of the Water Act, for example, found that some of the reforms
established under the Act and the Basin Plan were in transition, and were yet to be fully
implemented (Commonwealth of Australia 2014). The Basin Plan was designed to be
implemented over seven years (MDBA 2015a).
The MDBA pointed out that:
Implementing a plan of this scale and national significance takes time. The planned time fortransition and implementation of the Basin Plan in full is necessary to deliver the objectives
defined by the Water Act 2007 (Cwlth). (sub. DR127, p. 4)

An important ongoing issue for some farm businesses is an ongoing insecurity over waterrights, and the constraints this places on the development of water trading outside of the
Murray–Darling Basin. The independent review called for rapid and consistent national
implementation of reforms to:… ensure water access entitlements established through transparent processes were respected
and could not be arbitrarily eroded to any significant extent without compensation.
(Commonwealth of Australia 2014, p. 38)

The Queensland Farmers’ Federation also argued that:
The development of effective water markets is a critical factor to connect opportunities for
Queensland’s agricultural sector. Queensland’s water trading markets are nascent, focused inlocalized areas where supply is either supplemented by infrastructure or available fromunregulated river flows. (sub. DR217, p. 6)

Water trading has become more efficient as online systems for trading have improved. The
NWC found that there has been an improvement in the functionality of the ‘registers’ used
to process water trading transactions.
Victoria, New South Wales, Queensland and South Australia have online registers that have
improved the efficiency of transactions and access to market information — with the Victorian
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Water Register currently the benchmark in this area. In other jurisdictions limited market
information can be accessed online but it does not allow interrogation or processing of trades.
There is still work to be done to improve public access to jurisdictional registers and to
facilitate data searches within these registers. (NWC 2014c, p. 40)

One cotton farmer told the Commission that after a lengthy period of development, theonline system for trading water in New South Wales is beginning to work efficiently, andwater is generally transferred promptly once it is purchased (appendix C).
Other participants raised concerns about the design and implementation of water trading
regulations. These included the slow development of water property rights outside the
Murray–Darling Basin, restrictive conditions placed on accessing water, and unnecessary
restrictions on trade. According to the Pastoralists and Graziers Association of Western
Australia:
Licensing regimes in Western Australia do not follow the provisions of the National Water
Initiative as no perpetual licenses have been issued in this state. This water allocation is aproperty right and the fact that there is no continuity of access affects the owner’s ability toforward plan or borrow funds for expansion. (sub. 70, p. 6)

While the NWI does specify that water entitlements will be perpetual, it also allows
governments to issue non-perpetual entitlements where water resources are poorly
understood or less developed. The Australian Property Institute told the Commission thatwater has not yet been accorded the same property rights as land in all Australianjurisdictions, resulting in only ‘modest compensation’ if ‘the right to water is extinguishedby the state’ (trans., p. 148). This has implications for the value placed on water by banks,
and the lending capacity of farm businesses.
The Voice of Horticulture argued that current rules around the timing of water trading
impose a burden on horticultural businesses.
In Batlow water trading is difficult for apple growers at the top of the catchment as there arerules including flow rates that must be achieved before water can be harvested. However, thistiming does not coincide with the times water is required on the orchard. Consequently on-farmwater storage is required before a grower can buy more allocation. (sub. 42, p. 14)

Trade restrictions were also a concern for Australian Dairy Farmers:… while water entitlements are freely traded, other water products such as delivery shares, aretied to specific shared irrigation districts and are not freely tradeable in practice. This represents
a competitive disadvantage imposed on one group of farmers through an additional cost burden.
(sub. 63, p. 5)

This suggests that centralised rules designed to facilitate water trading can be perceived bywater users as being incompatible with local management practices. In some regions,infrastructure limitations can mean that delivery shares cannot be readily transferred tousers in distant locations. In other regions, trade of delivery shares is possible, andarbitrary barriers to such trade would impose an undesirable cost burden on water users.

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The continuing implementation of reforms under the NWI that integrate the benefits ofcentralised rules and local knowledge has the potential to improve the ability of farmers tomanage risks and boost farm output, competitiveness and productivity.
Trade between irrigation areas
Some farm businesses and water utilities that the Commission spoke to in this inquiry
suggested that while water can be traded efficiently within irrigation districts, water trading
between districts remains problematic. This is in part due to catchment hydrology and the‘transmission’ losses of water that occur when water is transferred long distances along
natural water courses. However, it is also partly due to administrative practices andregulations that aim to keep water within particular regions.
The states place a range of administrative restrictions on water trade between regions(BoM 2015). While participants in this inquiry did not raise concerns about theserestrictions, trade can be restricted when thresholds of water flow or other conditions aremet (NSW Office of Water 2014). And recently, some concerns were raised about thedesign and operation of these regulations. For example, the Ricegrowers’ Association ofAustralia criticised the operation of NSW Government regulations governing inter-valley
trade between the Murray and Murrumbidgee rivers, and claimed that it led to ‘a pretty
haphazard race to secure trades before the door closed, and the process lacked fairness’(RGAA 2015, p. 1).
The trade of water between irrigation areas is regulated through termination fees and othercharges. These are partially justified on economic efficiency grounds (PC 2010c). Whenwater entitlements are sold to another district, the fixed costs of water infrastructure (lesssaving from any infrastructure that can be decommissioned) are spread across fewer
remaining entitlements. The exit of water users from a scheme can cause the so-called‘Swiss cheese effect’, where the remaining users are geographically dispersed withpotentially ‘stranded’ irrigation assets along channels and pipelines that become too costly
to maintain (PC 2010c). To offset these costs, irrigation infrastructure operators can place
conditions and charge ‘termination’ fees when users cease using irrigation assets.
In the past, irrigation infrastructure operators have also imposed ‘exit’ fees on irrigators.
An exit fee is charged when a water entitlement is sold out of an irrigation area,irrespective of whether the user plans to continue to irrigate (for example, by purchasing
annual water allocations in lieu of its sold entitlements). Consequently, the National Water
Initiative specifies that exit fees should not become a barrier to trade.
The ACCC said:… where rights to hold or take water have been ‘unbundled’ from rights to delivery of water,
exit fees are not an appropriate type of fee for recovery of ongoing costs of the delivery
infrastructure … In this context, a fee with the purpose to recover the ongoing costs ofproviding water service infrastructure and mitigate risks of ‘stranded assets’ should be levied

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REGULATION OF AUSTRALIAN AGRICULTUREon rights of access to infrastructure (i.e. water delivery rights) rather than on water accessrights.
Levying such fees when water access rights are traded (i.e. ‘exit fees’) works against the policy
intent of unbundling and the facilitation of efficient and effective water markets.
(sub. DR121, p. 3)

The ACCC has also said that:
The imposition of a termination fee on an irrigator that is terminating their right of accessensures a contribution from exiting irrigators for the ongoing fixed costs of operating theinfrastructure. This provides a degree of revenue certainty for infrastructure operators. Revenue
from termination fees can be used to limit future increases in charges for those customers who
maintain their connection or to fund network rationalisation to lower ongoing costs.
(ACCC 2015f, p. 31)

Termination fees may be justified on efficiency grounds when, for example, there is an
implied agreement between the operator and the irrigator that the capital costs of past
infrastructure investments will be recovered through annual access fees (PC 2010c). As the
New South Wales Irrigators’ Council said: ‘these fees are a vital and reasonablerequirement on those selling out of an irrigation network to help offset the financial
impacts of exits on the forward revenue requirements of irrigation infrastructure operators
required to sustain its network operations’ (sub. DR239, p. 6).
However, excessive termination fees can be distortionary and act as a barrier to water
trade. Excessive termination fees increase the price paid for water entitlements inimporting regions and reduce the price paid for entitlements in exporting regions, reducing
the quantity of water traded and foregoing the economic benefits of reallocating water toits highest value uses. There is also a risk of locking water into low productivity businesses
and regions.
The Commission has previously questioned whether termination fees should be removed
or replaced with long term supply contracts tailored to each new investment (PC 2010c).
The ACCC regulates termination fees along with other water charge rules under the Water
Act to balance the benefits of permanent trades in water entitlements between districts withthe external costs imposed by these trades on remaining irrigators. The Basin Plan requiresthat infrastructure operators must not unreasonably restrict the trade of water delivery
rights, and outlines limited circumstances in which doing so may be reasonable. Somejurisdictions, including Victoria, have removed volumetric limits on trade out of irrigation
areas (VDELWP 2016a).
In 2014, an independent review of the Water Act revealed widespread concern aboutinconsistent approaches to setting water charges across the Murray–Darling Basin(Commonwealth of Australia 2014). Termination fees are one of three types of water
charges. Governments also levy ‘planning and management’ charges to recover the costs
associated with planning and managing the development of water infrastructure. Irrigation

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infrastructure operators levy ‘infrastructure charges’ to cover the cost of infrastructure for
harvesting, storing and delivering water.
The Commission has also previously suggested that trade between irrigation districts could
be facilitated by reducing unwarranted differences in the specification of water
entitlements (PC 2006b). More recently, the ACCC said:
States and territories should consider further ‘unbundling’ their water access rights into theircomponent parts, with separate and clearly defined rights to storage, carryover and delivery.
Where appropriate, these separate rights should be clearly defined and made tradeable, toenable a more efficient utilisation of water service infrastructure. (2014b, p. 56)

Water charges should vary between irrigation districts. Seeking to impose uniform charges
on users in districts with different infrastructure costs could create equity issues between
districts and reduce economic efficiency:… the use of a Basin-wide charge would be contrary to the user-pays and price transparency
objectives of the [Water] Act and to the National Water Initiative pricing principles, and would
result in cross-subsidisation and inefficient use of the infrastructure services and water.
(Commonwealth of Australia 2014, p. 60)

Based on a survey of 270 irrigated farm businesses, Ashton reported that:
Across the Murray–Darling Basin, an estimated 46 per cent of irrigators indicated the level of
fixed charges was very important to their decision to undertake a permanent water trade, with afurther 20 per cent indicating it was somewhat important … The highest responses for theimportance of fixed charges in making permanent water trades were for the Goulburn–Broken
and Murray region. (2015, p. 3)

Irrigation businesses, especially in New South Wales, raised concerns about the regulatoryburden imposed by the different sets of water charge rules. According to the NSWIC, thethree sets of water charges impose an unnecessary regulatory burden on irrigators andongoing changes to the framework add to this burden.
… the three sets of water charge rules mean a significant additional regulatory burden for
irrigators and irrigation infrastructure operators (either indirectly, through the determination of
bulk water charges in NSW, or directly, through additional reporting and compliancerequirements) … The constant change in the regulatory framework governing the determinationof bulk water charges in NSW is not only disruptive but also costly for irrigators, government
agencies, bulk water suppliers and stakeholder representative bodies. (sub. 3, pp. 5–6)

The National Irrigators’ Council added that:
Significant costs are imposed on irrigation businesses complying with water charge rules,
particularly the Water Charge (Infrastructure) Rules. (sub. 18, p. 6)

The NFF stated that:
Unlike state agencies and private water infrastructure operators, there is still little transparency
or independent review of the MDBA’s cost structure in this regard. (sub. 61, p. 16)

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Submissions to the 2014 review of the Water Act also raised concerns about water charge
rules. For example, Southern Riverina Irrigators (2014) were concerned about thecomplexity of water charging and the different water charging regimes across the
Murray-Darling Basin.
Concern over potential inequities in water charges led the Australian Government tocommission an ACCC inquiry into water charge rules. The ACCC’s (2015f) draft advice
was to retain, but streamline, the application of all three types of water charges by applying
them consistently regardless of the size or ownership of the water-using business, or the
purposes for which water is used. Other amendments were designed to improve thetransparency of pricing, and strengthen regulations to prevent discriminatory pricing.
Submissions to the ACCC were generally supportive of the current rules (ACCC 2015f).
The ACCC heard during its public forums that some irrigators were facing difficulties
paying termination fees, particularly as a result of Commonwealth purchases of water tomeet environmental targets. Farmers interviewed for this inquiry also noted that theregulatory burden of termination fees is adding to the natural barrier to inter-regional trade
posed by transmission losses (appendix C).
Termination fees and other water charges levied by infrastructure operators are likely to beconsidered further by the Commission as part of its water-related responsibilities. The
Victorian Farmers’ Federation (VFF) said it ‘encourages the Commission to consider
termination fees in its other water related responsibilities’ (sub. DR189, p. 21).
Calls to regulate water brokers
Water brokers investigate trading options for their clients, and facilitate the buying andselling of temporary allocations and permanent entitlements (ACCC 2010). They also
provide advisory services regarding water products and the functioning of water markets.
Water brokers assist farm businesses by bringing together buyers and sellers, reducing
search costs, improving information flows and helping with regulatory approvals.
The NFF explained the role that water brokers play in providing irrigation farm businesses
with up-to-date market information.
The absence of a consolidated source of market information results in considerable inefficiency
in the water market. Ultimately, most irrigation farmers largely rely on the advice of their water
brokers rather than conduct their own analysis of the many different trading platforms operated
by private companies, irrigation organisations or the often dated market information available
on government websites. (sub. 61, p. 16)

The NWC also commented on the positive contribution that brokers are making to theefficient functioning of water markets.
… private water brokers are filling a gap in market information, providing a combination of
publicly available data, and disclosing limited price and market information. This is having a

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significant positive impact on the availability of information in the marketplace as at least
60 per cent of trades occur through private water brokers. (NWC 2014c, p. 24)

The potential for misconduct by water brokers to undermine confidence in water markets
has led to calls to regulate the industry (ACCC 2010). Past calls for regulation appear tohave been motivated by concerns that ‘misconduct by intermediaries could impose
financial losses on consumers and damage market confidence’ (Allen Consulting
Group 2007, p. 9).
Concerns about the conduct of water brokers tend to be directed at ‘possible future
misconduct — and the potential negative consequences that this entails for the individuals
involved and for water markets more generally’ (ACCC 2010, p. 1). The ACCC noted thatconcerns relating to misleading or deceptive conduct, theft, fraud and insolvency are
addressed through the fair trading provisions of the Competition and Consumer Act 2010
(Cwlth)), the Corporations Act 2001 (Cwlth) and criminal law.
In its submission to this inquiry, the NFF said there were ongoing concerns in the
agricultural sector about the potential for water brokers to exercise market power over farmbusinesses.
Regulatory reform to improve the transparency and availability of water market information
would go some way to redress the information imbalance between water market participants.
(NFF sub. 61, p. 16)

Similarly, the VFF commented that:
The information gap between water resource managers, brokers and water users can impede
efficient trade of water resources and create the potential for some market participants tocapitalise on this information gap. (sub. DR189, p. 21)

And Agforce said that:
AgForce supports the Commission as part of its water responsibilities, to examine the need forregulation of water brokers to support growing confidence in water markets, particularly wherethese are developing. (sub. DR246, p. 3)

The South Australian Government and the Department of Agriculture and Water
Resources (DAWR) indicated that a voluntary accreditation scheme was an appropriate
option. The South Australian Government said it:… believes that a voluntary intermediary accreditation scheme would be the appropriate action
rather than an industry-specific regulation. (sub. 57, p. 19)

And DAWR said that the Australia Government considers that ‘industry-led self-regulationof water market intermediaries directed at protecting the integrity of the water markets has
merit’ and that they ‘will encourage water market industry representative bodies toestablish such arrangements’ (sub. DR183, p. 2).

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A draft regulatory impact statement prepared by the Department of Sustainability,
Environment, Water, Population and Communities for the Council of AustralianGovernments (COAG) found that introducing a licensing scheme was likely to have asignificant negative impact on the water broking industry.
It is likely that the cost of establishing and maintaining a licensing scheme … exceed[s] thebenefits associated with addressing stakeholder concerns and reducing risk of misconduct. If
full cost recovery is pursued, the cost is likely to be prohibitive for the majority ofintermediaries to continue operating. (DSEWPaC 2013, p. 36)

In 2014, the independent review of the Water Act recommended ‘that the AustralianGovernment work with industry to ensure that an appropriate and effective scheme ofindustry self-regulation is developed’ (Commonwealth of Australia 2014, p. 54).
The New South Wales Irrigators’ Council told the Commission that it was:… not convinced that despite recent accusations from some quarters within the irrigation sector
that Government needs to regulate the water market to prevent price speculation and market
manipulation there is still no evidence yet provided to prove such allegations. NSWIC
maintains its view that there must be clear evidence of market manipulation to justify heavier
regulation of the Australian water market. (sub. DR239, p. 6)

The Commission will examine the regulation of water brokers as part of its water-related
responsibilities. That said, there does not appear to be evidence of systemic misconduct ormarket failure in the water broking industry.
The New South Wales Irrigators’ Council argued that:Should another review of Australian water markets or water brokers be conducted, it should betargeted and have a clear objective. To continue with wholesale reviews of Australian watermarkets is a regulatory burden in its own right and results in obvious duplication between
agencies — leading to a waste of resources. (sub. DR239, p. 6)

Environmental flows
Surface water used on farms often has other important ecological functions in natural
ecosystems. An important focus of regulation that is not easily resolved by water markets
is how much water should be allocated to the environment relative to commercial uses
(PC 2010c). As the Centre for Ecosystem Science said:
Regulation is critical for water management, both on farm to protect floodplain ecosystems andecosystem services and also downstream in a catchment context. Flexibility in government
regulations needs to reflect this complexity while also allowing for the use of water for positiveenvironmental purposes. (sub. DR200, p. 14)

Maria Riedl told the Commission that:… the entire purpose of the [Basin] Plan … was to REBALANCE the unequal weight of water
going to agricultural uses to the detriment of the entire MDB system … the entire system was

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degraded, with loss of wetlands, loss of species, loss of habitat, loss of flows out the mouthtaking with it all the salt and chemicals and refuse we still put into the systems.
(sub. DR219, p. 10)

Some farm businesses and irrigators expressed concerns to this inquiry about the potential
for reduced access to water, and higher water prices to agricultural industries resulting
from the ‘diversion’ of water for environmental purposes (Ronda and Allen Harmer,
sub. 15). Australian Dairy Farmers, for example, said that:
Government intervention to reduce the amount of water available through the Murray–Darling
Basin Plan is putting upward pressure on water prices. More than 1160 [gigalitres] has alreadybeen transferred from the pool allocated for irrigation across to the environment under the
Basin Plan, through buybacks and on‐farm upgrades. The pool may shrink even further, if theBasin governments push ahead with a commitment to recover another 450 [gigalitres] inaddition to the Basin Plan’s 2750 [gigalitres] target. (sub. 63, p. 4)

Similarly, the VFF told the Commission that:
The implementation of the Basin Plan has reduced the amount of water available for productiveuse, restricted the ability of governments or infrastructure operators to reduce trade out of
districts and created a strong distrust of government in many irrigation communities.
(sub. DR189, p. 20)

While the recovery of water for environmental purposes does place absolute limits on theamount of water available for the expansion of agricultural industries, this does not affectwater entitlements already granted to individual water users. The MDBA told theCommission that:
Due to the excludability of water entitlements, water users are not affected by market activity
and continue to receive water under their water entitlements. (sub. DR127, p. 2)

The Department of the Environment said that the use of Commonwealth environmental
water regulated under the Basin Plan has helped to ease constraints on the availability ofwater for agriculture. Delivering water early in the year can increase the free space in dams
to capture inflows, reduce water losses and reduce competition for channel capacity during
periods of peak agricultural demands (sub. 80).
The Commission has previously looked at the most effective and efficient options forgovernments to recover water for environmental purposes in the Murray-Darling Basin(PC 2010c), and found that understanding the socioeconomic trade-offs between
consumptive and environmental uses is essential for setting targets for water recovery(based on ‘sustainable diversion limits’). The Commission also found that purchasingwater from willing sellers within existing markets is generally the most cost-effective wayof meeting targets for water recovery. It found that termination fees levied on
environmental water purchases offset the risk of stranding irrigation assets that could
otherwise result from geographically dispersed purchases of water entitlements.
The implications of recovering water for the environment through the Murray–Darling
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its water-related responsibilities. However, the Commission notes that while the allocationof water to the environment meets important community goals, it can be a potential sourceof uncertainty for agricultural industries.

Frontiers of water regulation
As regulation of surface water matures, the attention of regulators has been shifting toregulating groundwater and the interception of overland flows. Regulation of theseimportant water sources varies across the country, and ongoing improvements to regulation
has the potential to improve the overall security of all water entitlements. In non-regulatedareas, and areas where regulation is under development, the Commission heard that
lengthy delays in the design and implementation of these regulations are creating
uncertainty and undermining the confidence of farm businesses to innovate and invest(appendix C).
From the perspective of farm businesses, the regulation of groundwater and overland flows
are important because of the hydrological connections between these alternative sources ofwater. Physical interconnection means that unmeasured or uncontrolled use of groundwaterand overland flows can reduce the security of all water entitlements, including those held
for surface water. Uncertain water entitlements risk undermining confidence in watermarkets, and foregoing the productivity benefits of future trade that would allocate water toits highest value uses.
EDOs of Australia provided the following example:
In Queensland, the Water Reform and Other Legislation Amendment Act 2014 introduced an
exemption allowing mining and coal resource projects to take unlimited groundwater needed toaccess their resource without obtaining a licence … Without the water licence framework to act
as a check and balance prior to associated water being taken by the mine, the government
cannot adequately manage a State’s water resources. (sub. 60, p. 9)

Groundwater
The management of groundwater resources is covered by regulation spanning all levels ofgovernment. At a national level, groundwater is regulated under the Basin Plan. Water
sharing arrangements are governed by state and territory legislation. For example, theVictorian Government manages the allocation of surface water and groundwater inaccordance with the Water Act 1989 (Vic). A water entitlement and planning framework isin place to define how water is shared, held, used and traded. To use groundwater, farmers
in Victoria generally need a bore construction licence and a groundwater usage licence(VDELWP 2015b).
Local governments and regional organisations (such as community-based natural resource
management (NRM) groups and catchment management authorities) also play a role ingroundwater management through, for example: planning mechanisms; building controls;
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infrastructure and drainage management; environmental rehabilitation; and community
education.
While all jurisdictions have for some time had legislation that enables groundwater trading,the development of markets was initially slow (GHD, Hamstead Consulting and
O’Keefe 2011). By 2013-14, however, trade in entitlements of groundwater was about
315 gigalitres across Australia (or 13 per cent of the total volume of water entitlements
traded in that year) (Morey, Grinlinton, and Hughes, 2015). In some jurisdictions, property
rights for groundwater have yet to be separated from property rights for land, which
restricts trade (GHD, Hamstead Consulting and O’Keefe 2011).
The MDBA told the Commission that:Groundwater markets currently operate in New South Wales, parts of Victoria and South
Australia. The MDBA, in collaboration with Basin States, are currently working on finalising
the Basin Plan groundwater trade guidelines which are expected to be released in late 2016.
(sub. DR127, p. 3)

Trade in groundwater is limited to regions where this resource is available, and withinthese regions by the uncertainties that surround the level of storage, connectivity withsurface water and potential impacts on other users, including the environment (PC 2006b).
For example, the Basin Plan specifies that state Water Resource Plans will prohibit thetrading of groundwater unless it can be demonstrated that there is sufficient hydrologicalconnectivity between the two locations, and that water access rights in the two locations
are sufficiently similar (MDBA 2014). Proponents are also required to demonstrate thatmeasures are in place to address third-party impacts that result from trade. These
conditions are costly for individual farm businesses to comply with, and likely to preclude
trade in most instances (PC 2006b), unless facilitated by state Water Resource Plans.
Precise scientific measurement of groundwater and hydrological connectivity is notnecessary to achieve productivity benefits from trade. The Commission’s report on Rural
Water Use and the Environment noted that while comprehensive solutions may be sometime off, conservative separate groundwater and surface water caps could be adopted in the
short term. Also, simple ‘rules of thumb’ (such as capping extraction from all groundwater
sources within some distance of connected rivers) can be combined with new information
into policy settings over time (PC 2006b, p. 36).
Considerable progress has been made in understanding catchment hydrology (NWC 2012),
and in the development of robust ‘rules of thumb’ (SKM and NCGRT 2012). This has
supported the development of substantial markets for groundwater. The Commission is
likely to reconsider the regulation of groundwater as part of its water-related
responsibilities.

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Overland flows
Estimates suggest that in 2014-15, 59 000 farms used 1160 gigalitres of water from farmdams, or roughly 12 per cent of total agricultural water use (ABS 2016l). Nearly
80 per cent of this water use was in three states: Queensland (44 per cent), New South
Wales (23 per cent) and Victoria (12 per cent). The development of irrigation schemes in
Tasmania is reflected in that state’s disproportionate 10 per cent share of the national total.
Estimates of the interception and use of water on farms are likely to be conservative,
because this source of water is often not measured or reported. Water is intercepted bycountless small dams capturing small amounts of water for stock and domestic use, as wellas much larger dams used for irrigating crops and pastures. For example, cotton farms on
Australia’s ephemeral inland river systems rely on capturing, storing and irrigating withwater that flows across the landscape in times of flood. As one cotton farmer told theCommission, ‘we never used to admit that we did this, but now that they’re talking about
giving us a licence for it we had to start telling them’. (appendix C)
As is the case with groundwater, the regulation of overland flows is important forprotecting the integrity of water entitlements (PC 2006b). Regulating the interception of
overland flows involves a balance between the rights of farm businesses to water that falls
as rainfall or flows across their land in times of flood, and the availability of water to users
and ecosystems further downstream (PC 2010c). Water intercepted on farms may be
reduced in quality before it is returned to groundwater or streams, imposing additionalcosts on downstream users and the environment. For these reasons, all states and territories
regulate the interception, storage and use of water on farms.
EDOs of Australia stated that:
Given the significance to farming communities of maintaining water supplies and water
quality, EDOA recommends that all allocation and dam construction decisions be required todemonstrate that adequate environmental flows will be retained, and that these decisions be
open to challenge by interested third parties. (sub. 60, p. 9)

EDOs of Australia also pointed out that exemptions for small off-stream dams including
recent changes to legislation in Tasmania are ‘an example of regulatory amendments thathave improved efficiency while maintaining (potentially, improving) environmental
outcomes in respect of small farm dams’ (sub. 60, p. 9).
Under the Basin Plan, the Water Resource Plans prepared by each state and territory are
required to set out how interception activities — including run off dams, commercial
plantations, mining activities and floodplain harvesting — will be managed and monitored(MDBA 2015b).
Interception of overland flows is also regulated by water-related legislation in each state
and territory. In New South Wales, section 54 of the Water Management Act 2000 (NSW)
specifies the maximum dam capacity that can be used to harvest water on farms, and thepercentage of runoff that can be intercepted. The maximum allowable dam capacity varies
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by region with the amount and seasonal distribution of rainfall. The percentage of runoffthat can be intercepted ranges from 10 per cent in the central and eastern regions of thestate, to 100 per cent in the west (NSW DPIW nd).
In Victoria, farm businesses need a licence to take and use water for dams built for
irrigation or commercial purposes, but not for dams used for domestic use or watering
livestock (VDSE 2007). A construction licence is also required, which ensures that dams
meet acceptable engineering standards. Licences for farm dams across Australia often
place conditions on the operation of dams such as allowing water to flow at certain timesof year (WADW 2014).
Effectively regulating large numbers of small farm dams remains a significant challenge
for state and territory governments.
The Voice of Horticulture stated that:
Governments [also] need to speed up approval processes to enable growers to build new
on-farm dam storage and to purchase more water allocation to replenish their dams. This is aparticular problem in NSW. (sub. 42, p. 14)

The regulation of water captured from overland flows is an issue on the large inland river
systems in the northern part of the Murray–Darling Basin. The regulation of ‘floodplain
harvesting’ (New South Wales) or ‘overland flows’ (Queensland) controls the construction
and management of channels and dams used to divert floodwaters flowing across thelandscape. This infrastructure is typically much larger, and captures much greater volumesof water, than small farm dams used for domestic and livestock purposes. It consequently
also has greater implications for downstream users and the environment.
In Queensland, the ‘taking’ of water from overland flows is administered by the
Department of Natural Resources and Mines under the Water Act 2000 (Qld). Rules in the
Water Regulation 2002 and the Sustainable Planning Act 2009 (Qld) control theconstruction of new infrastructure to capture overland flows (Queensland
Government 2015a). Farmers in Queensland who participated in the Commission’s casestudy interviews (appendix C) did not feel any undue uncertainty regarding existing
infrastructure under these regulations, but commented that it was taking years for new
infrastructure to be approved.
In New South Wales, the Department of Primary Industries is in the process of
implementing a ‘floodplain harvesting policy’ that was published in 2013. The purpose of
the policy is ‘to manage floodplain water extractions more effectively in order to protect
the environment and the reliability of water supply for downstream water users, ensurecompliance with the requirements of the Water Management Act 2000 and meet theobjectives of the National Water Initiative’ (NSW DPI 2013a, p. 2)
A farmer in New South Wales that was interviewed by the Commission welcomed thepotential improvement in the security of water entitlements that regulating overland flows
was likely to bring (appendix C). However, lengthy delays in the design and
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implementation of these regulations are causing uncertainty and undermining theirconfidence to invest (box 4.4).
Box 4.4

A farmer’s perspective on the uncertainty of changing water
regulations

A cotton farm near Moree has nearly 250 hectares of dams, and a network of irrigation
channels and fields for capturing, storing and using water to irrigate cotton and other crops. The
irrigation infrastructure is an investment to optimise capacity for uncertain summer rainfall. It
was originally designed for an era of higher and more secure water allocations.
The farmer has been closely involved in local water policy for 40 years. His concerns are theconstant changes to water regulation, reductions in water allocations and the uncertainty thesecreate for investment, and the ongoing viability of the farm.
The farmer recognised that the introduction of water trading has been positive for the cotton
industry — it has increased productivity by giving farmers the flexibility to buy and sell water in
response to changing market and seasonal conditions. According to the farmer, after a lengthy
period of development, online systems for water trading are beginning to work efficiently, andwater that is purchased is generally transferred promptly.
However, changes to water policy have dramatically increased the exposure of his farm toseasonal climate risk. The most reliable source of water is groundwater, the allocation of which
has been reduced by 42 per cent since the introduction of national water reforms. This has
meant that the area of irrigated cotton that can be reliably grown each year has fallen from
300 to 180 hectares, and in turn has reduced the most reliable source of income for this farmbusiness.
According to the farmer, an ongoing concern is uncertainty over water allocations fromfloodplain harvesting. He is looking forward to the certainty that licensing this water will bring,but is concerned that the design of these regulations continues after a 10 year process. He said
that:
The farmer is the only constant. Over the last 10 years we’ve had five water Ministers and three namechanges to the Department, and each one led to changes and delays.

Also, the ongoing uncertainty associated with water allocations is affecting his capacity toborrow and invest. The farmer told the Commission that when he says to the bank ‘it’s ok, we’regoing to get a licence for harvesting overland flows’, the answer is ‘when?’. The farmer said that
he hasn’t been able to answer this question for a long time. The farmer claims that the ongoing
uncertainty is affecting land values — the value of non-irrigated farmland in the district has
increased from $100 to $800 per hectare over the past 15 years, while the value of irrigatedfarmland has remained largely unchanged, representing a significant reduction in real terms.
Source: Productivity Commission case study interview (appendix C).

In other industries, the pace of regulatory change is adding to the burden felt by farmbusinesses. The NSWIC said that it:… stresses that the timeframe imposed on irrigators and irrigation infrastructure operators to
respond to these significant changes in water resource planning and management is
inappropriate and must be reviewed with the focus of providing greater flexibility and timethroughout the review process. (sub. 3, p. 4)
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The Commission is likely to continue to assess the regulation of farm dams and floodplain
harvesting as part of its water-related responsibilities. In past studies, the Commission
found that the uncontrolled proliferation of farm dams and floodplain infrastructure could
significantly reduce stream flow and the security of water entitlements (PC 2006b). The
benefits of regulating overland flows are clear, and governments need to consider theuncertainty and productivity costs introduced by delays in implementation.

Summing up
Complexity and change in water regulation contributes to the cumulative burden felt byfarm businesses, and this in turn reduces the incentives for farmers to innovate and invest(appendix C).
Water trading within regions is beginning to work well (particularly where connectivity ishigh and transmission losses are kept to acceptable levels). It is providing farm businesses
with a greater degree of agility to adapt decision making to changing market and seasonal
conditions. Technology has helped to create effective trading mechanisms, and further
developments are likely to make water trading easier and faster.
The potential to build on the productivity of water trading in Australian agriculture
depends on:•

improving current systems for trading surface water using technology to reducetransaction costs, and allowing real-time trading where this is cost-effective•

increasing the use of water trading mechanisms in regions outside of the
Murray-Darling Basin•

improving property rights for groundwater and water intercepted as overland flows to
expand trade.

It has proven challenging to extend water trading between regions, and to include
groundwater and floodplain harvesting. This process is taking time, but the result is likely
to be worthwhile. As the Queensland Regional NRM Groups Collective told theCommission:
Whilst it’s long and tedious, I think the outcome is going to be ideal in that there will beagreement across a whole lot of key players, and that plan then will set the foundation for the
future, and hopefully then minimise the need for regulation. (trans., p. 613)

Australia’s river catchments have very different physical characteristics across different
regions. This physical diversity is matched or exceeded by the diverse characteristics of the
farm businesses, ecological systems, urban communities and other industries using water.
Byron (2010) argued that it is essential to consider this diversity when talking about‘delays’ in water reforms under the NWI. Regional diversity may require slower processes
that allow for more local ownership of agreed courses of action, within flexible principles
that seek consistency rather than uniformity at a national scale.
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The NFF agreed that ‘in relation to water policy and management, decisions should bemade by the least centralised level of government possible’, noting that catchments arediverse in terms of hydrology, infrastructure and historical development, as well as theevolution of regulation (sub. DR216, p. 23).
The MDBA also said that it was ‘committed to locally appropriate and flexible regulatory
settings’ (sub. DR127, p. 3).

FINDING 4.1

Complexity and ongoing changes in water regulation contribute to the cumulative
burden of regulation on farm businesses. However, the diversity of Australia’s rivercatchments makes streamlining and harmonising regulation difficult. More flexible
governance arrangements may be needed to develop locally relevant regulatory
settings for accessing water.

4.3

Farm use of water

Most of the water used by Australian farm businesses is used to irrigate pastures and crops(figure 4.2). Unlike regulations governing access to water, Australia has few regulations
that direct what farm businesses can use water for once they have the right to access it.
Typically, farm businesses are left to make decisions about how best to use water to meettheir own productivity and profitability goals.
The NFF told the Commission that:
Regulation of farm use of water is not a significant issue for the agriculture sector. Consistent
with the statutory water access and use rights that are established in state water management
laws, farm businesses should be left to make decisions about how best to use water to meettheir own productivity and profitability goals. (sub. DR216, p. 5)

A recurring issue has been the degree to which non-agricultural users should be eligible totrade water in rural water markets. Restricting potential water users (such as urban water
users, and mining and power generation industries) from accessing water markets prevents
the price of water from revealing the true value of alternative uses, and the overall benefitsof water use to the community (PC 2006b).
Some water used on farms is not regulated. Most state legislation governing access towater excludes water used for domestic purposes and drinking water for livestock,
although these uses account for a very small fraction of overall water consumption. (This
exemption does not apply to intensive livestock farming such as piggeries and feedlots.)
However, as noted above, state and territory governments generally regulate theconstruction of dams and other infrastructure used to provide water for livestock and
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domestic use. The NFF notes that ‘these regulatory processes place limited burden on thefarm sector and are not viewed by the NFF as an issue’ (sub. DR216, p. 25).
While direct regulation of water use does not appear to be an issue, it is likely that theregulation of water access and disposal could influence which agricultural activities are
profitable to irrigate. Regulations influencing the volume, seasonal availability and cost ofwater are likely to influence the profitability of irrigating crops and pastures that havedissimilar water requirements. Whether or not this influence is efficient depends onwhether a confluence of regulatory impacts (such as termination fees and other transaction
costs) prevent water from being traded to its highest value uses.

4.4

Farm disposal of water

Water used on farms can be recycled for reuse or returned to the environment via surface
or groundwater. From the perspective of regional water planning, accounting for return
flows is important for managing the security of water entitlements throughout eachcatchment (PC 2006b). Existing entitlements and seasonal allocations in many areas are
based on the expectation that, when water is applied on farm, some proportion of the water
returns to the hydrological system through seepage or runoff. As such, changes in return
flows (resulting from landuse changes) need to be accounted for in entitlement
specifications and/or resource management policies (PC 2010c).
Water returning to streams contributes to the health of downstream communities andecosystems. To avoid and manage adverse downstream impacts, all Australian states andterritories have an independent statutory authority (known as environmental protection
agencies or equivalent government department) that regulates water pollution, including
the disposal of water from farms. These regulations typically set minimum quality
standards for water leaving farms.
Water quality and effluent discharge are regulated by diverse environmental legislation(chapter 3). Regulations can require farm businesses to contain and reuse effluent andprevent it from leaving a property or entering waterways. Most state governments require
intensive industries such as sugar mills, piggeries and poultry farms to be licensed toensure compliance with pollution control regulations. In some areas of Australia, including
the Murray–Darling Basin, the contribution of water leaving irrigated farms to in-stream
salinity is subject to regional water management plans (NSW OEH 2013).
There are also a range of industry-specific guidelines that address, for example, manureand effluent management in intensive livestock systems (examples for the pork industry
are provided in chapter 3). The Consolidated Pastoral Company noted that the National
Beef Cattle Feedlot Environmental Code of Practice specifies outcomes that include‘preventing or minimising adverse impacts’ to surface or ground water (sub. 71, p. 79).

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The benefits to farm businesses of regulations that control the disposal of effluent andwater include improvements in the quality of water that they can access from waterways
and aquifers, and the environmental amenity of healthy rivers systems and wetlands. Soil,
nutrients and chemicals lost in water disposed from farms represent foregone opportunities
to reduce input costs and increase productivity. Improved effluent management can also
improve food safety, contributing to human health and providing innovative industries witha marketing advantage.
Complying with water regulations that improve water quality can also help agriculturalindustries to sustain their ‘social licence to operate’ within the broader Australiancommunity. As Canegrowers said:
Sugarcane’s proximity to the Great Barrier Reef continues to pressure growers and industry on
their social licence to operate. Canegrowers continues to participate in the Federal Reef
programs including Reef Programme through Reef Plan and Reef Trust through Reef 2050
Long Term Sustainability Plan relating to water quality improvement and the resilience of theGreat Barrier Reef. (sub. 22, p. 4)

Farm businesses can also benefit from improved water quality resulting from regulation
placed on other uses, such as mining. The Department of the Environment said that:
The water trigger was incorporated into the EPBC Act in June 2013, partly in response tocommunity concerns at a time when coal seam gas development was relatively new … The
water trigger seeks to provide confidence about the impacts of these developments on water
resources and water quality, including management responses to secure good water outcomes.
(sub. 80, p. 8)

While regulation of water disposal can benefit farm businesses (and the community more
broadly), there are also costs of complying with these regulations, including the costs of
installing effluent capture and processing technologies. The costs of compliance also
include any foregone productivity benefits from reducing the intensity of farming to meetenvironmental standards.
According to Canegrowers (sub. 22), the balanced use of herbicides and mechanicalcultivation in sugarcane production can improve productivity and water quality, while
reducing the risk of damage to the Great Barrier Reef. However, a failure to harmonise
these regulations can have adverse productivity and environmental consequences.
In a number of submissions to this inquiry, regulation of water disposal was cited as part ofa broader set of environmental regulations that farmers are required to comply with.
Australian Dairy Farmers, for example, said that it ‘wants planning and environmental
legislative frameworks that foster a consistent and inclusive regulatory environment for adiverse dairy industry’ (sub. 63, p. 3). Many dairy farms are expanding and investing in
new and more effective effluent management systems, and consistent regulation reduces
the cost of new investments. The dairy industry is developing innovative ways to reuse
effluent (Australian Dairy Farmers, sub. 63) that adds to productivity while reducing
pollution and waste.

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An issue addressed in chapter 2 is whether local governments have the skills and resources
necessary to administer this type of regulation. Environmental regulation is perceived bysome farm businesses as complex and at times inconsistent. For example, according to theWest Australian Pork Producers Association:… inconsistencies arise that encourage participants to question the fairness of the system. For
example deep litter based sheds compared to effluent based sheds do not need a licence yet the
moment pigs are put into sheds they suddenly need a licence. (sub. 24, p. 4)

Drainage design and water quality monitoring are also part of the regulatory requirements
for applications to develop new intensive livestock businesses in peri-urban areas. In theseareas, conditions imposed to protect other residents are said to be increasing thecompliance burden for some farm businesses (Cordina Farms, sub. 65).
Farm businesses can benefit from the regulation of water disposal through secure water
entitlements, increased productivity and improved water quality. Realising these benefits
requires regulatory regimes that take a holistic approach to controlling diverse influenceson the quantity and quality of water returned from farm businesses to the environment.

4.5

Water reporting

A number of inquiry participants told the Commission that water-related reporting
requirements of the Water Act and the Basin Plan impose an unnecessary and increasing
regulatory burden. Duplication and increased frequency of reporting were of particularconcern. For example, the NFF said that:
With the Australian Government’s implementation of the Water Act 2007, there are now
several Australian government agencies and authorities collecting water data … In many cases,
the different entities require slightly different water information, or the information in different
formats. State agencies also collect water data. All these different data requirements increase
the cost of doing business for the irrigation companies, costs which are then passed on tofarmers through water charges. (sub. 61, p. 16)

As noted by the NFF (sub. DR216), this reporting burden is usually an indirect cost forfarm businesses, and it is usually infrastructure operators who report water use to a rangeof Australian, state and territory government agencies (table 4.1). These include thegovernment departments and water authorities in each jurisdiction, the Bureau of
Meteorology, the ACCC, the Australian Bureau of Statistics (ABS), the Department of theEnvironment and DAWR.
The MDBA receives data from the agencies responsible for implementing the Basin Planin participating states and territory.
The MDBA does not collect any water use data or information from farm or agriculturalbusinesses. All water use data the MDBA collects is provided by the relevant Basin State water
agency under section 71 of the Water Act 2007 (Cwlth). (MDBA, sub DR127, p. 4)

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Table 4.1

Selected water reporting requirements of an irrigation
infrastructure operator in New South Wales
2014

Information

Collection agency

Frequency

Water supply and use

ABS

On request

ACCC

AnnualBureau of Meteorology

AnnualNSW Office of Water

Monthly

State Water

Monthly

Bureau of Meteorology

Annual

NWC

AnnualNWC
Bureau of Meteorology

AnnualAnnualACCC
NSW Office of Water

AnnualAnnualFinancial statements

ASIC

AnnualWater quality
Network characteristics

NSW EPA
ACCC

Weekly, Annual
AnnualNetwork Service Plan, Network Consultation Paper

ACCC

Five-yearly

Water trade/market data
Performance data

Source: Murray Irrigation (2014).

In addition to reporting water use to infrastructure operators, a sample of farm businesses
across Australia (more than 34 000 in 2014-15) report water use to the ABS’s annual Rural
Environment and Agricultural Commodities Survey (ABS 2016a). This information
informs the ABS’s calculation of the gross value of irrigated agricultural production(ABS 2015c). In 2010, the ABS also began collecting data on the ownership of waterrights via the Agricultural Land and Water Ownership Survey, with 11 000 farms surveyed
in 2013 (ABS 2014b).
According to Murray Irrigation, reporting imposes a significant regulatory burden on theirinfrastructure operating business.
A core concern for Irrigation Infrastructure Operators (IIOs) is the increased reporting
requirements and the added complexity in the water market created by the multiple layers ofState and Federal legislation and regulation. IIOs are licenced to operate under State legislationand therefore have significant reporting requirements at a State level, regulated in NSW under
the Water Management Act 2000. Many of these reports supply the same information, albeit ina different format, to those supplied to federal agencies under the Water Act. (2014, p. 2)

The National Irrigators’ Council (sub. 18) argued that this unnecessary regulatory burden
required some irrigation infrastructure operators to employ additional staff to meet theirreporting obligations. The irrigation farmers interviewed by the Commission also said thatthey expend considerable effort in reporting water use (and that this was often exacerbatedby unreliable internet services).

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In some cases, different types of data must be provided in different formats to the sameagency. In other cases, the same data must be provided to different agencies. According toRetailer and Supplier Roundtable Ltd:The lack of a standardised format or system means that information provided to a local entity
under one format cannot be shared with a federal or state entity, resulting in the farmer needing
to provide similar data to the other agencies in a separate step. (2014, p. 18)

The Australian Food and Grocery Council (sub. 28) was also concerned about an increasein compliance costs resulting from water-related reporting obligations. It indicated thatmultiple water usage and water quality parameters must be reported to government
agencies under the:•Environment and Resource Efficiency Plan, Water Management Action Plan and
Annual Waste Returns in Victoria•

ongoing Water Efficiency Management Plans in Queensland and Western Australia•

Water Savings Action Plans — New South Wales•

Water Discharge Reports required by state EPAs•

reports to water retailers such as Sydney Water and Yarra Water.

The overlapping nature of water reporting requirements was also noted in various
submissions to the 2014 review of the Water Act (such as NFF (2014c), NSWIC (2014)
and Waterfind (2014)). For example, Australian Dairy Industry Council Inc and Dairy
Australia stated that:… similar water information is collected, aggregated and distributed by the Bureau of
Meteorology, the MDBA, State water departments, state water corporations, the ACCC, theNational Water Commission, ABARES and the [Commonwealth Environmental Water
Holder]. (2014a, p. 8)

The Commission notes that steps have already been taken to understand the burden ofreporting, and to streamline reporting requirements to reduce this burden. As a result of the2014 review of the Water Act, an Interagency Working Group 8 reviewed water
information reporting burdens under the Water Act, as well as water-related reporting toother Australian government agencies. Its objective was to reduce the regulatory burden
associated with providing water information to the Australian Government (IWG 2016).
The IWG made a number of recommendations and proposals to reduce information
reporting requirements while achieving the objectives of the Water Act. These included:•

amending the water regulations to reduce information requests on rural water entities
from 37 to 10 subcategories of information•

obtaining water use data from state agencies

8 The Interagency Working Group was comprised of representatives from the ABS, ABARES, ACCC,
Bureau of Meteorology, the Department of the Environment, MDBA and the Treasury (IWG 2016).

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•

consolidating information requirements (IWG 2016).

The IWG estimated that implementation of its recommendations could reduce thereporting-related regulatory burden on agricultural businesses by over 20 per cent
(IWG 2016).
The IWG investigated a single portal for the supply of water information to the AustralianGovernment, but found that ‘it is not effective to have a single government agency collect
all the required information because of the very different roles of the agencies and hence
different skills, capacities and analysis of the information’ (IWG 2016, p. 4).
There has been considerable progress made towards reducing the administrative burden on
participants in water markets, especially in the Murray-Darling Basin. The MDBA told theCommission that:
The MDBA is committed to consistently decreasing the aggregate regulatory burden felt by
individuals and will continue to coordinate with other regulatory agencies. (sub. DR127, p. 3)

The Commission’s view is that value of reporting for policy development andimplementation need to be carefully weighed against the costs imposed on farmbusinesses. An important first step is to implement the reforms suggested by the IWG,
noting that the Australian Government accepted all 23 of its recommendations in
December 2015 (DAWR sub. DR183, p. 1). DAWR noted that:
A number of the Review’s recommendations were implemented by the Water Amendment(Review Implementation and Other Measures) Act 2016, passed by Parliament in May 2016 …
substantial progress has [also] been made on reviews of water information reporting to the
Commonwealth (led by the Bureau of Meteorology (BoM)) and the Australian Competition andConsumer Commission (ACCC) water charge rules. (sub. DR183, p. 1)

Amendments have also been made to the Water Regulations 2008 (Cwlth) to reduce thecategories of information reported by infrastructure operators, and the frequency ofreporting to the Bureau of Meteorology (DAWR, sub. DR183, p. 1).
The Commission agrees with comments made by both the Ag Institute of Australia andAustralian Dairy Farmers.
All information requested should be justified with explicit and clear explanation as to why it isrequired and how it will be used. (Ag Institute of Australia, sub. DR182, p. 21)… simply determining where reporting duplications are occurring is not sufficient. It is crucial
to also investigate whether the information collected is valuable and necessary for the outcomes
being sought from the data. (Australian Dairy Farmers, sub. DR218, p. 3)

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RECOMMENDATION 4.1

The Australian Government should implement the findings of the Interagency Working
Group on Commonwealth Water Information Provision to reduce duplicative andunnecessary water management information requirements imposed on farmbusinesses.

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5Regulation of farm animal welfare

Key points•

Animals (sheep, cattle, pigs and poultry) are an essential part of the agriculture sector. Theiroutputs, such as milk, wool, meat and eggs, are basic elements of the food and fibre chain.
While most Australians accept the rearing of animals for commercial purposes, many also
place a value on their health and wellbeing (welfare).

•

Good animal management practices are an essential part of livestock operations. Producers
have an incentive to improve animal welfare where it increases the productivity andprofitability of their business, including when consumers demand higher welfare products.
But animal welfare, productivity and profitability do not always go hand-in-hand.

•

The challenge for policy makers is to determine the level of regulation that weighs up thecost of improved animal welfare against its value to the community.

•

National standards and guidelines are being developed with the aim of improving animal
welfare (standards are intended to reflect contemporary scientific knowledge and community
expectations). However, progress to date has been very slow and the standard setting
process does not adequately value the benefits of animal welfare to the community.

•

To give consumers and the Australian community confidence that acceptable welfare
standards for farm animals are in place, the current approach to developing national
standards and guidelines needs to be improved by:– clarifying the objective of the standard setting process– relying more on rigorous science and evidence of community values for animal welfare– more independent and robust application of regulatory impact assessment processes.

•

The Commission proposes that an independent statutory agency (the AustralianCommission for Animal Welfare (ACAW)) be established to develop the national standards
and guidelines. The ACAW would also disseminate information on best-practice farm animalhusbandry, including through further development of the standards and guidelines.

•

State and territory governments should be more transparent about the monitoring andenforcement activities they undertake — this would help to improve community confidence
that animal welfare standards are being achieved.
– Monitoring arrangements could also be improved by recognising industry quality
assurance schemes (that meet mandatory welfare standards and involve independent
auditing) as a means of demonstrating regulatory compliance.

•

There is general support from industry and welfare groups for the regulation of live exports.
– The exporter supply chain assurance system (ESCAS) has led to some improvement inwelfare for Australian livestock in some overseas export supply chains.
– The regulatory burden of the system for exporters could be reduced through greater
cooperation and sharing of audits and costs between exporters. An industry-led quality
assurance program could, depending on its design, be used over time to demonstrate
live export welfare assurance.
– The ACAW should regularly review the performance of the ESCAS.

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Animals (cattle, sheep, pigs and poultry) are a fundamental part of the livestock industry
and their outputs such as milk, meat, and eggs are basic elements of the food supply chain.
Other outputs, such as wool and hides, are also important components of leather and fabricproduction. The gross value of livestock production during 2014-15 was about $27 billion(about half of the total value of agricultural production) (ABS 2016k).
Australians generally accept that it is appropriate to rear animals for commercial purposes(as revealed by their consumption of animals as food or in other products). They also placea value on the welfare of farm animals and expect, and benefit from knowing, that farmanimals are being treated humanely (both from an animal wellbeing and animal healthperspective). That said, there are some Australians who do not consider it appropriate touse animals for commercial purposes (Animal Welfare Brief Submissions 2). For example,
Vegan Australia (sub. 25) advocates for animals to be able to live free from human use.
Animal welfare issues have received increased attention in Australia in recent years,
particularly following exposure of malpractice in the livestock sector through electronic
media. The temporary suspension of live exports to Indonesia in 2011 is a prominent
example. The suspension was in response to community concern following ABC’s FourCorners airing of footage of mistreatment of animals in Indonesian abattoirs. Intensive
farming and housing systems, such as stalls for pigs and cages for hens, have also been thesubject of animal welfare campaigns. Exposure of incidents of mistreatment has raisedcommunity awareness and influenced consumers’ attitudes.
A number of concerns about farm animal welfare regulation were raised in this inquiry,
including that:•animal welfare regulations are not meeting community expectations about the humane
treatment of farm animals•

there is a risk that unnecessary regulations will be imposed on farmers based onemotive reactions rather than evidence (such as what represents an improvement in thewelfare of farm animals and how this is valued by the community)•

the current arrangements are a patchwork of different standards•

there are conflicts of interest under the current governance arrangements.

Concerns were also raised about practices used on animals, including surgical procedures
without use of anaesthetic (such as dehorning of calves and tail docking and teeth clippingof pigs), forced and continual pregnancy of pigs, separation of mothers and infants anddisposal of unwanted farm animals, primarily male chicks and ‘bobby’ calves (Animal
Law Institute, sub. DR213; Christine Bennett, sub. DR140; Jan Kendall, sub. DR106;
Vegan Australia, sub. DR115).
This chapter looks at the concept of animal welfare (section 5.1), the role for government(section 5.2) and farm animal welfare regulations in Australia (section 5.3). The objectivesof the regulation and the current process for developing and enforcing farm animal welfare
standards within Australia are examined in section 5.4, and options for improving the200

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regulations are discussed in section 5.5. The arrangements for regulating the welfare ofAustralian live exports in overseas supply chains are also examined (section 5.6).

5.1

The concept of animal welfare

The concept of animal welfare is elusive and has a number of dimensions, including
psychological as well as physical aspects, people’s subjective evaluations, and historicaland cultural influences (PC 1998). Essentially, though, animal welfare is about animal
health and wellbeing. The World Organisation for Animal Health (box 5.1) defines animal
welfare to mean:… how an animal is coping with the conditions in which it lives. An animal is in a good state ofwelfare if (as indicated by scientific evidence) it is healthy, comfortable, well nourished, safe,
able to express innate behaviour, and if it is not suffering from unpleasant states such as pain,
fear, and distress. Good animal welfare requires disease prevention and appropriate veterinary
treatment, shelter, management and nutrition, humane handling and humane slaughter orkilling. Animal welfare refers to the state of the animal; the treatment that an animal receives iscovered by other terms such as animal care, animal husbandry, and humane treatment.
(OIE 2016c, p. 1)

Box 5.1

Internationally agreed concepts of animal welfare

The World Organisation for Animal Health (OIE) is an intergovernmental organisation
responsible for improving animal health worldwide. In 2002, the OIE’s mandate was broadened
to include animal welfare standards and to take the lead internationally in this field. It is
recognised as a reference organisation by the World Trade Organization. In 2016 it had 180
member countries, including Australia.
OIE’s guiding principles for animal welfare note that there is a critical relationship between
animal health and animal welfare and refer to the internationally recognised ‘Five Freedoms of
Animal Welfare’ (published in 1965) to describe the right to welfare of animals under humancontrol. According to this concept, an animal’s primary welfare needs can be met by providing
freedom: from hunger; from discomfort; from pain, injury or disease; to express normal
behaviour; and from fear and distress.
Section 7 of the Terrestrial Animal Health Code sets out recommended standards for the
improvement of animal welfare. Specific welfare standards are included for the transport andslaughter of animals, and for beef, broiler chicken, and dairy cattle production systems.
Sources: OIE (2016a, 2016c).

The Australian Animal Welfare Strategy (AAWS) (discussed later) states that Australia
accepts the international definition of animal welfare developed by the OIE. It also statesthat animal welfare reflects the ethical imperative and social expectation that the use ofanimals for human benefit should minimise suffering of the animals involved. Welfare isrelated to health and wellbeing, but extends beyond survival to consider the quality of ananimal’s life. And while concern for animal welfare is widespread throughout the
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community, the underlying set of ethical values used to interpret and act on this concern
varies between individuals and groups, particularly as ethical concerns are not always
matched with consumption decisions. This raises significant challenges for policy makers.

5.2

A role for government in farm animal welfare?

Good animal management practices are an essential part of commercial livestock
operations. Many welfare improvements increase the productivity and profitability oflivestock production. For example:•

a stockperson training program (ProHand) developed by the Animal Welfare ScienceCentre9, has been shown to increase milk yields in cows, and increase litter sizes andgrowth rates in pigs (AAWS 2016)•

low stress handling and slaughter practices (that maintain glycogen (sugar) levels) can
help improve the quality of meat (UN FAO 2001).

As Australian Pork Limited (sub. 37, p. 6) said ‘the single most important factor in
addressing the welfare of animals is the husbandry skills of the stock-people’. Other
welfare attributes that improve livestock productivity and are essential for good livestock
production processes include good housing, nutrition and protection from diseases.
From a production perspective, the value of a farm animal is determined by what it
contributes to the economic output of the production process. This varies between
extensive (grazing) and intensive (housed or closed-stock) systems that use ruminant andnon-ruminant animals. As such, the way an animal is treated (in terms of food, shelter,
disease management and so on) is influenced by what is required to achieve the highest
level of productivity (the cost of which the producer will seek to recover in the sale of the
product). Above all, high mortality rates (a simple but useful measure of animal welfare)are typically at odds with productivity.
As noted by the (then) Australian Government Department of Agriculture 10, there is also alink between animal welfare and industry profitability, where improvements in animal
welfare can contribute to improved competitiveness and community acceptance of
livestock animal welfare arrangements. This can lead to better domestic and export market
access, higher prices and enhanced long-term sustainability (DoA 2015e). Producers also
have an incentive to improve animal welfare to meet changing consumer demands forhigher welfare products.

9 The Animal Welfare Science Centre comprises four collaborative partners — the Victorian Department of
Economic Development, Jobs, Transport and Resources; the University of Melbourne (Faculty of
Veterinary and Agricultural Sciences); the South Australian Research and Development Institute; and the
University of Adelaide (School of Animal and Veterinary Sciences).
10 Now the Department of Agriculture and Water Resources.

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And in practice, some producers will take factors other than profit into account, including
attitudes to risk, concern for animals and the environment, maintaining a certain way oflife, and farm succession (FAWC 2011). Maintaining cash flows and land values will also
be important for some farmers, particularly those in pastoral zones.
But animal welfare and production and profitability do not always go hand-in-hand(box 5.2).
Box 5.2

Conceptual relationship between productivity and welfare

A generalised relationship between the productivity of livestock and livestock welfare can beconceptualised using production economics. At low levels of output, there is complementarity
between increased livestock production from better practices (such as nutrition, housing, anddisease control) and livestock welfare outcomes. Ultimately, however, a point may be reachedwhere further productivity increases come at the cost of animal welfare as livestock ‘intensity’increases and production techniques seek to maximise the biological potential of livestock.

Points along the ‘welfare-productivity frontier’ (green line) are associated with different
preferences for animal welfare outcomes. Livestock producers will occupy different positions on
the frontier depending on their enterprise (dairying, organic, grass-based, etc.) and the intensityof their production system. That said, general consensus about what constitutes animal cruelty
will determine a minimum level of animal welfare that society expects and which may set thethreshold for government regulation. McInerney (2004) argues that beyond this point it is amatter of choice as to how animals are farmed, and how the balance between the economic
value attached to their output and the value attached to their welfare should be resolved.
While this ‘welfare-productivity frontier’ provides a useful theoretical depiction of the relationshipbetween livestock productivity and welfare, a potential limitation is that it is too generalised torepresent both intensive and extensive production systems. Also, it is not necessarily the casethat increases in intensity are always associated with lower welfare outcomes.
Source: McInerney (2004).

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Some welfare measures can involve costs for farmers with little or no offsetting gains tothe business. Examples include:•

where welfare measures reduce the intensity of livestock production, for example, bylowering stocking densities in poultry systems used for egg production•

the use of pain relief for invasive procedures such as mulesing or castration, that
impose costs with limited offsetting productivity improvements.

Producers may still have an incentive to adopt such measures if the final product can besold at a higher price — examples are free range eggs and pork — although prices forthese products may not relate to other (non-housing related) welfare attributes, such as useof surgical procedures without anaesthetic. Producers also have an incentive to adopt
higher animal welfare in response to changes in community values to avoid the risk of new
regulations, which could be more costly than industry-initiated welfare measures.

Public benefits of farm animal welfare
In principle, the community attaches a value to farm animal welfare that is distinct fromthe value that animal welfare contributes to the productivity and profitability of the farmbusiness. This value may not be reflected in the production process where farmers areseeking to maximise profitability. Farm animal welfare is important both to consumers ofanimal products as well as others in the community (those who are not consumers ofanimal products and are not directly involved in the production of animal products) who
feel concern or discomfort about the mistreatment of animals. Viewed in this way, farmanimal production can impose negative externalities on society which points to a role forgovernment, but only if the costs of government intervention are outweighed by thebenefits to the community.
Evidence shows that consumers assign a positive value to increased animal welfare,although how much they are willing to pay for products that have higher animal welfare
standards varies. For example:•

in a meta-analysis of the literature, consumers across several countries were found to beconsistently willing to pay price premiums for better housing conditions for caged hens
(Lagerkvist and Hess 2011)•

consumers in Western Australia were found to be willing to pay a premium for ‘welfare
friendly’ broiler products (Patterson, Mugera and Burton 2015). Consumers in thisstudy were most concerned about stocking density, hot metal blade beak trimming andpoor litter quality.

By contrast, Glass et al. (2005) found that in Northern Ireland, a significant proportion of
the public at that time were unwilling to pay for improvements in the welfare of pigs.

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The evidence also shows that:•

demographics (age, income and gender) matter for willingness to pay for improved
animal welfare (Lagerkvist and Hess 2011; Naald and Cameron 2011; Taylor and
Signal 2009)•

respondents’ self-rated knowledge of modern animal-based food production ispositively related to willingness to pay (Taylor and Signal 2009). Coleman (2009) alsosuggests that surveyed attitudes on animal welfare would become progressively better
predictors of consumer behaviour the more attitudes are based on direct experience (inthat case, experience and knowledge of the pork industry and its husbandry practices).

But people’s views are not always consistent with their willingness to pay for higher
welfare products (box 5.3). Nonetheless, most members of the community expect that farmanimals will be treated humanely and in a manner that achieves a minimum level of
welfare. This minimum level of welfare can be thought of as a public good as all (or many)members of society derive a benefit from it. 11 The government has a role in ensuring thisminimum level of welfare is achieved, where it would not otherwise be achieved as a resultof the commercial incentives and actions of producers. This suggests that the role ofgovernment should be confined to addressing instances where farm animal welfare andprofitability are not complementary. At the opposite end of the scale is a level of welfare
that a minority of society would consider desirable, but which can be considered a private
good and therefore there is a very limited role for government (McInerney 2004).
The challenge for policy makers is to determine the level of farm animal welfare thatprovides the highest net benefits to the community as a whole. That is, the level thatbalances the value of farm animal welfare against the cost of achieving a certain level of
welfare. This balance is not easily struck simply because some people value animal welfare
highly while others derive relatively little benefit from improved welfare.
Ethical considerations are important in determining the acceptability of welfare standards,
but it is critical that views about animal welfare are based on credible science. People may
perceive a practice to be cruel because they do not understand the actual welfare outcomesfor an animal. For instance, people may believe ‘free range’ eggs to always be superior to
cage egg production, but neglect the risks posed by predation, feather pecking andcannibalism in some free range systems (UK DEFRA 2005). And most people accept that
there can be tradeoffs between standards and the costs and practicality of achieving them.
For that reason, it is important that factual (scientific and economic) considerations are

11 For example, the benefit someone receives from knowing that a hen has improved welfare from that

person’s consumption of cage-free eggs does not prevent another person from also benefiting from theincreased welfare the hen receives (that is, animal welfare is non-rival). Also, other people cannot be
excluded from benefiting from the animal welfare embodied in the consumption of cage-free eggs (that is,
animal welfare is non-excludable). These public good features of animal welfare mean that consumers
may not purchase products that entail higher levels of animal welfare, even though they place a positive
value on this (Lusk and Norwood 2011).

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separated from judgements about what is appropriate (ethics) and that an effective
governance framework is in place for this to occur.
Box 5.3

Willingness to pay for higher animal welfare products

Taylor and Signal (2009) refer to a number of Australian and international studies that foundthat consumers’ attitudes to animal welfare are not always matched by their purchasing
behaviours, or the experiences of farmers using alternative (higher welfare) production systems.
Several studies have put forward explanations for this disparity.
•

Harvey and Hubbard (2013) suggest that people may be more willing to pay a premium forhigher welfare products if they could be sure that their contributions would make a difference
to animal welfare or if they could be sure other people were willing to support animal welfare.
These consequences are aspects of the ‘free rider’ problem, as well as information
asymmetries between producers and consumers.

•

Blokhuis et. al (2003) considered the limited availability and insufficiency of information
about ‘animal welfare friendly’ products to be a greater barrier than the price of those
products. Similarly, interpretations of welfare scores and the level of trust in animal welfare
certification processes can affect the extent of changes to consumer behaviour (Kehlbacher,
Bennett and Balcombe 2012; Nocella, Hubbard and Scarpa 2010). High transaction costs
associated with uncovering information to inform decisions may pose a barrier to changes inpurchasing behaviour.

Other reasons put forward by Vegan Australia include ‘tradition, convenience, widespreadpromotion by the animal industries, lack of information about the treatment of farmed animals
and lack of knowledge about non-animal alternatives’ (sub. DR115, p. 10). Consumer choice
can also be affected by product attributes other than animal welfare, such as taste, healthinessand food safety (Naald and Cameron 2011).

5.3

Australia’s animal welfare system

All levels of government in Australia are responsible for animal welfare, but primary
responsibility rests with state governments. The Australian Government is responsible foranimal welfare issues relating to international trade (including live animal exports) andinternational agreements (discussed in section 5.6). Local governments are responsible forsome areas of animal control (such as cattle at large). Some local councils also make local
laws for livestock welfare at saleyards, particularly where the council is the freehold owneror manager of the relevant public land (Harding and Rivers 2015).

Codes of practice govern Australia’s farm animal welfare system
Since the 1980s, the welfare of farm animals in Australia has been governed by a series ofModel Codes of Practice. The codes set standards for different categories of farm animals(including cattle, poultry, pigs, and sheep), land transport, processing, and saleyard codes. The
codes were developed through a cooperative process involving state and territory governments
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in an attempt to achieve national consistency. They were endorsed through the (then) COAG
Primary Industries Ministerial Council12 and were adopted to varying degrees by state andterritory governments — largely as voluntary standards, although some have adopted the codes
as mandatory or developed their own enforceable codes based on the model codes. For
example, in South Australia most of the model codes are mandatory. Victoria’s welfare
standards and guidelines for pigs (which are based on the model code) are mandatory, and in
New South Wales, its animal welfare code of practice for commercial pig production isenforceable under regulation, which includes welfare requirements for poultry.
In 2005, the Australian, state and territory governments agreed to convert the model codes ofpractice into Australian Animal Welfare Standards and Guidelines for the welfare of livestock.
This process was meant to convert the standards into mandatory requirements in state andterritory law, and for the guidelines to be used as recommendations for good practice. The
development of national standards and guidelines was a key feature of the AAWS (box 5.4).
Box 5.4

The Australian Animal Welfare Strategy

The Australian Animal Welfare Strategy (AAWS) was endorsed in 2004 by the then Primary
Industries Ministerial Council (PIMC). The aim of the AAWS is to assist in the creation of a moreconsistent and effective animal welfare system. Six working groups were established, withrepresentation from government, industry and sector specialist organisations. The working
groups covered: animals in research and training; native and introduced wildlife; animals used
for work, recreation, entertainment or display; aquatic animals; livestock and production; andpets and companion animals.
A key component of the AAWS is to create nationally consistent farm animal welfare policies by
replacing 22 voluntary national Model Codes of Practice for the Welfare of Animals — thatstates and territories use to inform their animal welfare legislation and codes of practice — withnationally agreed Australian Animal Welfare Standards and Guidelines. The standards aremandatory, whereas the guidelines are voluntary. The intention is that, once endorsed by
Agriculture Ministers, the standards and guidelines be implemented into legislation in each state
and territory (Australian Animal Welfare Standards and Guidelines 2016).
The AAWS was coordinated by the (then) Department of Agriculture, Forestry and Fisheries onbehalf of PIMC. PIMC was assisted by an Animal Welfare Committee (AWC) (which
coordinated government partners) and the Australian Animal Welfare Advisory Committee(which made recommendations on expenditure of AAWS funds and assisted the AWC in setting
the direction of the strategy) (DoA 2015c; Thornber, Kelly and Crook 2012).

Model codes of practice for farm animals are different to the legislative arrangements thatare in place for the welfare of companion animals. 13 Commercially farmed animals are
12 The Primary Industries Ministerial Council became the Standing Council on Primary Industries, which
was replaced with the Agriculture Ministers’ Forum (AGMIN) that met for the first time in May 2014
(DoA 2014b; Joyce 2014b).
13 For example, the model code of practice for domestic poultry (section 13.2) and the national standards
and guidelines for sheep (section 7) do not require the use of anaesthesia when de-beaking layer hens ormulesing of sheep under 6–12 months old, whereas state animal welfare legislation prohibits the infliction

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exempted from the overarching anti-cruelty and duty of care standards included in animal
welfare legislation. Most states’ primary legislation allows for the adoption of codes ofpractice by regulation, with compliance with the code being a defence to prosecution for
cruelty or breach of duty of care under the primary legislation. 14 A number of participantsquestioned the basis for applying different welfare standards depending on the use of theanimal (Animals Australia, sub. 53; Animals Tasmania, sub. DR146; Vegan Australia,
sub. DR115).
The agency responsible for enforcing animal welfare arrangements for commercial farmanimals is usually the government department responsible for administering animal welfare
legislation for farmed animals, typically primary industries or agriculture departments.
Arrangements are generally in place between the relevant department and the RSPCA thatoutline respective monitoring and enforcement roles, with the RSPCA typically (but notalways) dealing with companion animals, and the department dealing with farm animals.

5.4

How are farm animal welfare standards set?

The objective of the farm animal welfare standards and guidelines
In 2005, the usefulness and relevance of the model codes of practice (which the national
standards and guidelines are designed to replace) were questioned. The former Primary
Industries Standing Committee asked the (then) Department of Agriculture to consider
arrangements for reviewing and developing the codes as a basis for Australia’s future
livestock welfare regulation, and the arrangements were reviewed.
The 2005 review found that the codes did ‘little to provide consistency’, provided ‘poor
support to regulators’, resulted in ‘considerable additional work producing codes suitable
to some States and generally satisfy few expectations’ (Geoff Neumann and
Associates 2005, p. 10).
The review also found that the codes:•

had not routinely considered contemporary animal welfare science as a basis for astandard•

had not routinely involved preparation of an economic impact assessmentof pain on animals without reasonable steps taken to alleviate pain. For example, see the Prevention of
Cruelty to Animals Act 1979 (NSW) s. 5(3)(b).

14 For example, in Queensland, the Animal Care and Protection Act 2001 (Qld) (s. 40) provides that it is adefence to a charge of cruelty or breach of duty of care if there has been compliance with a relevant codeof practice. This means that if a farmer was charged with a cruelty or breach of duty of care offence, andwished to rely on the code as a defence, he or she would need to demonstrate compliance with the code.
A similar approach is followed in Victoria, South Australia, the Northern Territory, the Australian Capital
Territory and Western Australia (McEwen 2011; WA DAF 2015; White 2007).

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did not provide the degree of national consistency in animal welfare policy and practice
appropriate to Australia’s position as a significant producer and exporter of livestock•

had a questionable impact on the welfare of animals.

The subsequent Business Plan for the development of the standards and guidelines outlines
a vision and an objective for the standards and guidelines.
VisionThe vision is to establish national livestock welfare standards that reflect contemporary
scientific knowledge, competent animal husbandry and mainstream community expectations,and that these are maintained and enforced in a consistent, cost-effective manner.
Objective
As a cornerstone of the Australian Animal Welfare Strategy, the national livestock welfare
standards, with complementary guidelines, provide welfare outcomes that meet community andinternational expectations and reflect Australia’s position as a leader in modern, sustainable andscientifically-based welfare practice. (AAWS 2009, p. 2)

A slightly different formulation of this objective is referred to in documents supporting thedevelopment of specific standards and guidelines. For example, the regulation impact
statement (RIS) for the standards and guidelines for cattle states that the policy objective is‘to minimise risks to cattle welfare and unnecessary regulatory burden in a way that ispractical for implementation and industry compliance’ (Tim Harding and Associates andRivers Economic Consulting 2014a, p. iv). It also states that in terms of achieving thisobjective, the main criterion for evaluation is net benefit for the community.
The RIS states that the main problem underlying the development of the national standards
is welfare risks for cattle due to deficiencies in the model code of practice and, to a lesser
extent, uncertainty for industry due to lack of clear and verifiable standards and excess
regulatory burden arising from lack of national consistency. Excess regulatory burden was
not identified or quantified in the RIS, although some regulatory differences between
jurisdictions were identified, for example, the requirements to provide pain relief for
castration and other surgical procedures.
Different views on the objective of national standards will slow down their progress. Thiswas identified as an issue in a 2013 review of the process:This objective includes a requirement for the Standards and Guidelines to meet community
expectations. There is, however, currently a relatively low understanding, or agreement, on
what these expectations are. This is a gap in the current analysis and development of theStandards, which has contributed greatly to the problems of conflicts within the process.
Without a strong statement of objective, each party involved in the process has their own
benchmark of what the Standards should be seeking to achieve … (PwC 2013, p. ii)

The different views are reflected in polarised positions and concerns from animal welfare
and industry groups. Animal welfare groups expressed concern that the standards have not

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gone far enough to improve welfare outcomes and are not meeting community
expectations. Industry groups raised concerns about risks of excessive regulation (box 5.5).
Box 5.5

Participants’ views on farm animal welfare standards

RSPCA Australia, commenting on whether existing animal welfare regulations meet community
expectations said:
State and territory regulations authorise systems of production and husbandry practices that fall well
below community expectations … the primary concerns of the community relate to intensive
confinement systems such as the use of battery cages for laying hens and individual stalls for sows,routine surgical procedures without pain relief, and food and water deprivation during transportation
and at saleyards. (sub. 31, p. 1)

RSPCA Australia (sub. 31) also claimed that the national standards and guidelines have not‘raised the bar’ on animal welfare from those already in the model codes of practice. Similarly,
Animals Australia (sub. 53) did not consider that animal welfare regulations were meeting
community expectations about the humane treatment of farm animals. And Vegan Australia(sub. 25) suggested that if community expectations were met, many existing practices (such asprocedures without anaesthetic) would not occur.
The Law Society of South Australia (sub. 44) pointed to a similar list of community concerns as
raised by RSPCA Australia (sub. 31) and suggested that existing animal welfare regulations
required improvement to meet community expectations. The NSW Young Lawyers Animal Law
Committee (sub. DR284) said that Australia’s animal welfare standards are lower than manyother countries, pointing to World Animal Protection’s Animal Protection Index, which grades
Australia as an overall ‘C’ in both animal protection standards, and for protecting animals usedin farming. In contrast, New Zealand received an ‘A’ on both measures.
A number of agriculture industry groups and state government departments acknowledged thegrowing community concerns about the welfare of farm animals (Australian Pork, sub. 37; South
Australian Government, sub. 57). The Western Australian Government, however, noted that‘any cost impositions from unnecessary regulation, based on emotion as opposed to thatnecessary to ensure the humane treatment of animals, will have a disproportionately larger
impact on the export focused West Australian industry’ (sub. 54, p. 31).
The Consolidated Pastoral Company (sub. 71) also said that rules governing animal welfare
practices have been at risk of being politicised, resulting in excessive coverage. And the
NSW Farmers’ Association (sub. 72) argued that no case has been made for additional
regulation above and beyond state Prevention of Cruelty to Animals Acts. It suggested that theappropriate course of action is to allow changes in production practices to be guided byeconomic drivers in the consumer sphere. By contrast, NSW Young Lawyers Animal Law
Committee said that ‘market forces are an imperfect means of achieving acceptable standards
in production methods, particularly in circumstances where there is no requirement for
producers to disclose how products were produced …’ (sub. DR284, p. 6).

Progress developing national standards and guidelines has been slow
Three sets of national standards and guidelines have been endorsed — for sheep and cattle(both in 2016) and livestock land transport (in 2013). Livestock saleyards and depots
standards and guidelines are developed and pending endorsement from Agriculture
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Ministers, and the poultry code and the livestock at slaughtering establishments code are
currently in the process of conversion. Another 10 model codes are yet to be converted. 15
The standards for land transport of livestock have been implemented in state and territory
law in most states and territories. The sheep and cattle standards and guidelines are yet tobe implemented and the NSW Government has said it will not make the standards
mandatory, but will reference them as voluntary guidelines under its prevention of cruelty
to animals legislation (NSW Government 2015a).
The Tasmanian Department of Primary Industries, Parks, Water and the Environment(sub. 62) also said that its state’s Animal Welfare Advisory Committee (which makes
recommendations to the responsible Minister on the adoption of standards) has previously
refused to endorse a national standard where it considers the standard to be too low. An
example is where the Tasmanian Government gave effect to most of the standards
contained within the Model Code of Practice for the Welfare of Animals — Pigs (third
edition), but did not apply standard 4.1.5 of the code and prohibited the confinement ofsows in stalls except in some circumstances. The RIS for the prohibition determined that
there would be some initial adjustment costs (including capital costs and retraining costs)
for the pork industry, but that over a ten year period there would be a small annual net
benefit to the industry (Tasmanian Government 2013). The higher standards are claimed toaddress community concerns and to provide a point of differentiation for Tasmanian pork
products (TDPIPWE, sub. 62).
Despite difficulties developing the national standards and guidelines, participants to thisinquiry and in other forums, including the Agriculture Competitiveness White Paper
process, expressed support (to varying degrees) for a national approach to regulating farmanimal welfare (Australian Chicken Growers Council, sub. 51; Australian Chicken Meat
Federation, sub. 40; Law Society of South Australia, sub. 44; VFF 2014).
The costs and benefits of a national approach to livestock welfare
A national approach could help increase confidence in the community that livestock
production in Australia is based on consistent welfare standards. As the Australian Farm
Institute (AFI) said:
Having inconsistent approaches and enforcement practices at state level makes it very difficult
to adequately and effectively inform and educate consumers, and also has a direct impact on thecompetitiveness of national farm businesses. (Potard 2015, p. 76)

15 The Model Code of Practice for the Welfare of Animals — Pigs was being updated at the time thedecision was made to covert the codes into standards and guidelines. This document retained the nameand format of a code but contained standards that states and territories agreed to regulate (Thornber, Kelly
and Crook 2012).

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Difference in regulation can mean that consumers cannot compare the welfare attributes oflike products. As RSPCA Australia said:
A prominent example of this may be found in the case of free-range eggs. There is no
consistent legal standard for what free-range means in the context of egg production andconsumer confidence in the market has suffered as a result. (sub. 31, p. 4)(Consumer detriment from confusing or lack of understanding of welfare claims on foodlabels is discussed in chapter 10.)
A lack of clear and verifiable standards also creates uncertainty for producers. A recent
example of this is inconsistent interpretation of stocking densities for free range layer hensin the poultry code. Some producers have interpreted the maximum stocking density to be1500 hens per hectare while others have interpreted the section on range rotation to mean
there is no maximum stocking density (chapter 10).
Some participants suggested that differences across jurisdictions have reduced competition.
Different approaches to free range hen stocking densities was raised as an example in thiscontext (Australian Veterinary Association, sub. 26; Law Society of South Australia,
sub. 44). The Western Australian Government (sub. 54) and the Law Society of South
Australia (sub. 44) considered that greater consistency would protect the image of theAustralian livestock industry as well as the welfare of livestock.
Regulatory differences can impose costs on businesses that operate in more than one state,particularly in the eastern states where not only are livestock transported across stateboundaries, but also some farming businesses cross state boundaries. The Australian
Chicken Meat Federation (sub. 40) said that companies operating in more than one stateneed to be checking their internal standards for compliance with regulations on astate-by-state basis, rather than against one common set of standards and compliance
procedures.
A nationally consistent approach can reduce costs from regulatory differences that result in
additional transaction costs with no offsetting benefits. But there are challenges developinga national approach that takes into account the interests and circumstances of all
jurisdictions. There may be tradeoffs that favour states tailoring regulations to their own
circumstances and community preferences. As the Tasmanian Department of Primary
Industries, Parks, Water and the Environment said:
Tasmania adopts nationally agreed standards where possible but reserves the right to apply
higher standards. National standards need to cover the whole of Australia and one of thechallenges in developing them is that practices that are reasonable and acceptable in one part ofthe country may not be in another part. For example, due to the practical difficulty of inspecting
animals in the extensive grazing areas of northern Australia, it is reasonable to apply a lower
standard than in Tasmania where graziers face fewer challenges in inspecting stock.
(sub. 62, p. 6)

National standard setting processes that align regulatory arrangements to the ‘lowest (orhighest) common denominator’ are unlikely to be in the best interests of the community.
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While more (or less) stringent standards in some states may affect the competitiveness ofsome providers (by potentially raising their production costs relative to their interstatecompetitors), these costs must be balanced against the benefits to the community from
improved animal welfare outcomes, particularly where the higher standards have beenshown to better reflect community values.
On balance, the Commission’s view is that a national approach, with flexibility to address
local circumstances, is desirable. There would also be merit in prioritising the developmentof standards to areas (such as categories of farm animals, and production processes orpractices) where there is the most community concern about livestock welfare, and whererisk of adverse livestock welfare outcomes are greatest.
The Commission is concerned that progress in furthering standards and guidelines has been
too slow. Slow progress could reflect that some parties want to preserve the status quo andsee merit in delay, rather than directly addressing and arguing the various animal welfare
standards. It could also be a result of conflicts within the process, as evidenced bystatements made regarding the development of the sheep and cattle standards, which tookeight years to complete. Commenting on the time taken to develop the standards,
WAFarmers claimed that:
It is pertinent to note that this process could have been achieved some time ago if after eight
years of consultation and after final standards and guidelines were released for further public
consultation, the RSPCA hadn’t immediately come out in the press claiming the standards wereinsufficient even though the RSPCA representatives had sat at the negotiation table for eight
years and had agreed to the standards and guidelines being released for further public
consultation. (sub. DR226, p. 9)

In contrast, RSPCA WA claims that RSPCA representatives consistently expressed
dissatisfaction with certain aspects of the draft standards on multiple occasions during theprocess and that:
The delays were caused by the cattle and sheep industries deciding to withhold funding of theprocess until certain conditions were addressed to their satisfaction. This was communicated tothe stakeholder reference group by the CEO of Animal Health Australia in October 2010, wellbefore RSPCA Australia made public comment about the deficiencies in the draft standards.
(sub. DR306, p. 1)

It is in the interest of the community for the development of the standards and guidelines tobe expedited.
Concern that efforts to develop a national approach have stalled
As part of its 2014-15 Budget initiatives, the Australian Government ceased funding the
AAWS and disbanded the Australian Animal Welfare Advisory Committee (AAWAC)(Treasury 2014a). Australian Animal Welfare Standards and Guidelines are now being
developed under the auspices of the Agriculture Ministers’ Forum (AGMIN), the

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Agriculture Senior Officials Committee, and its advisory body on animal welfare issues,
the Animal Welfare Task Group (AWTG).
A number of participants expressed concern about the AAWS process being abandoned.
The Australian Veterinary Association said that:
Since the AAWS was discontinued, the lack of an inclusive framework risks the developmentof greater polarisation within the community, and loss of community confidence. In recent
years, we have seen the major supermarkets dictate welfare standards to industry in response tocommunity pressure. These standards are developed in an ad-hoc manner, [and] are notgenerally science-based. This is a risk to our livestock industries whose best defence is todemonstrate compliance with recognised, science based, balanced and enforceable animal
welfare standards. (sub. 26, p. 3)

And Australian Pork Limited said that:
With the Federal Government withdrawing its national leadership position on animal welfare
standards and guidelines following the 2013 Federal Election, there is significant mistrust anddissatisfaction with the current process … While this process mimics the prior process, it isapparent there is significantly less transparency about the process including who is involved
and how work programs are determined and directed. (sub. DR282, p. 3)

Adding to this, it said that there is ongoing mistrust of minimum standards and guidelines
for animal welfare, particularly with industry involved and partly funding the process.
There were calls for the Australian Government to reengage and take on a coordinatingrole in harmonising animal welfare standards (AAAL 2014; Australian Chicken Growers
Council, sub. DR149; ALFA 2014; ASWGA 2015; AVA 2014; NFF 2014; VFF 2014;
Voiceless 2014; Western Australian Government, sub. DR285). For example, the Victorian
Farmers’ Federation said it:… urges the Federal Government [to] put the issue of national animal welfare standards andguidelines back on the AGMIN agenda. But we must have a consistent national approach to theissue. (2014a, p. 23)

And the Community and Public Sector Union (sub. DR204) said that its members haveproposed the re-engagement of the Department of Agriculture and Water Resources(DAWR) in the AAWS.

Robust institutional arrangements?
The process for developing the national standards and guidelines is managed by Animal
Health Australia (AHA) (a not-for-profit company that facilitates partnerships between
governments and major livestock industries to protect animal health and the sustainabilityof Australia’s livestock industry). AHA provides secretariat support for a stakeholder
advisory group (comprising an independent chair, Australian and state government
representatives, various industry members, and animal welfare representatives) and a

214

REGULATION OF AUSTRALIAN AGRICULTUREsmaller drafting group (which has the task of developing the standards and guidelines forreview by the stakeholder advisory group) (figure 5.1).
Figure 5.1

Institutional arrangements for developing poultry standards

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Funding for the development of standards and guidelines is split equally (on a one third
each basis) between the Australian Government, state and territory governments, andrelevant industry groups.
There have been some reforms to the standards development process
The current standards setting process is different to the previous process (for transport,
sheep and cattle), in part, because of the disbanding of the AAWAC and the Animal
Welfare Committee. The AWTG is meant to play the role of the Animal Welfare
Committee, and state and territory governments facilitate the standard setting process(previously undertaken by the Australian Government) between AHA and the AWTG. For
poultry and livestock at slaughtering establishments, the NSW Department of Primary
Industries has taken on this role.
Other differences between the current and previous framework reflect recommendations
made in the 2013 review of the standards and guidelines development process (box 5.6).
The review identified issues with the lack of agreement on the objective of the national
standards and guidelines (discussed above), inadequate use of RIS processes (includinglack of scientific literature and research on community values to support claims), and theroles (particularly conflict resolution) of the groups involved in the process.
The Commission was advised that as a result of the review’s findings, the drafting group
now comprises a small number of people (two to three) with expertise in drafting
standards. Previously, the drafting group consisted of about nine people and included
representatives from industry, science and government. The stakeholder advisory group(previously referred to as the standards reference group) has also changed. It includes only
one active member from each relevant representative body (rather than multiple
representatives from the same body), although the total size of the group is still large.
The stakeholder advisory group is now chaired by an external consultant, and matters ofcontention will be referred to the AWTG to avoid long delays. Previously, AHA attempted
to resolve contentious matters. The 2013 review recommended that the reference group be
confirmed as a body for representative advice, not decision making, and that it should beclear to all parties that the ultimate decision maker for the standards is the Standing
Council on Primary Industries (now AGMIN).
These reforms to the process are currently being tested in the poultry standards andguidelines process. However, a different process is being used to convert the livestock at
slaughtering establishments code into national standards and guidelines. In this case, theNSW Department of Primary Industries is the project manager (AHA is not involved in theprocess). The Commission was advised that the reason for the different approach forslaughter establishments is because the standards were largely written by a task group
appointed by the then Animal Welfare Committee in 2012 based on existing industry
guidelines (developed by the Australian Meat Industry Council). A national RIS process is
not being undertaken as the standards are not expected to impose significant additional
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regulatory burden on abattoirs (NSW Department of Primary Industries, pers. comm.,
24 October 2016). A similar approach was used to convert the animals at saleyards code(the resulting standards are pending endorsement from Agriculture Ministers) although inthis case a national RIS was undertaken.
Box 5.6

Review identifies opportunities to improve the process

A 2013 review (commissioned by the then Primary Industries Standing Committee’s Animal
Welfare Committee) of the process for developing animal welfare standards and guidelines
identified a number of opportunities to improve the process.
•The objective of the animal welfare standards and guidelines. The review noted that there islittle understanding of, or agreement on, what community expectations are, which has
contributed to conflicts in the process, particularly between industry and animal welfare
groups. The review recommended the use of focused research and surveys to improveunderstanding of community expectations and values, with the outcomes of the researchbalanced with industry input and scientific knowledge on animal welfare matters.

•

The structure of the standards and guidelines. Some stakeholders to the review suggested
that including both standards and guidelines in the same document created confusion about
the role of the guidelines and their enforceability. On balance, the review recommended thatguidelines be retained in the document and that industry take a higher level of responsibility
for promoting the guidelines as representative of good industry practice.

•

Process structure and roles. The review found that the structure of the process involved theappropriate elements but greater clarity and demarcation of the role of each party wasneeded. The review recommended that the roles of project manager, standards
development and drafting, representative advice and comment, and decision making, beclearly articulated. The reference group should be confirmed as a body for representative
advice, not decision making. Standards development and drafting should be conducted byan individual or group (not a representative body) with expertise in standards development
and be provided with legal support for drafting so that the standards are ‘regulation ready’.

•

Conflict resolution. Conflict between parties was identified as a major impediment toagreeing on standards. Animal Health Australia (as project manager) has endeavoured tomediate between parties but there was a strong view that this was not their role. The review
recommended that meetings be facilitated by an independent person, and that the regulation
impact statement process be more clearly used to consider a range of options and reflect onevidence.

•

Evidence-based decision making. The review noted that there were significant gaps inknowledge of current practices and costs of alternatives, which makes it difficult tounderstand the extent of the ‘problem’. It recommended that small research tasks be
conducted (with emphasis on engagement of research independent of other interested
parties) to support the RIS, and that future RIS development be properly resourced.

Source: PricewaterhouseCoopers (2013).

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Concerns about the independence and transparency of the process persist
Despite changes to the process, concerns continue to be raised about its independence andtransparency, including with respect to the development of the poultry standards. Animals
Australia (sub. DR268) said that the process for converting the poultry code into standards
and guidelines is mimicking the failure of the sheep and cattle standards (as reflected bythe ‘refusal of cattle, dairy and sheep industries to accept a requirement to use available
and practical pain relief for painful and invasive surgical practices (mulesing, dehorning,
disbudding of calves, some cattle spaying techniques’ (p. 5)). Voiceless (sub. DR166) said
that its requests to be involved in the development of the standards and guidelines was
rejected by the AWTG without reason, and that, of the 35 stakeholders involved in theinitial draft consultation process, only two represented animal welfare or protection groups.
Background information for the poultry standards process states that the RIS will
incorporate public consultation feedback and changes made by the majority of the
stakeholder advisory group (AAWSG 2016). This means that any majority decision will bestrongly influenced by the composition of the group, the majority of which represent thepoultry industry.
Another example of where the process appears to have failed to consider the interests ofthe broader community relates to unstunned slaughter. In June 2016, members of the
stakeholder advisory group were told that non-stun (religious) slaughter would not be
considered in the review of the code for livestock at slaughtering establishments (Animals
Australia, sub. DR68). According to Animals Australia (a member of the stakeholder
advisory group), the Animal Welfare Task Group deemed that the issue of religious
slaughter would not be part of the standards and guidelines development process and thatthe current exemption (that allows non-stun (religious) slaughter at approved abattoirs)
would remain — it is effectively ‘off the table’ for discussion. At the time of writing, there
was no publicly available information on the conversion process or what issues were being
considered for standards of slaughter at abattoirs. As noted above, the standards forlivestock at slaughtering establishments are being managed by NSW DPI and a national
RIS is not being undertaken.
The Commission sees no legitimate reason for unstunned (religious) slaughter to be
excluded from the standards and guidelines development process. Also, the rationale forthe exemption is questionable. The animal welfare risks associated with unstunnedslaughter (as expressed by Christine Bennett, sub. DR140 and in Australian Government
commissioned scientific reviews (Adams and Sheridan 2008)) demonstrate that it is amatter that should be on the table for public discussion.
RSPCA Australia (sub. 31) was also concerned that failure to properly take into accountcommunity expectations is continuing under the current process, and said that it was notaware of any plans for such research to be undertaken in future standards development
processes.

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Similarly, the Australian Veterinary Association (sub. DR167) pointed to concerns that
community groups are underrepresented in standard setting and suggested that additional
expertise from veterinarians and animal welfare scientists may lead to the development of
more defensible animal welfare standards.
The Commission understands that the main way that community values will be taken into
account in the development of standards is through public consultation for the RIS (wherea RIS occurs). The Commission is not aware of any plans to undertake targeted surveys oradditional research to assess the benefits of animal welfare to the community.
Concerns about impartiality, transparency and accountability in the standards development
process are also raised in the animal law literature. Ellis (2010) raised concerns aboutsignificant input from bodies whose interests she described as ‘essentially antagonistic’ tothose of animals. Mundt (2015) (a legal representative for Animals Australia) suggested
that the involvement of industry in the development of standards (through their role asmembers of AHA) allows them to exert disproportionate influence.
Disproportionate industry influence in the standard setting process was also raised as aconcern by Animals Australia, which argued that this was an area in urgent need forreform:… particularly to remove the bias and inherent conflicts of interest that pervade animal welfare
standard-setting and enforcement regimes which are dominated by industry capture andgovernment agriculture department oversight. (sub. 53, p. 1)

It pointed to the newly endorsed sheep standards and guidelines as evidence of this —specifically, the failure of the process to endorse pain relief for lambs undergoingmulesing 16 as an enforceable standard (box 5.7). The RIS assessment of pain relief formulesing was that the net incremental welfare benefits did not justify the additional
compliance costs for farmers. This was based on the views of the standards referencegroup (now the stakeholder advisory group). A similar approach was used to balancecompliance costs against welfare benefits for other welfare measures in the sheep
standards, as well as in the cattle standards.
Compliance costs to industry are a critical consideration in any benefit–cost assessment.
However, these costs are only one element of a rigorous benefit–cost assessment. Also
relevant is the distribution of compliance costs, including the degree to which they can bepassed on through the supply chain, including to consumers (to determine who bears theburden of the costs). For example, the RIS for Tasmania’s restrictions on the use of sow
stalls stated that the sensitivity of demand to changes in the price of pork in Australia washigh (according to research from the Rural Industries Research and Development
16 Mulesing is the removal of wrinkled skin from the breech and/or tail of a sheep using mulesing shears.

Mulesing is used to reduce urine and faecal soiling or dag formation in the breech and tail wool tominimise susceptibility to flystrike (Tim Harding and Associates and Rivers Economic
Consulting 2014b).

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Corporation), which meant that pork producers would have limited capacity to pass costs
on to consumers without losing market share (Tasmanian Government 2013). Costs toindustry (reflected in lower demand from higher prices) need to be weighed against theintangible benefits to the community from improved animal welfare outcomes.
Box 5.7

Case study: the costs and benefits of changes to sheep
mulesing standards

The Regulation Impact Statement (RIS) for the Australian animal welfare standards andguidelines for sheep states that the most controversial issues raised when consulting on the
RIS were:•mulesing and other surgical procedures (such as castration and tail docking) without pain
relief•availability of water and provision of shelter•

methods of slaughtering sheep.

In 2004, the wool industry agreed that mulesing would be phased out by the end of 2010, andalthough this is still the longer term goal, there is no longer a fixed date. The Australian Wool
Innovation and the Australian Government have invested in researching alternative methods ofbreech flystrike prevention, which include breeding of resistant sheep, anti-fly strike clips,
intradermal injections and blow fly control.
The RIS states that ‘mulesing is a very painful procedure and involves a greater degree oftissue trauma than other surgical husbandry procedures such as castration or tail-docking’(p. 40). It refers to a 2007 study that found that lambs mulesed with no drug application
exhibited large increases in the stress-responsive hormone cortisol, reduced lying andincreased standing with a hunched back compared with unmulesed lambs. It further stated thatavailable scientific research suggests that it is possible to achieve pain relief (including by usinga spray application of Tri-Solfen) in conjunction with mulesing.
Under the base case of the RIS, 4.86 million lambs per year were estimated to be mulesed
without pain relief. The cost of using pain relief for these lambs was estimated to be $33 million
over ten years (or $0.45/sheep). The benefits of increased animal welfare outcomes were
attributed to the lambs but were unquantified. The RIS did not discuss the value to thecommunity from the increased level of sheep welfare. The RIS concluded that the netincremental welfare benefits for 4.86 million lambs per annum did not justify the additional
compliance costs for farmers. This assessment was based on the views of the standards
reference group meeting from December 2015. The reference group comprises representativesof 11 national livestock industry organisations (including those representing the livestocktransport industry, and production, saleyard, feedlot and processing sectors for sheep), twoanimal welfare organisations, representatives from the eight state and territory governments,
the Australian Government, and the Australian Veterinarian Association.
The preferred sheep standards in the RIS were endorsed by the Agriculture Ministers’ Forum in
January 2016. On 23 March 2016, the NSW Parliament passed a motion urging the state’s wool
producers to provide pain relief when mulesing sheep and to breed sheep that are lesssusceptible to fly strike. The motion called for the 20 per cent of wool producers who do not use
pain relief or breed more fly-strike resistant sheep to do so.
Sources: Animal Health Australia (2014b); Parliament of New South Wales (2016).

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Commenting on the sheep and cattle standards, the Animal Law Institute said that they
represent:
A retrograde step, as they make provisions such as being able to ‘reasonably’ strike, punch or
kick an animal, or throw or drop sheep from 1.5 metres or less. These ‘welfare’ requirements
may suit the agricultural industry, but we doubt these requirements represent practices
acceptable to the public, let alone welfare scientists without vested interests in the agriculturalindustry. (sub. DR213, p. 3)

And RSPCA Australia, commenting on how the standards are implemented, said that:
Even when a set of standards have been finalised by stakeholder reference committees andendorsed for implementation by state and territory agriculture ministers, political lobbying byindustry groups can nevertheless result in last minute changes … This is a reflection of the factthat state agriculture departments and ministers are especially susceptible to influence fromstate farming organisations and this raises broader questions regarding the governancearrangements for the development of animal welfare policy and standards. (sub. 31, p. 5)

Assessing community attitudes and values for farm animal welfare
The extent of improvements in animal welfare from changes in standards and the benefits
derived by the community are not easy to quantify. An element of judgment is required.
Judgments should be informed by a transparent process that identifies community values
and demonstrates how these values are balanced against costs to industry. This is acomplex task which requires independent analysis and robust techniques for testing
community values.
A number of participants suggested that further research was required to understandcommunity and consumer perceptions. For example, the National Farmers’ Federation(sub. DR216) said that the Australian Government should undertake research into
consumer perceptions and expectations of animal welfare to determine how animal welfare
outcomes could be improved and communicated. AHA (sub. DR250) proposed that
longitudinal research on community attitudes and values be undertaken to better
understand trends and genuine concerns about the humane treatment of animals. It said that
this research should be combined with community communication and education
campaigns to improve understanding of animal welfare in general and farming practice.
There are a number of methods that can be used to assess community attitudes to animal
welfare, including public consultation and surveys (box 5.8). In Europe, the Eurobarometeris used to gauge public opinion on a range of issues. A special 2016 Eurobarometer on
attitudes to animal welfare found that of those surveyed (approximately 1000 people ineach country), 94 per cent thought it was important to protect the welfare of farmed
animals and 82 per cent believed that the welfare of farmed animals should be better
protected (European Commission 2016).
One of the challenges of determining community values for the welfare of farm animals isthat views on animal welfare can be polarised and community attitudes can change over
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time, sometimes rapidly in response to revelations of incidents of mistreatment. As the AFI
said:
The challenge associated with this policy area lies in the development of structures that havethe capacity to deliver balanced outcomes over time, rather [than] responding to short-term or
political developments in a piece-meal and haphazard manner. (Potard 2015, p. vi)

Box 5.8

What do we know about community attitudes to farm animal
welfare?

A survey of Australians’ relationships with animals found that ‘52 per cent of respondents
thought that factory-farming methods of producing meat, eggs, and milk (which are becoming
dominant trends) were cruel’ (Franklin 2007, p. 19). The data comes from a survey of2000 representative Australians.
A 2012 study commissioned by the Victorian Government found that 23 per cent of Victorians
surveyed valued animal welfare highly, but had a relatively low level of trust that farmers would
address these issues without coercion (Parbery and Wilkinson 2012). Another Australian survey
found that:•

61 per cent of surveyed respondents thought that animals deserve some protection fromharm and exploitation but that it is appropriate to use them for the benefit of humans•

30 per cent thought that animals deserve the same rights as people to be free from harmand exploitation•

4 per cent thought that animals do not need much protection (EMC 2012).

The public consultation document supporting the welfare standards and guidelines for sheep
stated that 51 per cent of surveyed respondents did not agree that the standards would help toprotect the welfare of sheep, although the agreement ratings for individual standards were high.
A similar result was found for the consultations for the cattle standards (Animal Health
Australia 2014).
Research also shows that Australian consumers’ preferences for some products, such as
free-range eggs, are primarily driven by animal welfare concerns, but can also be influenced byother factors such as taste, health and price. Over the past decade, there has been an increasein the proportion of retail free-range eggs sold, from 15 per cent to 39 per cent (chapter 10).
Changes in standards in other developed nations and in Australia may also be indicative ofchanges in community expectations for animal welfare. For example, the ACT has passed
legislation to prohibit sow stall, farrowing crate and battery cage production practices. And
Tasmania has restricted use of sow stalls to 10 days within a reproductive cycle(TDPIPWE, sub. 62).

Perceptions of animal welfare can also be based on a lack of information about farming
practices, or misunderstanding of practices. Many people believe that animals should beallowed to lead natural lives by displaying their normal behaviour in a reasonably naturalenvironment. But as pointed out by research from the Animal Welfare Science Centre,
natural environments often contain hardships, such as climatic extremes, food shortages
and predators. Also, it is unclear what constitutes the natural environment for a domestic
hen given its long history of selective breeding. Scientific knowledge of design features of222

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animal housing from the perspective of animal welfare is also often poor (Hemsworth,
Coleman and Skuse 2014).
Some research shows that Australians have widely different views. An example is researchon what stocking density provides an acceptable level of welfare for free-range layer hens.
Research from CHOICE suggests that a very small proportion (two per cent) of free-range
egg buyers consider 10 000 hens per hectare to be acceptable. In contrast, researchcommissioned by the NSW Farmers’ Association suggests that 10 000 hens per hectare
meets or exceeds consumers’ expectations. The way in which research is undertaken,
including the way questions are posed, can significantly influence survey results(chapter 10 discusses some of the issues associated with the above surveys).
A 2009 study on tools to assess community attitudes and consumer responses to animal
welfare in the pork industry (funded by the Department of Agriculture and Australian Pork
Limited) found that attitudes do not predict meat purchasing behaviour to any major extent.
Rather, they predict other community behaviours (such as donating money to a welfareorganisation, signing petitions, or speaking to friends or family about a welfare issue) that
may affect government policy makers. The study noted that attitudes are more reliablepredictors of behaviour if based on knowledge and experience of farming practices. It
recommended that surveys include questions on these matters. It also recommended that,
because generic attitudes provide an indicator of trends in community values (and because
decision makers respond to these), general attitudes to welfare be monitored (including
through a large-scale survey conducted every few years) (Coleman 2009).
It is imperative that the community has confidence that research used to inform
policymaking is unbiased, credible and is conducted by qualified, independent researchers
using robust research methods. It is also essential that a broad spectrum of consumers andmembers of the community are able to participate in the process.
Ultimately, judgment about whether the benefits (value) to the community of changes inanimal welfare outweigh the costs is a matter for government. Some groups consider thatgovernment is not adequately fulfilling this role, mainly because advice to inform decision
making is provided by representatives from departments of primary industries, whose
principal objective is promoting the productivity of the agricultural sector.
Concerns about a conflict of interest in farm animal welfare regulation making
A number of participants expressed concern about a conflict of interest in the arrangements
for animal welfare regulation in Australia (Humane Society International, sub. DR253;
Law Society of South Australia, sub. DR181; PETA Australia, sub. DR109). The NSW
Young Lawyers Animal Law Committee said:
At both the federal and state and territory level, the regulation and governance of animal
protection has been delegated to government departments that possess a real or perceived
conflict of interest as they are also responsible for ensuring the profitability of the agricultural

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industry. This raises concerns that animal welfare laws are not being appropriately enforced.
(sub. DR284, p. 7)

And Animals Australia said that:… there is a serious misalignment between the regulations and the expectations of thecommunity in this regard. The root of this ‘misalignment’ lies in the inherent and untenableconflict of interest that exists within both the Commonwealth and state/territory Departments
responsible for agriculture — whereby the department charged with maximising the interests ofproducers is in most cases the same department charged with looking after the animal welfare
portfolio. (sub. 53, p. 1)

The independence of the project manager (AHA) for the standards and guidelines
development process was also questioned. The 2013 review considered the role of AHA to
be a strength of the process. In submissions, some industry groups and state governments
also supported AHA continuing to manage the standards development process (Australian
Chicken Growers Council, sub. DR149; Tasmanian Government, sub. DR245; Victorian
Farmers’ Federation, sub. DR189; WA Government, sub. DR285).
However, the 2013 review also noted concerns from animal welfare groups and somegovernment representatives that AHA as an organisation is more closely aligned withindustry positions, and therefore may not be sufficiently independent in the process.
Goodfellow, Tensen and Bradshaw (of RSPCA Australia) subsequently observed that thenature of the review’s conclusion is indicative of the ‘flawed approach taken to consultingwith stakeholders during the standards development process itself’ (2014, p. 45). (Thereview consulted 31 representatives of 20 livestock industry groups and four
representatives from animal welfare organisations.) They further stated that ‘in basing its
conclusion on the views of the “majority of stakeholders”, the concerns of animal welfare
stakeholders are simply overshadowed by those of the livestock industries’ (Goodfellow,
Tensen and Bradshaw 2014, p. 45).
Concerns about conflicts of interest are also expressed in the animal law literature.
McEwen (2011, p. 3) (from the Barristers Animal Welfare Panel), for example, contends
that federal and state departments of agriculture (as part of their involvement in thestandard and guideline setting process) are ‘standard bearers’ of producer interests and that
their conflict of interest in regulating animal welfare is patent.
There is the potential for a conflict of interest to arise where policy and regulatory
objectives conflict. Animal welfare is likely to be of secondary importance when the
primary objective of the agency responsible for livestock welfare is to promote a
productive and profitable agricultural sector.
Goodfellow (2016) looked at the perceived conflict of interest of state and federal
departments of agriculture in administering animal welfare law and argued thatmeasureable economic goals associated with productive and profitable primary industries
are prioritised over the more elusive, less determinate public interest animal welfare test.
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Overrepresentation of industry interests in the standards setting process, industry influence
over development of animal welfare science, and inadequate compliance and enforcement
were considered to be symptoms of this conflict.
In contrast, a 2015 review of the administration of the Animal Welfare Act 2002 (WA) wasstrongly of the view that the Minister for Agriculture and Food, assisted by the Departmentof Agriculture and Food, should remain responsible for administering and enforcing the
Act (Easton et al. 2015). To address any actual or perceived conflict of interest, the review
recommended that the department (and the RSPCA, which also has enforcement functions)ensure that inspection functions be separated from operational areas within theorganisations.
Representing the interests of the industry that a government department is tasked withaddressing is not of itself a concern, it is consistent with its objective. However, issues canarise when that department is also responsible for implementing a regulation that has
broader community interests that may conflict with those of the industry.
Risks from combining commercial and regulatory functions in the one entity have become
apparent in the greyhound racing industry. Recent reviews into the greyhound racing
industries in New South Wales, Victoria and Queensland found that the combination ofcommercial and regulatory functions in the one body has the potential to severelycompromise the integrity of the sport. The NSW Special Commission of Inquiry, chairedby the Honourable Michael McHugh AC QC, found that in New South Wales, thecommercial imperatives of the industry were given precedence by Greyhound Racing
NSW and that this issue could not be sufficiently overcome by improved governancewithin an entity that exercises both functions. The inquiry report recommended thecreation of a new statutory body, the NSW Greyhound Racing Integrity Commission,
which would have the role (amongst other things) of maintaining, protecting andenhancing animal welfare standards in greyhound racing (McHugh AC QC 2016).
The NSW Government banned greyhound racing due to a number of concerns, including
the animal welfare concerns identified in the report. However, it subsequently reversed theban and announced that the industry would be given one more opportunity to conform tohigher standards of animal welfare. Stricter new regulations have been announced. A panel
will determine the new regulatory regime, including the establishment of an independent
regulator with stronger powers to ensure transparency and accountability as well as
substantially increased resources for animal welfare enforcement and prosecution. Subject
to the panel’s recommendations, legislation to reverse the ban and introduce the new
regulatory regime is expected to be introduced in early 2017 (Baird 2016).
Concerns about the scientific evidence used to inform standards

Some participants claimed that there was biased selection of the science presented during
the process of standard setting, both from animal welfare groups and industry groups(Animals Australia, sub. 53; Australian Pork Limited, sub. DR282).
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Others questioned the validity of scientific studies funded by industry (Animal Law
Institute, sub. DR213; Edgar’s Mission sub. DR145). Animals Australia (sub. 53) referred
to a research paper from the University of Queensland which questioned the conclusions
drawn from a scientific assessment of the welfare effects of time-off feed for bobby calvesduring transport (box 5.9). Other examples were provided by the Australian Veterinary
Association.
[T]he current standard for tail docking in sheep permits short tail docking, whereas the science
indicates that short-tail docking leads to negative outcomes such as vulval cancer, rectal
prolapse, and increased fly strike risk. Similarly standards which require pain control during
procedures such as castration, tail docking and mulesing are currently set at 6 months of age insheep, however science shows these practices are very painful at the much younger ages whenthese procedures are typically performed. These are lost opportunities to improve animal
welfare standards over and above current practice. (sub. DR167, p. 3)

Box 5.9

Time-off feed for bobby calves

A paper assessing the evidence base used to inform farm animal welfare standards identified
instances where research conclusions appear to be unfounded based on the evidence. One of
the examples is a critique of research undertaken on the welfare effects of time-off feed forbobby calves (bobby calves are surplus dairy calves, usually male, that are slaughtered within a
few days of birth). The research concluded that 30 hours for time-off feed is defensible as anouter ‘legal’ limit. Phillips and Petherick (2015) claimed that this observation was made on thebasis that most of the measures were within reference ranges, even though plasma glucose
concentrations for some calves were reduced to below the lower limit of the reference range at
30 hours. Also, no direct measures of stress (e.g. cortisol) were considered in the research(Phillips and Petherick 2015).
Animals Australia (sub. 53) claimed that the research was based on a sample of 60 calves froma single well-run farm, where the operators were aware of the study and the need to provide
adequate colostrum, good shelter and accommodation and feed prior to the study. Similarly,
Jan Kendall (sub. DR106, attachment 1) suggested that the science used to inform the standard
was misleading as it was conditional on the assumption of good practice in other areas of calf
management, which cannot be assumed to occur.
Industries involved in the bobby calf supply chain have subsequently agreed to implement anational industry standard for time-off feed of 30 hours for calves aged between 5 and 30 days
being transported without mothers.

It suggested that the assessment of animal welfare benefits in regulatory impact
assessments could be improved if performed by people with animal welfare science
expertise, as they are better able to assist in the interpretation of the literature. To illustrate
this point, it noted that science based on a single measure, such as blood cortisol levels, cansometimes be equivocal when trying to assess animal welfare, and viewed in isolation,
papers based on these sorts of findings can be misleading. Animal welfare behaviouralindicators can be more important but are sometimes overlooked.

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In this vein, the Animal Welfare Science Centre notes that scientists’ views differ on how
animal welfare should be measured or judged, with three prominent concepts of animal
welfare in the literature. The welfare of animals is judged on the basis of:•

how well the animal is performing from a biological functioning perspective•

affective states, such as suffering, pain and other feelings or emotions•

the expression of normal or ‘natural’ behaviours.

The differences in concepts of animal welfare within science lead to differences in themethodology used by scientists to assess animal welfare under different husbandry or
housing practices (Barnett and Hemsworth 2009). A research program to further
understanding the relationships between these concepts and methodologies is being
conducted by the Animal Welfare Science Centre (2016).
Large gaps in the scientific literature on animal welfare were acknowledged in the 2013
review, although specific examples were not identified. The review stated that stakeholders
differed strongly on whether the appropriate science was being used in the development of
the standards and that often — but not exclusively — conflict arose where there was a lackof science based literature to support claims. The review report suggested that resources
needed to be invested in further research.
Similarly, AHA (sub. DR250) suggested that the standard setting process would be
improved by establishing an independent animal welfare scientific advisory body (fundedby the Australian Government) to provide advice on animal welfare science and values, tofeed into the standards and guidelines process.
Australian Pork Limited (sub. DR282) also agreed that a more independent process wasneeded for reviewing the science presented and determining what science is relevant to thestandards process.
And Professors Paul Hemsworth and Grahame Coleman from the Animal Welfare ScienceCentre (sub. 87) recommended that an independent, expert and well-respected advisorycommittee be established to provide factual advice to the community and major
stakeholders on science, philosophy and practices around food and fibre production(including animal welfare, environmental and food safety issues). This step was considerednecessary for achieving a well-informed community and to facilitate rational discussions
around food and fibre.

5.5

Improving the effectiveness of farm animal welfare
regulation

There is significant scope for greater rigour in the process of developing national farmanimal welfare standards and guidelines. And importantly, for science and (soundly
elicited) community values to play a more prominent role. Without reform, there is a risk
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that the agricultural sector and the Australian community will continue to face a patchworkof different regulatory arrangements across jurisdictions that do not rigorously take into
account economic and social considerations.
There are three areas where farm animal welfare regulation could be improved.
•

The objective of the national standards and guidelines needs to be clearer.

•Standards and guidelines should be evidence-based, drawing on independent andcredible evidence on animal welfare science and research on community values foranimal welfare. This evidence should also be used in RIS processes.

•

There needs to be more independence in the standards development process so thatoutcomes are not overly influenced by the views of any one group, either industry or
animal welfare groups. Judgments made to balance conflicting considerations should betransparent and apply rigorous scientific principles. Surveys of community values foranimal welfare should be statistically robust and transparent.

The Commission considered three options:
1. setting up an independent animal welfare science and community ethics advisory bodyto provide advice on animal welfare science and community values for animal welfare.
(This option does not involve any other changes to the institutional arrangements
described above for developing the standards and guidelines, which would remain at
the state and territory level.)
2. creating an independent animal welfare body at the Australian government level — thebody would be responsible for the development of national standards and guidelines,
including the management of all inputs to the process
3. Australian Government responsibility for livestock welfare regulation.
These options are not mutually exclusive. The merits and feasibility of each option are
discussed below.

Option 1: An independent national animal welfare science andcommunity ethics advisory body
Scientific evidence and community values are critical to decisions about animal welfare
and need to be embedded in the process for developing standards and guidelines. But as
outlined above, there are large gaps in the scientific evidence base used to informstandards, both in relation to animal welfare science and community values.
An independent animal welfare science and community ethics advisory body would help tobuild a better evidence base on the effects of various animal management practices and on
what community values are in the area of animal welfare. The advisory body could:•

228

review the existing scientific research on farm animal welfare (and undertake orcommission additional research where knowledge gaps are identified)
REGULATION OF AUSTRALIAN AGRICULTURE

•

communicate scientifically-based information in an accessible form to the community
about best-practice livestock farm animal husbandry practices and contemporary
animal welfare science — well informed members of the community are better able toexpress a view on the value they place on animal welfare•

review the literature on community views, and manage public consultation processes(including, for example, regular public attitudes surveys) aimed at determining
community values for livestock welfare. Challenges in this area include ensuring
people’s views about welfare take into account their willingness to pay for it, and that
their views are based on accurate information on the actual, rather than perceived,
welfare impacts of farming practices•

provide advice to the standards and guidelines project manager (as part of the project
manager’s role in managing the RIS assessment) and resolve conflicts to determine
which scientific literature is most applicable to the relevant standard•

coordinate research and data collection across jurisdictions.

Because there is some uncertainty about the science of animal welfare, policy makers needcredible information about the extent of scientific uncertainty. And, because there aretrade-offs with achieving different animal welfare outcomes, it is important to know how
the community values different outcomes. Building this knowledge base would be the roleof the community ethics component of the body.
While public consultation is essential for a rigorous RIS process, consultation solely
through submissions is unlikely to be sufficient to balance the sharp differences in views of
stakeholders who are likely to engage in the RIS process. More rigorous and participatory
consultation and evidence gathering approaches are needed to understand what is generally
acceptable to the community. This could include targeted public forums and community
attitudes and consumer surveys.
The science and community ethics body should be made up of a number of experts,
including in the fields of animal welfare science, consumer behaviour and social science
research. It would need to be sufficiently resourced so that it could commission research
for identified gaps in the scientific and social science literature. Expertise in public
consultation, including survey design, would also be required.
The Farm Animal Welfare Committee in the United Kingdom is an example of a body thatwas established to provide independent advice (including scientific advice) andrecommendations to government on the welfare of farmed animals and advice on
legislative (or other) changes that might be considered to improve standards of animal
welfare (FAWC 2016). In Australia, state and territory governments also have animal
welfare advisory committees to provide advice on animal welfare matters. The governancestructures of the committees vary by jurisdiction and include statutory bodies as well as
non-statutory committees and offices.

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An advisory body, however, would not address concerns about a conflict of interest in
project management and decision-making for standards and guidelines. Nor would it
necessarily guarantee that this evidence is appropriately balanced against economic
considerations — that is, the effects on industry from different welfare options. These
trade-offs are usually considered within a RIS assessment — a RIS aims to identify the
option that provides the highest net benefits to the community as a whole, balancing
economic and social considerations. The value of independent and credible animal welfare
science and research on community ethics will be undermined if the RIS process is not
performed rigorously and if final decisions are not made transparently and in the interestsof the community as a whole.

Option 2: An independent body that develops national standards andguidelines
The independent animal welfare advisory body could also develop the farm animal welfare
standards and guidelines. It would need to be clear that its objective is to balance thebenefits of animal welfare outcomes against the costs of achieving those outcomes, withthe ultimate aim of providing net benefits to the community as a whole.
The proposal to establish an independent animal welfare body at the Australian
government level is not a new idea.
•

In July 2013, the Australian Government announced that it planned to establish an
independent office of animal welfare and an inspector general for animal welfare.
However, in October 2013, following a change of government, the Minister for
Agriculture announced that the government would not proceed with the establishmentof the independent office or inspector general.

•

In June 2015, the Australian Greens introduced a Bill to establish an independent officeof animal welfare. The Bill (and subsequent proposed amendments) proposed that an
independent statutory body, supported by an advisory committee, be established. The
proposed advisory committee was to have responsibility (among other things) for
commissioning independent animal welfare science to support the development of
national standards and guidelines. The Senate Rural and Regional Affairs andTransport Legislation Committee recommended that the bill not be passed(SRRATLC 2015a).

An independent animal welfare body could take a number of forms. It could be established
as a statutory body (similar to the approach that is used in New Zealand to develop animal
welfare codes (box 5.10). Alternatively, the body could be established as an office within adepartment, as is the case with the Office of the Gene Technology Regulator, which resides
within the Department of Health (chapter 6).

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Box 5.10

New Zealand National Animal Welfare Advisory Committee

The National Animal Welfare Advisory Committee is an independent statutory committee
established under New Zealand’s Animal Welfare Act 1999 to provide independent advice on
animal welfare to the Minister for Primary Industries, including on the welfare of animals in New
Zealand, research needs, codes of welfare, and legislative proposals. Codes of welfare form
part of the Act, and set minimum standards of care and management of animals as well asrecommend best practice above the minimum standards. Evidence of failure to meet minimum
standards in a code may be used to support prosecution under the Animal Welfare Act. There
are livestock welfare codes for: dairy cattle, layer hens, meat chickens, pigs, sheep and cattle,
commercial slaughter of animals, and transport of animals.

The structure of the Animal Welfare Advisory Committee
The committee is made up of a chairperson, the chairperson of the National Animal Ethics
Advisory Committee, and up to nine other members. Members are chosen for their expertise,knowledge and experience based on criteria set out in the Act. Current members havebackgrounds in: veterinary science and epidemiology; accountancy; the RNZSPCA; corporate
governance; agricultural economics; farming; and animal science.

Operation of the committee and guidelines on its operation
In 2015, the committee focused on eight priority areas, including to: advise the Minister on
options for addressing farrowing crates in the code and/or regulations; recommend a code of
welfare amendment for dairy cattle to the Minister; develop a position on shelter and/or
recommend regulations to maintain animal welfare in pastorally farmed livestock.
The Committee publishes guidelines on how it operates. This includes a guideline on howsociety’s ethical values, technical viewpoints and public opinions are taken into account. The
guideline states that there are three relevant dimensions in this regard.
•

To consider ethical values taking into account the evolution of attitudes towards animals.

•

Technical views on the physical, health and behavioural needs of animals and how they may
be met, which evolve over time partly in response to scientific knowledge and technology.

•

Society’s ethical values versus public opinion. The guideline makes a distinction between
ethical values and current public opinion, and states that public opinion may or may not be agood measure of a change in society’s ethical values. Ethical values relate to the generalthought in New Zealand society on what is or is not considered to be acceptable ways ofcaring for and managing animals.

The Committee states that it will reach its own decision on a draft code and will not formulate
codes by following international trends, industry demands or public opinion. Its ‘obligation is towork to improve animal welfare by rigorous evaluation of relevant science, practical experienceand good practice first, with economics, international trends and public ethical concerns
modulating that information. Economic considerations may constrain the speed of
implementation of a change the Committee desires, but cannot prevent it’ (NAWAC 2011, p. 1).
Source: New Zealand Ministry for Primary Industries (2016).

The benefits of establishing an independent body are that it would:•

provide greater independence in the standard development process, which would help
ensure that standards provide a net benefit to the community

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•

address concerns about potential conflicts of interest, particularly if the body was atarm’s length from DAWR•

enable trade-offs between competing interests and objectives to be made more
independently•

enable farm animal welfare regulation to be proactive, rather than reactive to incidentsof mistreatment.

There was strong support in submissions for establishing an independent body to develop
farm animal welfare standards (box 5.11). The Commission also received over 1200 brief
submissions from individuals who advocated for the establishment of an independent bodyfor animal welfare. However, some industry groups and state governments opposed theidea of an independent body, although they acknowledged the lack of evidence oncommunity values for farm animal welfare and the need for scientific principles andevidence-based policy to guide the development of standards. There was a concern that an
independent body would lead to an increase in the regulatory burden on farm businesses.
An independent body would not result in a duplication of current regulatory processes ornecessarily result in an increase in regulation. The independent body would replace (andimprove upon) the national structure (described earlier in this chapter) that is already inplace for developing standards and guidelines. Importantly, it would be an advisory body,not a regulatory body.
The main costs with establishing an independent body are the administrative costs ofoperation. However, a well-designed independent body need not be more expensive thanthe current arrangements, and could deliver cost savings over time by providing greater
clarity on farm animal welfare issues and by reducing the likelihood that regulations will
be hastily implemented in response to intense public reaction to revelations of
mistreatment.
Currently there is government funding for a number of farm animal welfare advisory andregulatory activities and some of this may not be required if an independent body isestablished. The current standards and guidelines development process is funded on a
one-third-each basis by the Australian Government, state and territory governments, andrelevant industry groups. There are also animal welfare advisory bodies in most states andterritories. And government funding is provided for farm animal welfare research (forexample, through rural research and development corporations). To minimise costs, thebody could operate under a shared corporate services arrangement with another body or
government department.
If the body only has responsibility for developing standards and guidelines, it will not beable to address inconsistency in the implementation (and enforcement) of the standards bystate and territory governments. This issue could be partially addressed by giving the body
responsibility for reviewing progress in implementing (and enforcing) standards andidentifying opportunities for further harmonisation.

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Box 5.11

Participant views on an independent animal welfare body

Many participants supported the establishment of an independent body. For example:
It is our strong view therefore that in the absence of national leadership, an Independent Office ofAnimal Welfare is needed to monitor, investigate and be able to make recommendations togovernment regarding matters impacting on animal welfare across all areas of animal use (not only
farmed animals). (Animals Australia, sub. 53, p. 10)[Animal Law Institute] strongly agrees with the Commission’s recommendation that the AustralianGovernment should establish an independent body with responsibility for animal welfare matters …
[Animal Law Institute] is supportive of the view that the proposed independent body be involved withestablishing standards that operate in conjunction with the State and Territory anti-cruelty legislation.
However, ALI does not think that the independent body should be involved in enforcement ... (Animal
Law Institute, sub. DR213, p. 3)
The Society supports Draft Recommendation 5.1 which outlines that the Australian Government shouldtake responsibility for ensuring that scientific principles guide the development of farm animal welfare
standards. To achieve this, an independent body tasked with developing national standards andguidelines should be established. (The Law Society of South Australia, sub. DR181, p. 2)
The CPSU supports the creation of an independent Commonwealth entity tasked with developing
national standards and guidelines for farm animal welfare … The body should include representation ofregulatory bodies and other industry stakeholders, be independent from industry, and be fully financed
by government. (Community and Public Sector Union, sub. DR204, p. 1)

Many individuals and other animal welfare and rights groups and other organisations also
supported an independent body (see Animal Welfare Brief Submissions 1 and 2; Animal Justice
Party, sub. DR112; Animal Liberation, sub. DR143; Animal Welfare League of Queensland,
sub. DR238; Edgar’s Mission, sub. DR145; Environmental Farmers Network, sub. DR174;
Humane Society International, sub. DR253; Lawyers for Animals, sub. DR153; NSW Young
Lawyers Animal Law Committee, sub. DR284; Peri Urban Group of Rural Councils,
sub. DR220; People for the Ethical Treatment of Animals Australia, sub. DR109; RSPCA
Australia, sub. DR223; Voiceless, sub. DR166; Vegan Australia, sub. DR115; Vets Against Live
Exports, sub. DR199).
A number of industry groups and state governments opposed the idea of an independent body
(Animal Health Australia, sub. DR250; Australian Livestock Exporters’ Council, sub. DR305;
Livestock SA, sub. DR303; National Farmers’ Federation, sub. DR216; Sheepmeat Council ofAustralia, sub. DR245; Tasmanian Government, sub. DR287; Western Australian Government,
sub. DR285; Wool Producers Australia, sub. DR237).
CCA appreciates that there is a leadership void that currently exists at the Federal Government level.
However, the proposed establishment of an Independent Office will not satisfactorily alleviate this void,as the new bureau would have a high probability of imposing additional bureaucratic processes andrelated costs. These extra impositions would not produce effective outcomes and would appear
contrary to the Commission’s Terms of Reference for this Inquiry, by increasing the burden of
unnecessary costs on producers. (Cattle Council of Australia, sub. DR290, p. 3)
ADF does not support the assertion that community expectations about animal welfare are not being
met … There is no market failure justifying the establishment of a new statutory body with new
functions. The proposal for establishing a new independent body/agency is counter to the AustralianGovernment’s policy of reducing red tape and is not supported by ADF. (Australian Dairy Farmers,sub. DR218, p. 3)
The Commission’s recommendations in this section of the report represent a significant shift fromcurrent Commonwealth-State responsibilities and it is not clear they have a feasible constitutional
basis to actually advance this matter, or could be implemented in a way that is materially different fromthe status quo. (Department of Agriculture and Water Resources, sub. DR183, p. 4)

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Also, if the body sat outside DAWR (such as in the Attorney General’s portfolio, assuggested by some participants, including Animals Australia, sub. DR268; Animal Law
Institute, sub. DR213; Lawyers for Animals, sub. DR153), some livestock welfare
expertise and synergies with the agriculture portfolio’s other areas of responsibility, suchas biosecurity and advances in livestock industry practices, could be lost.
In the Commission’s view, an independent body is the best option for delivering balanced
farm animal welfare standards and outcomes over time, both for the benefit of theAustralian community but also for the agriculture sector. It would enable regulation to be
more proactive — rather than reactive to reports of incidents of mistreatment — which will
help ensure the long-term sustainability of the agriculture sector.
Ensuring the body has a clear statement of objectives will help ensure that standards andguidelines are set with the ultimate objective of providing net benefits to the community as
a whole. The body could prioritise issues and focus on the development of standards andguidelines in the areas where market forces and industry incentives are insufficient toachieve a level of welfare that is generally acceptable to the community.
The body would also include animal science and community ethics advisory committees
with clear and effective processes in place for assessing (to the extent possible) community
values for different livestock welfare outcomes. The body would use this information tobalance economic and social considerations and provide information to the community andindustry on best-practice animal husbandry practices.

Option 3: Australian Government responsibility for farm animal welfare
The key difference between the Australian Government assuming responsibility for farmanimal welfare and the options outlined above is that the Australian Government would
design and implement the regulations and enforce the national arrangements.
Under this option, producers would only have to comply with one set of arrangements.
Consumers and the community more broadly would also benefit knowing that agricultural
products in Australia are produced with the same level of, and compliance with, welfare
standards. However, the Australian government being responsible for monitoring andenforcement activities is likely to be less efficient than state and territory monitoring andenforcement. This is because states and territories can shift monitoring and enforcement
resources between various related functions (such as animal health, biosecurity and wild
animal control) as circumstances change. State and territory governments also have a better
understanding of the issues affecting their jurisdiction and agricultural sectors.
That said, a nationally consistent enforcement approach would not necessarily require
Australian Government officers. States and territories (and local government where
relevant) could retain farm animal welfare monitoring and enforcement functions based ona national approach. This would be similar to food regulation in Australia, where FoodStandards Australia New Zealand (a statutory body) is responsible for the standards and an
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intergovernmental agreement between the Commonwealth and states and territories
establishes that states and territories adopt and enforce these standards (chapter 10).
A number of participants supported this option. For example, the Law Society of South
Australia said:… only the Commonwealth Government has the resources needed to fund national animal
welfare standards and this, coupled with a national statutory authority to enforce such standards(save those subject to State jurisdiction such as companion animals owned by individuals)
would be the best and most effective way of proceeding to appropriately regulate the area.
A similar case was made for the protections of the environment with the creation of theEnvironment Protection and Biodiversity Conservation Act 1999. It is arguable that the power
to make laws that govern animal welfare at the Federal level can be derived from, inter alia, thetrade and commerce power or the Corporations power. (sub. 44, p. 11)

The Australian Chicken Meat Federation also said:
The ACMF believes that, not only is the current state-based approach inefficient, but that there
needs to be strong national leadership in this particular area. For this reason, we strongly favour
the concept of regulatory responsibility for domestic production animal welfare reverting to the
Commonwealth Government, rather than being regulated at a jurisdictional level. (sub. 40, p. 6)

The Australian Chicken Meat Federation further stated that, in the absence of Australian
government responsibility for regulation of livestock welfare, it supported strong national
leadership, and nationally consistent legislation with respect to animal welfare. The
Australian Chicken Growers’ Council (sub. 51) expressed a similar view.
The South Australian Government also commented that:
The current regulatory system would benefit from greater leadership by the AustralianGovernment in steering animal welfare policy and legislation beyond livestock export andquarantine. (sub. 57, p. 6)

And the AFI (2015) favoured the establishment of national farm animal welfare legislation(which would also establish a national enforcement system), supported by a farm animal
welfare advisory council to provide advice and recommendations to government (including
in relation to national livestock standards) (box 5.12).
While this option could provide benefits in terms of national consistency and more timely
development and implementation of welfare standards, it raises issues about the division ofroles and responsibilities between the Australian and state and territory governments. As aresult, there may be constraints on the Australian Government’s ability to act unilaterally
in this area, meaning that agreement between the Australian and state and territory
governments would be required.

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Box 5.12

Australian Farm Institute’s proposal for national legislation

The Australian Farm Institute described the current farm animal welfare policy system inAustralia as:… out-dated, unwieldy, and unable to address urgent emerging challenges effectively. … standards
are being established in different ways in different production sectors, and they also differ amongstates, and it seems that decisions which impact on farm animal welfare are being made by people
without appropriate education and background. (Potard 2015, p. 74)

It proposed national legislation to replace the existing fragmented state legislation. The
proposed ‘National Farm Animal Welfare Act’ would focus on farm animal welfare and would:•

outline the guiding principles for farm animal welfare consistent with international standards•

set up a process for writing and updating the standards and guidelines (to be appliedconsistently across states and across different farm sectors)•

establish an advisory council and relevant committees and implement an enforcement
system based on national standards and guidelines.

The Australian Farm Institute proposed that the independent farm animal advisory council
would have the role of scrutinising and formally recommending farm animal welfare standards
and guidelines to the government for adoption, and overseeing the revision of them as new
information becomes available. The importance of having a council independent of the (then)Department of Agriculture was noted, due to the complexity of some of the issues associatedwith farm animal welfare.
The Institute proposed two advisory committees to support the council — a scientific advisorycommittee (to prepare a review of the latest scientific information related to the welfare of theanimal(s) affected by the standard being reviewed) and an ethics advisory committee.
Source: Potard (2015).

Summing up
On balance, the Commission considers that the best option is to establish an independent
body (option 2) — the Australian Commission for Animal Welfare (ACAW) — withresponsibility for developing national standards and guidelines. The ACAW should be
responsible for managing the RIS for the standards, using good-practice regulatory impact
assessment processes (PC 2012c), informed by independent and sound science on animal
welfare and community values. Industry and animal welfare organisations would provide
input through the RIS and other public consultation processes. The standards andguidelines developed by the independent body would be implemented by state and territory
governments (with little or no variation unless required to meet clearly defined local
circumstances). Compliance functions would remain with state and territory governments,
although there is scope to improve these arrangements (discussed in the following section).
The ACAW should also be responsible for independently assessing the effectiveness of theimplementation (including enforcement) of the standards by state and territory
governments (section 5.5), and the live export regulatory system (section 5.6).

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Functions and governance of the ACAWThe Commission proposes that the ACAW be a stand-alone statutory organisation, with its
functions and membership requirements specified in a separate Act of Parliament. This
will help ensure the actual and perceived independence of the ACAW and would also
provide relative stability given the difficulties in abolishing independent organisations.
The ACAW should be set up to develop farm animal welfare standards that provide thehighest net benefits to the community, and to disseminate information to the community
and industry on farm animal welfare. It should do this by rigorously and transparently
balancing independent scientific evidence on animal welfare, community values and costs
to industry.
The functions of the ACAW should include:•

determining if new standards for farm animal welfare are required, and if so, to develop
and publish the standards, for implementation by state and territory governments•

publicly assessing the efficiency and effectiveness of the implementation andenforcement of farm animal welfare standards by state and territory governments•

conducting and publishing regular reviews of the effectiveness of the live export
regulatory system and making recommendations to improve the system to theAustralian Government Minister for Agriculture•

identifying areas where animal welfare research is required, and commissioning
research where necessary•

promoting public understanding of farm animal welfare issues and disseminating
information on best-practice animal husbandry practices.

The ACAW should be made-up of no more than five members, including a Chair,appointed for terms of five years with the option of reappointment. Members would be
appointed by the Australian Government following consultation with state and territory
governments. It is essential that members of the ACAW be appointed on the basis of skills
and experience, not as current representatives of a particular agriculture sector,
organisation or group. This would help assure the community that members have noconflicts of interests and avoid politicisation of the body. Collectively, the members of the
ACAW should have skills and experience in the areas of:•animal welfare science and veterinary science•

agricultural science and commercial livestock production•

public policy, law and economics•

ethical standards and conduct with respect to farm animals.

The ACAW would be responsible for establishing the advisory committees on animal
welfare science and community ethics, with each committee consisting of at least two
members of the body. It should also be required to adopt good-practice consultation
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processes, including public submissions and surveys, and could convene targeted andtime-limited stakeholder advisory groups to elicit input from specific industry andconsumer groups.
The ACAW should be funded by Commonwealth and state and territory governments, notfrom industry or animal groups. This would help to ensure that the body is not unduly
influenced by the positions of particular stakeholders.
The Australian Government should take responsibility for establishing the ACAW, and indoing so should consult with state and territory governments. Intergovernmental
cooperation could occur through the Agriculture Ministers forum and/or could be outlined
in an intergovernmental agreement. The Commission notes that there are various instanceswhere the Australian and state and territory governments have worked cooperatively toestablish national processes and national regulatory bodies in other areas, such as for the
regulation of food safety, agricultural and veterinary chemicals, and consumer protection.
A similar approach could be taken for farm animal welfare.

RECOMMENDATION 5.1

To facilitate greater rigour in the process for developing national farm animal welfare
standards, the Australian Government should take responsibility for ensuring thatscientific principles guide the development of farm animal welfare standards. To dothis, a stand-alone statutory organisation — the Australian Commission for Animal
Welfare (ACAW) — should be established. The functions of ACAW should include:•

determining if new standards for farm animal welfare are required, and if so, todevelop the standards using good-practice public consultation and regulatory
impact assessment processes•

publicly assessing the efficiency and effectiveness of the implementation andenforcement of farm animal welfare standards by state and territory governments•

publicly assessing the efficiency and effectiveness of the livestock export
regulatory system and making recommendations to improve the system to theAustralian Government Minister for Agriculture.

ACAW should comprise no more than five members (including a Chair) appointed by
the Australian Government following consultation with state and territory governments.
Members should be appointed on the basis of skills and experience, not as
representatives of a particular industry, organisation or group.
It should also include animal science and community ethics advisory committees toprovide independent, evidence-based advice on animal welfare science andcommunity values.

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An outcomes-based approach for national standards?
A more outcomes-based approach to the development of national standards and guidelines
could play a greater role in farm animal welfare regulation than prescriptive standards. An
outcomes-based approach could focus on ways of measuring livestock welfare, and could
be used for measuring compliance. Grandin (2014), for example, identified a number ofnumerical scores that could be used to determine whether handling and stunning practices
during the slaughter process were improving or deteriorating. The scores included thepercentage of animals that are rendered insensible with one captive bolt or gunshot,
vocalise and/or fall during handling, and are moved with electric prods.
The OIE Terrestrial Animal Health Code (article 7.3.8) encourages the use of performancestandards. For example, it states that for the loading of animals, ‘performance standards
should be established in which numerical scoring is used to evaluate the use of such
instruments [goads and other aids], and to measure the percentage of animals moved with
an electric instrument and the percentage of animals slipping or falling as a result of theirusage’.
Outcomes-based regulation gives livestock producers flexibility in terms of the production
process and practices they use (such as housing systems and livestock handling aids) toachieve welfare objectives. However, this approach is less appropriate where outcomes are
not easily observed and measured, or where there is only one way of achieving a regulatory
objective. In these cases, a combination of input-based and output-based measures may be
preferable, as noted by the Australian Veterinary Association.
The best animal welfare outcomes are achieved through a combination of input-based andoutput-based measures. Welfare inputs such as space requirements provide measurable criteria
for objective assessment of the conditions under which animals are being farmed, consistencyfrom one operation to another and certainty to farmers as to what conditions they must provide.
Output based measures such as health, productivity, and behavioural indices help to inform us
how animals are coping with their environment. Inputs are sometimes easier to monitor from acompliance perspective so a combination of the two is preferred. (sub. DR167, p. 4)

Governments may also choose to prohibit certain practices where these are considered
unacceptable to the general community. Some farm businesses may also sometimes preferprescriptive arrangements because they provide greater certainty about their regulatory
obligations.

The role of public funding to improve farm animal welfare
Under the options outlined above, relevant governments could retain responsibility forproviding any public funding to support the transition to different welfare standards (wherethese are assessed as providing net benefits to the community). Public funding could be
provided in a number of ways, including through support for scientific research on animal
welfare (such as through research grants, and funding through Rural Research andDevelopment Corporations (chapter 6)). Producers could also be supported to meet one-off
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costs associated with a transition to a new production practice. For example, in 2013, theTasmanian Government provided $500 000 to assist producers in converting theirinfrastructure and to transition away from the use of sow stalls during gestation(Tasmanian Government 2013). However, subsidies can disadvantage producers who havealready invested to achieve higher animal welfare outcomes. They can also discourage
further voluntary development of production methods that achieve higher welfare
outcomes, and which can be marketed to obtain a higher price. 17

Monitoring and enforcement of livestock welfare regulation
Effective regulation includes incentives for regulated entities to comply with regulation.
No matter how well designed, regulations will not achieve their objective if those that are
regulated do not comply or if the standards are not able to be effectively enforced. The
effectiveness of monitoring and enforcement arrangements is influenced by whether
non-compliance is able to be detected and addressed, which is in turn influenced by the
resources and skill sets available to regulators.
Transparent and effective monitoring and enforcement functions are needed to assure thecommunity that regulatory objectives are being achieved. But aiming for 100 per centcompliance is unrealistic as there are costs associated with monitoring and enforcement.
Publicly available information on the compliance activities of state and territory
government agencies responsible for farm animal welfare is limited. This makes it difficult
to assess the extent of compliance with welfare standards. State and territory governments
generally share responsibility for livestock welfare inspection activities with the RSPCA,
although the RSPCA’s responsibility is limited with respect to livestock in some instances(box 5.13). State and territory food safety authorities are also responsible for animal
welfare regulations at meat processing facilities (such as abattoirs). And as noted above,
local governments are also responsible for some areas of farm animal welfare, such as
cattle at large and in saleyards owned and run by local councils. And local government
officers and the police can be appointed as inspectors under state animal welfare
legislation.
Concerns were raised about the level of monitoring and enforcement of farm animal
welfare standards. Vegan Australia (sub. 25) said that state and territory enforcement
agencies fail to enforce animal welfare regulations and even where regulation is enforced,
it is very rare for a perpetrator to be punished appropriately.

17 Harvey and Hubbard (2013) proposed the novel idea of a consumption subsidy for products that involve

higher animal welfare outcomes. However, it is hard to envisage how such a subsidy would be calibrated
and implemented in practice.

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Box 5.13

Responsibility for enforcement of farm animal welfare
regulation

Responsibility for enforcement and inspection activities in relation to livestock welfare is
generally shared between state and territory government agencies and the RSPCA. For
example:•in Queensland and Victoria, the RSPCA’s role relates to companion animals andnon-commercial farm animal welfare issues (Agriculture Victoria 2016b; Queensland
Government 2013a)•

in Western Australia, the Department of Agriculture and Forestry and the RSPCA are both
responsible for enforcement of farm animal welfare regulations. The RSPCA is responsible
for enforcement for both companion and farm animals, including ‘level three’ (serious)
commercial livestock matters. Funding to the RSPCA from the WA Government is for
enforcement of companion animal welfare issues only — this funding does not relate toinspections for animal cruelty cases relating to farm animals (RSPCA Western
Australia 2015)•

in New South Wales, the Department of Primary Industries is responsible for administering
the Prevention of Cruelty to Animals Act 1979 (NSW), but officers of the department do nothave powers of enforcement (NSW DPI 2016a). The enforcement agencies are the RSPCA,
the Animal Welfare League of NSW and the NSW Police•in South Australia, the Department of Environment, Water and Natural Resources is
primarily responsible for administering the Animal Welfare Act 1985 (SA). Enforcement isconducted by authorised RSPCA inspectors and, to a lesser extent, the SA Police (South
Australian Government, sub. DR295)•

in Tasmania, inspections are conducted by the Department of Primary Industries, Parks,
Water and Environment. RSPCA animal welfare officers are also authorised to inspectpremises where animals are kept for commercial purposes. Unannounced routine
inspections occur for intensive pig farms and poultry farms (TDPIPWE 2016a).

Animals Australia (sub. 53) suggested that in the main, the system of enforcement is reliant
on complaints. But as observed by the Law Society of South Australia (sub. 44),complaints are likely to be limited for intensive farming facilities as animals andoperations are usually in closed buildings or in remote areas. This makes it difficult formembers of the public to observe animal farming practices. It also stated that:
A series of requests by Animals Australia to state government animal welfare enforcement
officers to request details of any ‘routine’ or systematic compliance initiatives recently found it
varied significantly between the states — in NSW and Victoria for example there were no
current routine compliance monitoring systems related to animal welfare in place (other thanfor abattoirs), and only in Tasmania was ‘unannounced’ inspections the norm. (sub. 53, p. 12)

Animals Australia further stated that ‘discretion to prosecute chiefly resides withdepartments of agriculture/primary industry, which take into account factors relevant totheir role as facilitators of agribusiness’ (sub. 53, p. 14).
Similarly, RSPCA Australia (sub. 31 and DR223) considered that animal welfare
regulations are not appropriately enforced. It suggested that the most significant problem
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with enforcement is lack of funding, which it said was not reflective of the degree of public
interest involved in animal welfare. Also, funding from the states to the RSPCAs (throughannual grants) typically accounts for a small percentage of the various RSPCAs’ actual
enforcement expenditure.
The Law Society of South Australia (sub. 44) expressed a similar view. As did the
NSW Young Lawyers Animal Law Committee:… the RSCPA is not sufficiently resourced by the government to detect contraventions of, andenforce, animal welfare laws. As a result, the detection of contraventions of animal welfare law
has, in large part, been left to individuals and animal welfare groups. Had it not been for thework of these parties, illegal activities resulting in the abuse of animals would likely remain
undetected. The Committee considers that circumstances where individuals and charities are
required to take on the role of investigating and detecting contraventions indicate that there is asignificant deficiency in the enforcement of the law. (sub. DR284, p. 7)

RSPCA Australia (sub. DR223) also suggested that greater resources needed to be
dedicated to establishing formal routine inspections programs where government officers
inspect livestock and other animal facilities according to key animal welfare performanceindicators.
A challenge for animal welfare enforcement is that there are limited resources available.
The large number of reported animal welfare incidents relating to companion animals limit
the available resources for compliance activities in farming, particularly as some farming
occurs in vast geographical rural areas. That said, sufficient resources should be devoted toensuring compliance that is proportionate with regulatory objectives.
Commenting on the enforcement of livestock regulation, the Australian Veterinary
Association said:
A section of the public has lost its confidence in the power of government and non-government
agencies to adequately enforce existing legal protections for animals. Some animal welfare
advocates have felt compelled to take matters into their own hands. This situation isundesirable for a number of reasons, not the least of which is the potential for serious breaches
in biosecurity protocols and risks to the animals themselves from uncontrolled andunauthorised contact with animal welfare advocates. (2015, p. 3)

The 2015 review of the administration of the Animal Welfare Act 2002 (WA) in Western
Australia found that the Department of Agriculture and Food was ‘under-resourced todeliver a level of service to meet community and industry expectations’ (Easton etal. 2015, p. 3). The review found that livestock welfare investigations took priority overinspections, and that investigations were reactive not proactive due to resource constraints.
The review recommended that funding to the department be increased and that a process be
put in place for annual reporting of animal welfare activity by inspectors. The WA
Government supported the recommendations (Baston 2015).
Effective enforcement requires clearly defined and well understood criteria for breaches offarm animal welfare regulations and standards. The AFI (2015) claims that most states’
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REGULATION OF AUSTRALIAN AGRICULTUREcurrent enforcement frameworks are inherited from the past, when the regulators’ main
objective was to police cruel behaviour by individuals towards animals. The AFI also
considered that the current enforcement system (through prevention of cruelty legislation)
does not specialise in farm animal welfare issues, as reflected in most of the jurisprudence.
Under current state and territory animal cruelty legislation, it is not a legal requirement tocomply with all codes of practice (unless the code is mandatory), although compliancewith a code provides a defence to a person charged under relevant animal cruelty
legislation. The AFI (2015) suggested that most courts do not have a clear process to assess
issues of compliance with farm animal welfare standards and how this differs from cruelty.
Similarly, Ellis (2010) considered that the exemption of commercial livestock from state
animal welfare Acts means that there is an absence of Australian legal authority regarding
words such as ‘unnecessary’ in relation to animal cruelty provisions as they apply to
livestock. McEwen (2011) raised similar concerns.
Industry quality assurance systems as a complement to regulation
Industry quality assurance schemes can complement farm animal welfare regulation, forexample, where the scheme puts in place requirements that are higher than the minimum
standards prescribed by law. Where a quality assurance scheme has a clear and transparent
compliance framework and independent trained auditors, it could be used as a complement
to state and territory monitoring arrangements. Where the quality assurance system isdeveloped by a national industry group, it could also help to provide consistency where
there are different regulatory requirements at the state and territory level.
An example is the Australian Pork Industry Quality Assurance program for pig producers.
This program was approved as part of a co-regulatory arrangement in Victoria under theLivestock Management Act 2010 (Vic). The Australian Livestock Processing Industry
Animal Welfare Certification System is another example of an industry quality assurance
program. This system uses independent audits to demonstrate compliance with animal
welfare standards established by the Australian Meat Industry Council.
Co-regulation offers potential advantages over traditional regulation, including greater
flexibility and adaptability, lower compliance and administrative costs, ability to address
industry-specific and consumer issues directly, and quicker and lower-cost complaints
handling. And, as noted by AHA (sub. DR250), co-regulatory models can also empowerindustry enterprises to jointly manage regulatory and commercial requirements and allow
jurisdictions to redirect resources to areas of greater need.
However, co-regulation also has limitations. Adequate protection must be in place toensure that the arrangement is not captured by the industry for its own, rather than thecommunity, benefit (Hepburn 2006). The potential for co-regulation to involve conflicts ofinterests was raised as a concern by a number of submitters (Humane Society, sub. DR253;
RSPCA Australia, sub. DR223; World Animal Protection, sub. DR137). Animals Australia
said that a co-regulatory model for animal welfare ‘would require adequate accountability
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and oversight safeguards to ensure legitimacy, including mandatory reporting by auditorsof serious welfare issues’. And that ‘there are already legitimate community and welfare
group concerns … that industry [quality assurance] schemes are “in-house” and regularly
put the needs of industry above the welfare needs of individual animals’ (sub. 53, p. 14).
State and territory governments need to be sure that any industry quality assurance schemealigns (at a minimum) with the relevant farm animal welfare standards established in law.
External (independent) monitoring and auditing (potentially including unannounced
inspections by government regulators/inspectors) would be required to ensure that thescheme is achieving its objectives.
Other industry-led initiatives could also help to improve confidence in the community thatanimal welfare standards are being maintained. For example, some abattoirs in Australia
have installed closed circuit cameras to monitor animal welfare and worker safety.
Monitoring of video footage by third-party auditors may further increase community
confidence. And broadcasting video footage (for example, Ecoeggs’ ‘ChookCam’)provides information to consumers and the community about the production practices usedby producers. Slow Food Australia suggested that ‘if production methods were more open
to inspection by the public and if product information was more honest andstraightforward, the market would secure adjustments in animal welfare standards’ (subDR278, p. 3).
Third parties along the livestock supply chain could also play a role in helping to ensurecompliance with welfare standards. An example could be a requirement that stock agentsor managers of livestock saleyards report any breaches of welfare standards to the relevant
regulatory agency (which could be a local government as, in some cases, saleyards are
owned and operated by councils, which make local laws applicable to livestock welfare atsaleyards) (Harding and Rivers 2015). The use of drones could also reduce the costs
associated with monitoring animal welfare outcomes on large farms (chapter 6).
Greater transparency of monitoring and enforcement activities
The Commission is of the view that more transparent and effective monitoring andenforcement arrangements will help increase confidence within the community that farmanimal welfare standards are being met. Annual reporting by relevant regulators of thecompliance activities they undertake, including routine unannounced inspections, would
improve transparency.
Targeting monitoring and enforcement activities to areas of highest risk for farm animal
welfare, and to areas where there is significant community concern, could improve theoverall effectiveness of monitoring and enforcement arrangements, and help prioritise useof limited resources. Improvements could also be made by recognising industry quality
assurance schemes that (at a minimum) comply with mandatory farm animal welfare
standards and involve transparent compliance arrangements using independent auditing.

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To manage perceived (and potential) conflicts of interest, there should be independence
between farm animal policy functions and regulatory enforcement functions — both withinrelevant departments of agriculture and primary industries as well as the RSPCA.
Assessment and reporting on monitoring and enforcement activities by the independent
body (as discussed in the preceding section) would also help to increase transparency forthe community, and help to identify issues in the implementation of farm animal welfare
standards. This role could also be given to existing state animal welfare advisorycommittees.

RECOMMENDATION 5.2

State and territory governments should review, by the end of 2017, the way in which
their farm animal welfare regulations are monitored and enforced, and makenecessary changes so that:•

there is separation between agriculture policy matters and farm animal welfare
monitoring and enforcement functions•

a transparent process is in place for publicly reporting on monitoring andenforcement activities•

adequate resourcing is available to support an effective discharge of monitoringand enforcement activities.

State and territory governments should also consider recognising industry quality
assurance schemes as a means of demonstrating compliance with farm animal
welfare standards, provided that the scheme complies (at a minimum) with standards
in law, and involves independent and transparent auditing arrangements.

5.6

Live export regulation

Australia has a two-part system for regulating animal welfare for live exports.
•

The Australian Standards for the Export of Livestock regulate the welfare of animals
being prepared for live exports in Australia and during the voyage to the importing
country. These standards were introduced following the 2003 Cormo Express incident,
which involved the rejection of a boatload of Australian sheep by Saudi Arabia,
resulting in the vessel and sheep remaining in limbo for almost three months.

•

The Exporter Supply Chain Assurance System (ESCAS) regulates animal welfare forlive exports originating in Australia from arrival in the importing country to slaughter.

The ESCAS is based on four principles:•

animal handling and slaughter in the importing country consistent with OIE animal
welfare recommendations

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•

control through the supply chain by the exporter with all livestock remaining in the
supply chain•

traceability through the supply chain to, and including, slaughter•

independent auditing and reporting of the supply chain in the importing country.

The ESCAS was implemented in 2011 following public response to a news report by
ABC’s Four Corners program on the mistreatment of Australian animals in someIndonesian abattoirs (Four Corners, 30 May 2011). The (then) Minister for Agriculture,
Fisheries and Forestry suspended trade to Indonesia of cattle for slaughter. During thesuspension, new safeguards for animal welfare ― the ESCAS ― were designed. Trade toIndonesia resumed in August 2011, under the new ESCAS framework, and the ESCAS has
since been expanded to all destination markets for Australian live exports (although
Australia has not exported live animals to Saudi Arabia since August 2012 due to Saudi
Arabia’s concern that the implementation of the ESCAS would impinge upon its
sovereignty).
The ESCAS aims to ‘ensure that Australian livestock exported for feeder and slaughter
purposes are handled in accordance with international animal welfare standards and toprovide a mechanism to deal with animal welfare issues when they occur — preventing theneed for trade suspensions’ (Commonwealth of Australia 2015a, p. 2).

There is support for regulation of Australian live exports
There was general support from participants for the regulation of Australian livestockexport supply chains, although there were various suggestions for improvement to thesystem. Industry and animal welfare and animal rights organisations’ views on the tradealso differ considerably.
The NSW Farmers’ Association expressed support for the ESCAS:
We recognise that the community response to revelations in the live export industry created awidespread reaction from the public and that regulatory intervention to respond to this level of
public reaction was not inappropriate. (sub. 72, p. 26)

And the Australian Livestock Export Corporation (LiveCorp) observed that:… there has been widespread transformation across Australia’s markets and the involvement ofindustry and exporters in supply chains. The introduction of ESCAS immediately expanded the
responsibilities and expectations of livestock exporters into their overseas markets and set
minimum standards which needed to be achieved. The scope and nature of this legal obligationis unique in any international export context. (sub. DR300, p. 16)

Similarly, the Australian Livestock Exporters’ Council (sub. 78) said that ESCAS has
achieved its aim of regulating the export of livestock along the supply chain to provide agreater level of assurance of animal welfare. However, both the Australian Livestock

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Exporters’ Council and LiveCorp suggested that the benefits of the system are achieved
with significant costs and adjustment for the industry (discussed further below).
Participants did not want to see a return to the system prior to the introduction of the
ESCAS in 2011, although some proposed that live exports be banned or phased out andreplaced with a processed meat trade (Animals Australia, sub. 53; Humane SocietyInternational, sub. DR253; Lyndell Whyte, sub. DR180; Margaret A Clinch, sub. DR150;
Vets Against Live Export, sub. DR199; Vegan Australia, sub. 25). The Commission also
received a large number of brief submissions from individuals who proposed that live
exports be banned (Animal Welfare Brief Submissions 2). And there have been renewed
calls for a ban on live exports following reports of inappropriate handling and slaughter ofcattle at ESCAS facilities in Vietnam in June 2016.
A ban on live exports could lead to several outcomes, with different implications foranimal welfare. It is conceivable that Australian exports of refrigerated meat could replace
live exports over time. An economic analysis of live cattle exports by ACIL Tasmansuggested that in Indonesia the majority of growth in demand will come from a rising,affluent, urban middle class (this is consistent with the consumption pattern in mostdeveloping countries). Rising middle classes have preferences for higher quality meatproducts sold in convenient ways in modern retail outlets (ACIL Tasman 2012).
Australia is continuing to develop a significant trade in meat products, but a lack ofrefrigeration and cold chain facilities, as well as cultural preferences for freshlyslaughtered meat, could preclude Australia from servicing all of its export markets withprocessed meat products (DAWR 2015p), at least in the short to medium term. (Thissituation is likely to change over time as GDP and incomes grow and infrastructure andrefrigeration improves). Accordingly, there is a risk that a ban on live exports from
Australia would, in the short to medium term, induce increased livestock exports fromcountries with lower welfare regulations. So, perversely, a ban on live exports could
actually result in poorer animal welfare outcomes.
At the same time, if not designed and implemented well, any regulatory arrangement thatseeks to improve the welfare of Australian animals in export markets could unnecessarily
increase the costs of Australian live exports. If these costs cannot be absorbed by exporters
or passed through in final prices, there is a risk that buyers could substitute to exports fromcountries with lower animal welfare regulations.
An important policy question is whether regulatory arrangements can effectively manage
the welfare of Australian live exports without imposing costs that lead to a substitution toexports from other countries.
That said, if regulation is unable to effectively address the welfare risks for live exports(both during the voyage and in export supply chains), then the Australian Government
could still decide to prohibit the trade on ethical grounds if this aligns with the expectationsof the Australian community.

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Is the ESCAS meeting its objectives?
The ESCAS was introduced to meet the dual objectives of:•providing assurances to the Australian community that the welfare of animals exported
from Australia is maintained through to the point of slaughter in the importing country•

facilitating the livestock export trade so that exporters can increase market shareoverseas.

Commenting on the objectives of the ESCAS, LiveCorp said:… a significant gap in the current ESCAS regulation is the lack of a clear objective andguidance or principles for decision making/discretions and an overt recognition within the live
export laws of the regulator’s need to balance legitimate social and economic goals, and how
this should be achieved. (sub. 75, p. 23)

LiveCorp also said that without a legislated objective there is a perception that theregulator has primarily drawn its purpose from the discretion allocated to the Secretary
under the Export Control (Animals) Order 2004 — which sets out the ESCAS and is madeunder regulations to the Export Control Act 1982 (Cwth). However, such an approachprovides regulatory flexibility and enables rules to be more easily adapted to changing
circumstances. Regulatory guidance can be provided to help provide certainty to livestockexporters about how any regulatory discretion may be used. Indeed, guidance in the formof export advisory notices and guidelines has been developed that outlines the regulatory
requirements and compliance strategy underpinning the ESCAS (discussed further below).
Some evidence of improved welfare outcomes for live exports
In a 2015 Australian government review of the ESCAS, exporters and importing countries
were reported as saying that the ESCAS had led to greater efficiency in processing animals
at slaughter, as well as improved animal welfare outcomes. For example, a Philippines
importer was reported as noting that the ESCAS had improved staff knowledge andcontributed to the establishment of procedures for feedlot and meat processing facilities(Commonwealth of Australia 2015a).
The livestock export industry has also made substantial investments in infrastructure andtraining and systems to meet ESCAS requirements.
To support this expanded responsibility and obligation, the industry substantively invested andcommitted to training, systems, infrastructure and technologies to meet these animal welfare,control and traceability requirements. For example, this included extensive training in handlingand slaughter (over 10 000 people), the development and introduction of Standard Operating
Procedures to meet minimum standards (such as for confirmation of death or lack ofconsciousness), the installation of new and improved infrastructure such as restraint boxes,
crushes, races, stunning devices etc; and technologies and systems for control and traceability(including NLIS tag readers and CCTV). (LiveCorp, sub. DR300, p. 16)

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Animals Australia acknowledged that welfare for Australian live exports has improved
following the introduction of the ESCAS (sub. 53, attachment). While retaining its policy
position that live exports should be replaced by carcass-only trade, Animals Australia
suggested that some Australian exporters are now more proactive in securing improved
treatment of exported animals. It referred to Indonesia and the broad implementation ofstunning as an important example of this. Between July 2011 to September 2013, it isestimated that about 90 per cent of cattle exported to Indonesia were processed in facilities
that used pre-slaughter stunning (Commonwealth of Australia 2015a). Pre-slaughter
stunning was rarely used prior to 2011.
Despite these developments, some participants point to the number of ESCAS breaches(discussed below), as evidence of a failed regulatory system and an industry that has lostits social license to operate (Humane Society, sub. DR253; Lyndell Whyte, sub. DR180;
RSPCA Australia, sub. DR223; Voiceless, sub. DR166). There are also calls for the
ESCAS to be strengthened, including through:•stronger penalties for non-compliance and strengthening of the audit system•mandatory pre-slaughter stunning and extension of the system to include animals used
for breeding purposes.

An independent review of Australia’s livestock export trade in 2011 (the Farmer review),
found that there would be practical difficulties extending the ESCAS to breeders, and that
it would be difficult, costly and intrusive for industry or regulators to maintain a ‘line ofsight’ over the many years that breeders may live. The review also noted that international
animal welfare standards allow for slaughter with or without stunning and that there wassensitivity (in some countries) about suggestions that Australia might seek to mandate its
own standards overseas. However, it was generally accepted that Australia was seeking toensure, via commercial arrangements, the welfare of Australian animals in accordance with
the OIE standards (Farmer 2011).
Live exporters also raised concerns about the costs of the system and called for reforms to
reduce the level of oversight by the regulator, including through reliance on industry
quality assurance schemes and codes of conduct (Australian Livestock Exporters’ Council,
sub. 78; Consolidated Pastoral Company, sub. 71; LiveCorp, sub. 75).

Industry concerns about the costs of the ESCAS
Exporters are required to provide a substantial amount of paperwork to DAWR for the
ESCAS, including application documents, contracts or control arrangement documents,
and traceability procedures and audit reports (Commonwealth of Australia 2015a).
The Pastoralists and Graziers Association of Western Australia (sub. 70) said that livestockexporters are often confronted with requests for differing levels of detail that vary fromofficial to official and consignment to consignment. As a result, exporters are unable toestablish standard operating procedures for the ESCAS.
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Analysis conducted for LiveCorp by Ernst & Young estimated the costs associated with
the ESCAS to be $22.3 million per annum, which is made up of: administrative costs(69 per cent); substantive compliance costs (27 per cent) and ESCAS charges (4 per cent)— 84 per cent of the substantive compliance costs are estimated to be fixed costs(LiveCorp, sub. 75, attachment 1). However, the report did not address the extent to whichthese costs represented unnecessary regulatory costs, or whether any costs could be
mitigated or avoided (for example, through cost sharing between exporters).
These costs are also substantially higher than previous estimates from DAWR and Meat
and Livestock Australia and LiveCorp.
•

In 2015, DAWR estimated that the ESCAS had cost about $18 million per year since2011 ― with $12 million of these costs incurred by the live export industry and$6 million by the Australian Government, some of which is cost-recovered fromexporters. An additional $5 million in government support was provided over 2011–13
for private investment in supply chain improvements, including infrastructure upgradesand personnel training (Commonwealth of Australia 2015a).

•

A study conducted in 2013-14 by Meat and Livestock Australia and LiveCorp,
estimated the economic costs from the ESCAS (per head of livestock) to be between$0.77 (for sheep) and $13 (for goats as well as for sheep that are transported by air)
(MLA 2014). Based on these estimates and the number of livestock exported in
2013-14, the cost of complying with the ESCAS would be about $13.2 million per year
(LiveCorp, sub. 75, attachment 1).

In an addendum to its report, Ernst & Young suggested several explanations for thedifferences in the estimates:•

different methodologies (including whether costs were estimated or self-reported)•

the use of different population bases (whether costs were measured per animal or perexporter)•the fact that some costs of complying with the ESCAS had not been fully realised by
the time the earlier studies were undertaken (LiveCorp, sub. 75, attachment 2).

Reforms to reduce the cost and complexity of the ESCASThe cost and complexity of the ESCAS was acknowledged in the 2015 ESCAS review.
The review also raised questions about whether the same animal welfare outcomes could
be achieved through a simpler, clearer and ultimately more cost-effective system.
Options to improve the system were identified in the review and some reforms have been
introduced, including:•250

new auditing arrangements that apply a risk-based (low, medium, or high) approach todetermining the frequency of audits for facilities in ESCAS supply chains. Facilities

REGULATION OF AUSTRALIAN AGRICULTURE

with a high risk or a history of poor performance will be subject to an increased numberof audits while audits for facilities with good performance may be reduced•

allowing the sharing of audits for the same facility or supply chain•

allowing a standing ESCAS approval process so that exporters do not have to submit an
ESCAS application for every consignment (notice of intent to export) (Commonwealthof Australia 2015; DAWR, sub. 50; Joyce 2015).

RSPCA Australia (sub. 31) stated that it was consulted on the reforms and that in each case
it expressed concerns about the potential for regulatory oversight of the trade to be
reduced. RSPCA Australia stated that any benefits in terms of improving efficiencies inregulatory processes must not come at the expense of reductions in animal welfare andthat:
Net community benefits in this regard must be conceptualised broadly to include satisfying
community concerns for animal welfare. (sub. 31, p. 4)

Managing compliance with ESCAS requirements
Australia has no legal basis or authority to conduct compliance activities in export supply
chains or slaughter facilities located in export destination countries. Rather, it relies on
notifications of breaches from auditors, exporters and third parties. The inability of DAWR
to directly observe activities in foreign supply chains and to assess compliance with the
ESCAS is one of the biggest challenges for the regulation of live exports.
Since its inception in August 2011 until the end of October 2016, there have been 116
reported incidents of non-compliance with the ESCAS, involving about 49 000 animals(out of a total of 13.9 million). The number of reported incidents has increased over time
— from 5 in 2012 to 43 in 2015 (28 incidents have so far been reported in 2016). Less thanhalf (51) of the reported breaches have come from animal rights groups, the media or third
parties, while the remaining 65 have come from exporters themselves, industry reports andaudit reports (in one instance) (DAWR, pers. comm., 1 November 2016).
The level of self-reporting by exporters has increased over time, although Animals
Australia (sub. 53, attachment) claimed that self-reporting is due to the threat of exposureby animal welfare organisations and that without this threat the level of self-reporting
would be much lower. It also claimed that without Animals Australia performing the roleof unofficial ‘watchdog’, breaches of the ESCAS in export markets would have gone
undetected, but this role is not sustainable for a charity (Animals Australia, sub. 53,
attachment).
The main reason for non-compliance is the movement of animals outside of an approved
supply chain. According to DAWR, most instances of non-compliance are due to a loss ofcontrol of the supply chain (and hence the animals within the supply chain) withoutestablishing any adverse animal welfare outcomes (Commonwealth of Australia 2015a).
The 2015 review of the ESCAS stated that non-compliance with ESCAS was higher for
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sheep exports, as sheep are not individually identified and are commonly sold for homeslaughter in the Middle East ― the main market for Australian sheep. Of the 59 reported
incidents up to that point — November 2014 — 22 were identified as resulting in adverse
or unknown welfare outcomes, involving up to several thousand animals in one instance.
Regulatory action taken as result of complaints that were upheld include changes to export
licence conditions, and additional conditions to an ESCAS approval, including increased
auditing in, and reporting from, some markets, and restrictions or suspensions of facilities.
No suspensions or cancellations of licenses and no criminal sanctions, such as fines or
imprisonment, have been imposed on Australian exporters as a result of non-compliancewith the ESCAS.
Additional control and traceability standards and auditing requirements have been appliedin some export markets. For example, since October 2015, Australian exporters supplying
cattle and buffalo to Vietnam have been required to verify effective implementation of the
livestock industry’s ‘six point plan’ to address supply chain leakage in Vietnam. The plan
includes criteria for management, monitoring, recording and auditing of control andtraceability within ESCAS supply chains and facilities, such as use of working real time
CCTV at key control points with remote monitoring and recording, and unrestricted accessby the exporter and their representative to all facilities within their supply chain(DAWR 2015h).
However, additional requirements do not guarantee that the relevant welfare standards will
be met. DAWR is currently investigating allegations of breaches of the ESCAS in supply
chains and facilities in Vietnam (where additional requirements are in place). During thisinvestigation the department has suspended 32 facilities and 3 importers (with one facility
reinstated as of 31 October 2016). The department also suspended two of the nine
exporters from supplying to Vietnam; both these exporters have subsequently been
permitted to resume supply to Vietnam under additional conditions (DAWR, pers.
comm., 1 November 2016).
Commenting on the administration of the ESCAS in Vietnam, RSPCA Australia said:
The rapid approval of supply chains in Vietnam provides evidence of lax auditing and therubber stamping of supply chains by the Department of Agriculture and Water Resources. In
2012, just 3353 cattle were shipped to Vietnam; in 2015, that number had jumped to 311,523.
The Australian Government now approves nine exporters to send 20-30,000 cattle per month toover 200 facilities. There are now more Australian Government-approved abattoirs in Vietnam
than there are abattoirs operating in Australia. Many of these facilities are small, rudimentary
operations with the capacity to slaughter only a handful of animals per day …
Such rapid expansion in such high risk conditions could only be made possible via a process ofrubber stamping supply chains, and this has played out in the country’s compliance record.
Exporters have more recorded breaches of ESCAS in Vietnam than in any other country,
including evidence of Australian cattle being bludgeoned to death with sledgehammers. Suchevidence was presented to the Australian Government in June 2013, May 2015, and mostrecently, in June 2016. (sub. DR223, p. 4)

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REGULATION OF AUSTRALIAN AGRICULTUREThere have been other instances of breaches of the ESCAS in supply chains and facilities
that have been audited and approved under the ESCAS, including in Israel and Gaza.
Animals Australia (sub. 53, attachment) called for greater penalties for non-compliance.
The 2015 review also suggested that the ESCAS be supported by a system of financial orother sanctions (such as enforceable undertakings), rather than relying on theadministrative and criminal (strict liability) sanctions currently available.
A broader range of monitoring, investigation and performance powers to deal with
non-compliance (including infringement notices, enforceable undertakings and civil
penalties) are currently being considered as part of stage two of the AustralianGovernment’s review of agricultural export legislation. Stage two reforms are expected totake place during 2016 and 2017 so that implementation can occur before April 2020
(when the delegated legislation will cease). These reforms are likely to provide a more
effective suite of tools to manage instances of non-compliance with the ESCAS. DAWR
stated that expanding the range of sanctions will provide effective enforcement tools thatcan be applied proportionately to a breach or an act of non-compliance (DAWR 2015j).
The independence and competence of auditors
Enforcement of the ESCAS relies on a system of independent audits (box 5.14) and reports
from exporters or third parties. The independence and competence of the auditors
employed under the ESCAS was questioned by Animals Australia:
The auditors are selected, paid for, and retained by exporters, and their audit reports areprovided to the exporters prior to being submitted to DA. This puts them in the category of
second-party audits (at best), and certainly cannot provide the independence of a third-party
audit. (sub. 53, attachment, p. 3)

RSPCA Australia also raised concerns about the veracity of audits conducted under the
ESCAS stating that ‘auditors are appointed by the exporters themselves and their audit
reports have been found wanting on many occasions’ (sub. DR223, p. 4).
There has been an increase in the number of exporters addressing and resolving
non-compliance before the audit is submitted to the department. The AustralianGovernment stated that this outcome is in line with the principles of the ESCAS — todetect, manage and prevent non-compliance — and for this reason, there are few audit
reports with non-compliance that have not had corrective action taken. But asacknowledged in the 2015 ESCAS review, audits provide an assessment at a single point intime so it is possible that non-compliance occurs outside an auditor’s visit (Commonwealthof Australia 2015a).

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Box 5.14

Auditing under the ESCASThere are two main types of auditing requirements under the ESCAS.
•

The independent initial audit report is required as part of an exporter’s application for an
ESCAS approval for a new supply chain and new facilities for existing supply chains.

•

The independent performance audit report is provided by the exporter on the performance ofthe supply chain.

Audits report on an exporter’s control of the supply chain, the traceability system, and whether
World Organisation for Animal Health recommendations for animal welfare can be (in the caseof an initial audit) or have been (for performance audits) met. The frequency of performance
audits (annual, half yearly or quarterly) is determined using a risk-based auditing schedulebased on the type of facility, its inherent risks and the actions and compliance history ofexporters. Exporters may share audit reports to minimise costs, provided each exporter submits
an audit report that references their name. Audit reports must be provided to the Department ofAgriculture and Water Resources within one month of completion.
Independent auditors must possess the necessary accreditation, qualifications and skills to be
accepted as an ESCAS auditor by the Department of Agriculture and Water Resources. The
auditing company must have independence, no conflict of interest and possess an appropriate
level of competence (through qualifications and expertise) accredited (to an international
standard) by an appropriate authority, such as a member of the international body for
accreditation of Conformity Assessment Bodies — the International Accreditation Forum. An
example of an authority that provides accreditation is the Joint Accreditation System —Australia and New Zealand. The Department requires evidence that the auditing company
meets these requirements prior to accepting an independent audit report.
Source: Department of Agriculture and Water Resources (2015d).

To be approved as an auditor for the ESCAS, the auditor must have independence, noconflict of interest, and possess an appropriate level of competence (accredited by anappropriate authority). The regulator should satisfy itself that such criteria have been met,
and continue to be met, especially where concerns are raised by third-parties about auditor
competence or independence.
DAWR could require, as part of its audit policy, that auditors are regularly rotated, or
replaced where it is found that auditors are not performing to the standards required bytheir accreditation. 18 Depending on the frequency of audits and the risk status of therelevant facility, auditors could be rotated on an annual or biannual basis. The benefits ofrotating auditors, in terms of promoting independence, would need to be weighed against
the potential costs from loss of auditor knowledge, experience and quality.
DAWR could also select (and potentially appoint) which third-party auditors or audit
companies can be used under the ESCAS, with exporters paying full cost recovery fees for
18 For example, Division 5 Part 2M of the Corporations Act 2001 (Cwlth) states that an individual auditor or

authorised audit company must not play a significant role in the audit of a particular listed company orlisted registered scheme for more than five successive financial years. Auditors for companies areappointed by the Board and paid by the company.

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audits (as proposed by Animals Australia (sub. 53, attachment)). DAWR could selectauditors that have demonstrated training and experience in animal behaviour and animal
welfare and auditing of livestock production and processing facilities — expertise inanimal welfare is not currently a requirement to be selected as an auditor under the
ESCAS. However, direct appointment of auditors by the Department could raise issues if
importing countries view this as auditing by the Australian Government.

Options to improve the effectiveness and efficiency of the ESCASBoth LiveCorp (sub. 75) and the Australian Livestock Exporters’ Council (ALEC, sub. 78)
proposed reforms to reduce the regulatory burden of the ESCAS (box 5.15). The mainconcerns underpinning the proposed reforms related to what ALEC defined as:•lack of clear objective setting for the role, expectations and scope of the operation of
the regulator•

failure to define and limit the scope of discretionary powers, allowing for significant
regulatory creep•

expectation of infallible performance by exporters•

strict liability and secondary liability for exporter non-compliance•de facto sanctions applied to exporters where evidence is circumspect or unproven.
Box 5.15

Reforms to the ESCAS proposed by live exporters

Reforms to the ESCAS proposed by LiveCorp and the Australian Livestock Exporters Council(ALEC) can be broadly grouped into the following categories:•

set clear objectives and principles in governing legislation that articulates the critical balance
between social and economic objectives of the trade•entrench the concept of ‘reasonableness’ rather than the current requirement of absolutecompliance•provide guidance on the use of discretionary powers and ensure that the government’s risk
appetite for the trade in livestock is set out in transparent and defined legislation•

refocus the Department of Agriculture and Water Resources on substantive matters rather
than micro-management•

expeditiously introduce a regulatory pathway to recognise suitably structured welfare
conformance and certification programs and/or equivalence in other regulatory jurisdictions•

establish the level of intervention in a recognised program at a systems level•

reform the current approach to non-compliance assessment and enforcement, including thesubstantive ties to license approvals, particularly for operational matters.

In addition, ALEC suggested that the substantial public good elements of the ESCAS requires
more active recognition and support from government and that government investment in theLivestock Global Assurance System provides an opportunity for this to occur.
Sources: ALEC (sub. 78); LiveCorp (sub. 75).

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Both suggested that many of the above issues could be addressed through primarylegislation that clearly articulates the objective of the ESCAS, and outlines the role andpowers of the regulator.
It is unclear if this approach would provide greater net benefits than other options that
could be implemented in the shorter term to reduce the regulatory burden of the ESCAS,
particularly given that sanctions for non-compliance have been limited to date. Also,
regulatory guidance is already available through export advisory notices and guidelines.
For example, DAWR has prepared a number of export advisory notices and guidelines forlivestock exporters that outline ESCAS requirements. This includes notices on: risk-based
auditing arrangements; standards, requirements, checklists and templates for audits; control
and traceability standards; and the ESCAS compliance and investigations strategy,
including the regulatory options that may be used (and when) to address non-compliance.
The Commission considers that the greatest scope to reduce the regulatory burden of the
ESCAS is through greater cooperation between exporters, including in the auditing
process, and recognition of equivalent regulatory standards in importing countries.
Recognising industry assurance schemes and equivalent regulatory regimes
ALEC (sub. 78) raised concerns about ‘micro management’ by DAWR, and suggested that
there are duplicative auditing processes and ineffective use of independent auditing.
There is currently scope for duplication of audits between exporters to be reduced throughsharing of audit reports. While some exporters have used this option, more extensive use
may be limited by commercial factors associated with sharing audit reports.
Another way to reduce duplication of audits is to rely on industry quality assurance
programs that involve animal welfare assurance and independent auditing. The Sheepmeat
Council of Australia and the Cattle Council of Australia (sub. 88, attachment), forexample, suggested that the ESCAS requires simplification with transition to a
co-regulatory model.
The Livestock Global Assurance Program (LGAP) is being developed by the live exportindustry (with funding from Meat and Livestock Australia) with the intention that it could
be used by Australian exporters as a means of demonstrating regulatory compliance with
the ESCAS. The LGAP is intended to be independent of government but recognised as analternative pathway for live export welfare assurance. The main differences between the
LGAP and the ESCAS for exporters are claimed to include:•

greater ability for the LGAP to remove audit duplication than under the ESCAS•

better risk management at the facility level (rather than supply chain level) by allowing
facility performance to be monitored on an individual and ongoing basis throughstandardised mechanisms

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•

responsibility for the day-to-day welfare and management of livestock shared more
equitably by the facilities which handle the livestock•

internal audits used as a standardised risk mitigation tool to better manage what occurs
during the time between external audits (or the inter-audit gap)•

focus on continual improvement, while non-conformities carry consequences (Meatand Livestock Australia 2015).

ALEC (sub. 78) said that the challenge for the Australian Government (if LGAP is
implemented by industry) is negotiating the appropriate intersection between the program’s
independence and the Government’s regulatory oversight of the trade.
The Commission understands that the LGAP could be accepted as a co-operative auditingarrangement under existing ESCAS arrangements, if DAWR is satisfied that the LGAP’s
auditing arrangements satisfy the relevant ESCAS auditing criteria. Recognising equivalent
importing countries’ livestock welfare regulations could also provide scope to reduce theburden of the ESCAS for Australian exporters operating in those countries. The ESCAS is
likely to impose an unnecessary regulatory burden on exporters that are operating inmarkets that have equivalently high standards of animal welfare. For example, it is unclear
whether the additional ESCAS regulations have resulted in any discernible improvements
in animal welfare in Japan (Commonwealth of Australia 2015a). That said, the current
regulatory burden may not be material for exporters operating in Japan as the move to arisk-based auditing approach has meant that auditing is now only required once per year
for facilities and supply chains in Japan.
Exempting countries from the ESCAS would require DAWR to be satisfied that theregulations in other countries are at least equivalent to those of the ESCAS, both inprinciple and in practice. Difficulties arise where importing countries have regulatory
arrangements in place but, in practice, the requirements are not generally enforced.
Overall, the Commission considers that the ESCAS has helped to improve welfare
outcomes of Australian live exports in some export markets. The system is complex andthere are regulatory costs imposed on exporters, but there is scope for the burden on theindustry to be reduced through greater exporter co-operation and sharing of audits. The
LGAP could be a means of achieving greater co-operation and reducing costs forexporters.
The LGAP also has the capacity to address some of the auditing issues outlined above. The
LGAP program owner (proposed to be a not-for profit membership organisation) would
review, appoint, contract and pay qualified certification bodies and auditors directly. There
would be no direct relationship between the entity being audited and the certification bodyor auditor. Internal and unscheduled audits are also part of the LGAP. Auditors will also be
required to have a minimum amount of experience and training in the areas of auditing,animal behaviour, health, husbandry and welfare.

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Whether the LGAP could be used by exporters to demonstrate compliance with therequirements of the ESCAS depends on whether it can be shown to assure the welfare ofAustralian live exports in line with the Australian community’s values.
The LGAP is still in development and concerns about its likely effectiveness have beenraised.
•RSPCA Australia (sub. DR223) acknowledged that some aspects of the LGAP (such as
the appointments and skills of auditors) are improvements over the ESCAS. However,
it noted that it would be opposed to any ‘watering down’ of the AustralianGovernment’s oversight of the trade, and stressed the need for Government to maintaina strong and direct role.

•

Animals Australia (sub. DR268) does not support the LGAP because in its view, it does
not provide any improvements for animals over the current ESCAS standards (forexample, in relation to use of stunning prior to slaughter), and offers no greater
independence in auditing and compliance.

•

World Animal Protection (sub. DR137) said reliance on an industry assurance program
to meet ESCAS requirements is not warranted as community confidence in theindustry’s compliance with ESCAS is already extremely low.

How the program will publicly report non-compliance, and how the Government will
impose penalties when information is provided to the LGAP program owner (rather thanthe Government) are key issues to work through before the LGAP can be used todemonstrate regulatory compliance. Also, the LGAP is a voluntary industry initiative andmay not be adopted by all exporters. Focusing government resources on its development
should not come at the expense of continual review and refinement of the ESCAS — theCommission notes that the Australian Government has announced $8.3 million of funding
for the implementation of the LGAP (Liberal Party of Australia 2016).
It is critical that the community has confidence in the system used to regulate live exports.
Incidents of mistreatment of animals in facilities that are within the purview of the ESCAS
and that are overseen by the Australian livestock industry reduce community confidence inthe trade and the regulator’s effectiveness.
The Australian Commission for Animal Welfare (recommendation 5.1) should play a rolein live export regulation. At a minimum, this role should involve reviewing theperformance of the ESCAS, including the performance, independence and effectiveness of
the auditing arrangements, and making recommendations for reform. Mandatory rotationof auditors (as discussed above), and specific requirements for auditors to have experienceand training in animal health, husbandry and welfare, could improve the effectiveness of
the auditing arrangements. These options should be considered in the first independent
performance review of the ESCAS.
It should also review other aspects of the regulatory system for live exports, including theAustralian Standards for the Export of Livestock. Although not a focus of analysis of this258

REGULATION OF AUSTRALIAN AGRICULTUREinquiry, the Commission notes concerns raised about these standards, including withrespect to the accreditation and independence of veterinarians on board live export vessels(AVA, trans. pp. 395–396).
Regular, independent reviews will help to address any perceived or actual conflict ofinterest in livestock export regulatory arrangements, and ultimately help to further improve
the welfare of Australian live exports. It is important that the live export regulatory system
is independently reviewed irrespective of whether the Australian Government establishes
an independent organisation for farm animal welfare. If the Australian Commission for
Animal Welfare is not established in time to review livestock export regulations by 2017
then the Australian Government should appoint an independent expert or committee toundertake the first review.

RECOMMENDATION 5.3

The Australian Government should appoint an independent expert or committee topublicly inquire and report, by the end of 2017, on the efficiency and effectiveness of
the livestock export regulatory system.
The review should include an assessment and make recommendations for reform on:•industry-developed initiatives, such as quality assurance programs, as a means ofcompliance with livestock export regulations•

recognition of equivalence of regulatory arrangements in livestock export markets•

the effectiveness of the auditing arrangements used to demonstrate compliancewith livestock export regulatory requirements, including mandatory rotation ofauditors and requirements for auditors to have expertise in animal welfare andanimal husbandry.

If the Australian Commission for Animal Welfare (recommendation 5.1) is establishedin time, it should undertake the first review. It should also undertake subsequent
regular reviews of the livestock export regulatory system.

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6

Regulation of technologies

Key points•

New agricultural technologies can improve the productivity, competitiveness and safety offarm businesses, as well as the quality of agricultural products. Any unnecessary barriers to
the development, access and use of technologies should be removed.

•

The Australian Government regulates genetically modified (GM) organisms and products toprotect human health and safety and the environment. The regulatory frameworks andprocesses of the Office of the Gene Technology Regulator (OGTR) and Food Standards
Australia New Zealand (FSANZ) adhere to international standards and are sufficiently
rigorous to protect the health and safety of the Australian community and the environment.

•

Scientific evidence indicates that GM organisms and foods approved by the OGTR and
FSANZ are as safe as their non-GM counterparts.

•

States and territories can regulate GM organisms to address market access and tradeconcerns, and some jurisdictions have imposed partial or complete moratoria on thecultivation of GM crops.

•

The coexistence of GM and non-GM crops is possible, and has been demonstrated inAustralia and internationally. This brings into question the rationale for banning GM crops.
The ability for GM and non-GM crops to coexist means that if there are any market accessand trade advantages (such as price premiums) for non-GM crops, these can still beachieved when GM crops are in the market. Moratoria on GM crops should be removed.

•

There are some concerns within the community about GM technology. Many of these relate
to the health and safety of GM food, and are likely to be based on a misunderstanding orlack of knowledge of the risks and benefits of GM technology and regulation to protect healthand safety. However, there are other concerns that are broader and relate to social andethical issues.

•

Effective communication and public engagement by government agencies may help toaddress community concerns about GM technology where these are based on a lack of
information or understanding. Government agencies responsible for food policy andregulation should coordinate communication strategies designed to increase publicknowledge about the benefits and risks of, and the regulatory framework for, GM technology.

•

Regulations must be flexible and responsive to facilitate the adoption of new technologies
that enable Australia to remain competitive. The OGTR is currently conducting a technicalreview of its regulations to clarify if new breeding techniques fall under the definition of a
GM organism.

The technologies used by farm businesses have evolved over thousands of years, and willcontinue to do so. From the early days of simple mechanical farm equipment powered byhumans, horses and other domesticated animals, agricultural technology transitioned totractors powered by the internal combustion engine and then to the vast range of complex
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farm machinery, electronic devices, software applications and genetic engineering
techniques used today. Technology has also changed the way farmers operate theirmachines — remote computer monitoring systems, global positioning systems andself-driving tractors mean that farm machines can be used with less human involvement(box 6.1). Many of these new technologies require access to the internet.
Technology plays an important role in improving productivity, competitiveness and safety
in the agricultural sector, as well as the quality of agricultural products. For example:•

biotechnology has allowed plants that are resistant to certain pests to be created,decreasing the need for pesticides•

early testing suggests that the use of drones is likely to reduce the financial costs andsafety risks involved in monitoring and gathering cattle on large farms (CSIRO 2015d).

In relation to the regulation of agricultural technologies, the Commission heard concerns
about genetic modification (GM) technology, new plant breeding techniques and drones.
Participants also raised concerns about the lack of access to telecommunications
infrastructure in regional Australia.

6.1

Why are governments involved?

Governments regulate agricultural technologies because of their potential risk to humanhealth and safety and the environment. For example:•

the risks associated with new technologies can be unknown, either because of a lack ofindustry experience, or because of inadequate scientific information•

consumers can be unaware that certain technologies are used, or unable to verify thatthey are used safely, because they do not observe the production process. And when
they can observe the production process, they may not know what constitutes safe use(however, technological advancements may also be able to help overcome information
asymmetries by providing better and more timely information)•

the use of certain technologies can have (positive or negative) spillovers that affectneighbouring farms or other properties.

Governments can intervene in various ways, including by developing and administering
legislation to ban or control the use of technologies, developing policies and codes ofpractice, and funding research activities. Research activities are sometimes co-fundedthrough industry levies (box 6.2).

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Box 6.1

Examples of agricultural technologies

Precision agriculture
Precision agriculture involves observing variations across the landscape of a farm, and varying
farming practices accordingly (CSIRO 2016a). This requires collecting data across large areasof land about soil types, crop or animal performance and other environmental variables. The
advent of technologies, such as global positioning systems and drones, has enabled thecollection of such data, and has increased farmers’ productivity by, for example, allowing them
to apply fertilizer and water only where it is needed (The University of Sydney 2016;
Thomasson 2015). This also reduces costs and the environmental impact of agricultural activity.

Automation in the dairy sector
Technologies currently used in the Australian dairy industry include automatic gate timers,
walkover weigh scale systems and automatic feeding and milking systems (Dairy
Australia 2016). Automatic milking systems reduce the amount of labour required for milk
harvesting and provide greater flexibility around milking times and milking frequency.
Each cow is fitted with a unique electronic identification tag that allows the cow to be ‘recognised’
electronically at gates and in the milking unit. A robotic arm cleans the teats, attaches the milking cups
and sprays the teats of each cow. Each quarter is milked individually and cups are removed based on
the milk flow from each teat, thereby minimising overmilking. (Dairy Australia 2014, p. 1)

Useful data on milk quality, milk output, feed intake and cow traffic are collected in the process.

Use of mapping technology to improve the efficiency of livestock transport
The CSIRO (2015c) is developing modelling tools that can be used to improve the efficiency oftransporting livestock from Northern Australia to abattoirs on the east coast. (Moving northern
Australian cattle from farm to market can involve distances of up to 2500 kilometres, with landtransport costs making up to 35 per cent of the market price of livestock). Decision support tools
help identify the least cost route by incorporating data from 50 000 properties, 88 000
origin-to-destination combinations, and over 1.5 million recorded vehicle movements, andintegrating factors such as truck configuration, livestock weight and regulatory constraints.
According to the CSIRO (2015c), these tools have the potential to help reduce transport costs
incurred by northern beef producers by over $10 million annually.

Other technologies in development
The CSIRO is also developing:•thermal remote sensing technology on unmanned aerial vehicles (drones) to determine thelocation of livestock in large rangelands — this may prove to be a reliable and cost-effective
system for identifying animals in extensive landscapes (2015d)•

biosensors that mimic the smell receptors of animals to detect and measure odours andchemicals in different substances — this technology could be used to detect insect
contamination in grain and detect other pests, weeds or diseases in commodities (2015b).

TECHNOLOGIES263

Box 6.2

The use of levies in the agricultural sector

Levies (imposed on domestic products) and charges (imposed on imported and exported
products) are used by some primary industries to support research and development (R&D),
marketing and promotion, residue testing, and plant and animal health programs. These levies
and charges are generally initiated by an industry body that has identified the need for funding
to respond to a specific problem or opportunity.
Levies are sometimes used to fund rural Research and Development Corporations (RDCs).
RDCs allow Australian Government and primary producers to co-invest in R&D — theAustralian Government matches industry funding up to 0.5 per cent of the gross value of
production in a particular industry. There are currently 15 RDCs, five of which are
Commonwealth statutory bodies. The remainder are industry-owned.
The Commission reviewed the RDC model in 2011 and found that the main rationale forgovernment intervention in rural R&D was to address ‘spillover’ effects which would otherwise
discourage producers from investing in socially valuable research. The Commission noted thatwhile government intervention may be justified to address spillover-related market failures, itneed not take the form of public funding support. For example, governments could intervene byprotecting intellectual property or compelling all industry participants to contribute to the cost of
R&D through levies. However, the Commission concluded that, in many circumstances, othermechanisms were unlikely to fully correct for under-investment by the private sector, andtherefore public support was warranted.
The Commission also recommended reducing the cap on government matching contributions
from 0.5 per cent to 0.25 per cent of an industry’s gross value of production. The AustralianGovernment did not adopt the recommendation.
Sources: DAFF (2009); DAWR (2015o, 2015v); PC (2011e).

6.2

Regulating genetically modified organisms andproducts

Genetic modification involves using biotechnology to change the genes of plant and animalorganisms. In Australia, the only genetically modified (GM) crops that have been approvedfor commercial release to date are certain varieties of canola and cotton that have beenaltered to be resistant to particular pests and/or herbicides (DAWR 2015e). Field trials are
currently underway for GM banana, barley, perennial ryegrass, safflower, sugarcane,
wheat and white clover (ABCA 2015).
In addition, some GM products can be used:•

as ingredients in foods — including GM varieties of soybean, corn, potato, sugar beet,
wheat and rice (FSANZ 2016c, 2016d)•

for the production of stockfeed — including GM cottonseed meal, imported
GM soybean and GM canola meal (Ansell and McGinn 2009; FSANZ 2016d).

264

REGULATION OF AUSTRALIAN AGRICULTUREThere are benefits for both the agricultural sector and consumers from GM technology. For
example, GM technology can be used to create crops and other plants that are moreresistant to weeds and pests and increase crop yields. The use of biotechnology (including
genetic modification) and best practice pest management has allowed Australian cotton
growers to reduce pesticide use by more than 90 per cent over the last 10 years(NFF, sub. 61).
GM technology can also improve the nutritional value, shelf life and other quality
characteristics of food. For example, high oleic acid soybean oil, made from GM soybeans,offers improved nutritional properties compared to conventional soybean oil (FAO 2016b).
However, there may also be risks associated with GM technology. Risks to human healthcould include the allergenicity of new genetically modified organisms (GMOs) and thepossibility of gene transfer (for example, if antibiotic resistance genes used as genemarkers were to be transferred to cells of the human body) (WHO 2016). Risks to theenvironment could include the persistence of the modified gene after crops have been
harvested and the susceptibility of non-target organisms, such as insects that are not pests(WHO 2016).
Regulation is put in place to manage these risks — in Australia, approved GM foods must
be assessed to be at least as safe as their conventional counterparts, and licences for
dealings with GMOs are only issued where risks to human health, safety and theenvironment can be managed. GM technology in Australia is regulated at theCommonwealth level by:•

the Office of the Gene Technology Regulator (OGTR) for GMOs such as seeds and
crops

•

Food Standards Australia New Zealand (FSANZ) for GM food•the Australian Pesticides and Veterinary Medicines Authority (APVMA) for agvet
chemicals containing GM material•

the Therapeutic Goods Administration, the National Industrial Chemicals Notification
and Assessment Scheme and the Department of Agriculture and Water Resources forother GM products.

In addition, states and territories can impose bans or ‘moratoria’ on the cultivation ofGM crops for market access and trade reasons, but not for safety reasons. These moratoria
were the main technology-related regulatory issue raised by participants to this inquiry.
This section discusses the regulatory arrangements for GM technology, and assesses theneed for state-based moratoria. Concerns regarding the mandatory labelling of GM foods
are discussed in chapter 10.

TECHNOLOGIES265

The OGTR assesses GMOs for health, safety and environmental risks
The Gene Technology Regulator is an independent statutory office holder responsible foradministering the Gene Technology Act 2000 (Cwlth) and its associated regulations. The
objective of the Gene Technology Act is to:… protect the health and safety of people, and to protect the environment, by identifying risks
posed by or as a result of gene technology, and by managing those risks through regulating
certain dealings with GMOs.

The OGTR applies protective measures at all stages of the regulation of gene technology.
Dealings with GMOs are prohibited unless authorised under the Act, and before a dealing
with a GMO is authorised, the OGTR prepares risk assessments and risk management
plans that rely on credible evidence and consideration of uncertainty (OGTR 2013)(box 6.3). As the OGTR said:
The effect of the gene technology regulatory scheme is to create a science-based system toassess and regulate the safe development, trialling and commercial release of GM plants andanimals that can be used in agriculture (and other sectors). The scheme touches all stages of theresearch and development pipeline from proof of concept through to commercial release. The
assessment of applications and decisions about licence conditions are based on current
available science and a published, well respected Risk Analysis Framework which ensuresconsistent decision making. (sub. 76, p. 3)

Box 6.3

The OGTR’s risk assessments

In assessing the risks posed by a GMO and identifying risk management controls, the OGTR
implements a risk analysis framework based on the Australian/New Zealand Standard
ISO 31000:2009 Risk Management — Principles and guidelines. Risk assessments provide a
structured, reasoned approach to consider the potential harm from certain activities with GMOs,
and include consideration of the following key questions.
•

What could go wrong? Consideration is given to a range of circumstances where a GMO
could harm people or the environment.

•

How serious could the harm be? An assessment is made about the seriousness of potential
harm using risk scenarios.

•

How likely is the harm to occur? An assessment is made about the likelihood of potential
harm using risk scenarios.

•

What is the level of concern? The risk is assessed as negligible, low, moderate or highdepending on the seriousness of the harm and the likelihood of it occurring.

Sources: OGTR (sub. 76, 2013).

Licences for dealings with GMOs can be accompanied by specific conditions to manage
risk. In accordance with subsection 56(1) of the Gene Technology Act, the Gene
Technology Regulator must not issue a licence for a dealing with a GMO unless satisfied
that the risks to human health, safety and the environment can be managed. The Gene
Technology Regulator also has powers to suspend, vary or cancel a licence.
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REGULATION OF AUSTRALIAN AGRICULTURE

The OGTR said that:
In each of the cases for the commercial growing of GMOs, the regulator has found that theweight of evidence that there is shows that these GMOs are as safe as their conventionalcounterparts. (trans., p. 380)

FSANZ assesses genetically modified foods for health and safety risks
FSANZ regulates GM foods under Standard 1.5.2 of the Food Standards Code. Under thisstandard, GM foods require mandatory pre-market approval, including a food safetyassessment, before being released into the food supply chain. FSANZ’s foremost objectiveis the protection of public health and safety, and it undertakes GM food safety assessmentsin accordance with internationally established scientific principles and guidelines
developed through organisations such as the World Health Organization and the OECD
(FSANZ 2016e) (box 6.4).
Box 6.4

Food safety assessments for GM foods

Safety assessments undertaken by Food Standards Australia New Zealand are characterisedby:•a case-by-case consideration of GM foods. This allows each food to be assessed according
to its particular characteristics, including the type of genetic modification•consideration of both the intended and unintended effects of genetic modification. For
example, the intended effect of genetic modification of an organism may be a new trait suchas insect protection, but unintended effects such as changed nutritional characteristics may
also arise. Both of these effects are evaluated•comparisons with conventional foods with an acceptable standard of safety. This enables
the identification of similarities and differences between the GM food and an appropriatecomparator, and allows identified differences to be characterised to determine any potential
safety or nutritional issues.

Source: FSANZ (2016e).

FSANZ (2016e) states that ‘gene technology has not been shown to introduce any new oraltered hazards into the food supply’ — a view that is comprehensively shared byinternational regulators and organisations. For example:•

the US Food and Drug Administration stated that:… credible evidence has demonstrated that foods from the [genetically engineered] plantvarieties marketed to date are as safe as comparable, non-GE foods. (2015a)•

the World Health Organization recently reported that:
GM foods currently available on the international market have passed safety assessments andare not likely to present risks for human health. In addition, no effects on human health havebeen shown as a result of the consumption of such foods by the general population in the
countries where they have been approved. (2016)
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267

the OECD also said that:•

Worldwide, many people are eating GM foods (especially in North America and China) withno adverse effects on human health having been reported in the peer-reviewed scientific
literature. (2000, p. 8)

FSANZ also actively monitors the scientific literature and other information about
GM foods to determine if it needs to revise its safety assessments (FSANZ 2015e).

How effective is the regulation of the health and safety of GMOs?
There have been two independent reviews of the Gene Technology Act since its
commencement in 2000.
•

The first review in 2005-06 found that the object of the Act — to protect human healthand safety and the environment — was being achieved, and that the regulatory
framework was appropriate and applied effectively (Timbs, Adams and Rogers 2006).

•

The second review in 2011 found that the national scheme for the regulation of genetechnology was effective and efficient (Allen Consulting Group 2011).

Both reviews recommended minor and technical changes to improve the operation of theAct, and some amendments — such as the discontinuation of quarterly reporting to the
Minister for Health on activities under the Act — were made as a result.
FSANZ has also commissioned external reviews of its regulatory processes (box 6.5). Bothreviews found that FSANZ’s risk assessment processes were scientifically rigorous.
Box 6.5

External reviews of FSANZ’s risk assessment processes

In 2008, an international expert from Canada, Dr. William Yan, conducted a peer review of
FSANZ’s GM food safety assessment procedures. Dr. Yan found that FSANZ’s safetyassessments were based on concepts and principles developed and recognised internationally,
and that:
The GM food safety assessment process employed by FSANZ is scientifically rigorous … and is one of
the most, if not the most transparent in the world. (Yan 2009, p. 1)

Dr. Yan also made several recommendations, including that FSANZ maintain scientificexpertise to enable it to address future challenges. In response, FSANZ outlined proposed
actions that addressed all recommendations.
In 2012, an expert in toxicology, public health and epidemiology from the World HealthOrganization, Dr Angelika Tritscher, conducted an external peer review on FSANZ’s risk
assessment practices and procedures. Dr. Tritscher confirmed that the methods and approach
used by FSANZ for the safety assessment of GM food were consistent with internationalguidelines, and concluded that:As judged by a previous external assessment, FSANZ’s risk assessment science for GM food is
considered to be strong. (Tritscher 2012, p. 30)

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Industry participants generally expressed support for the science-based approaches of the
OGTR and FSANZ (AusBiotech, sub, 20; Australian Dairy Farmers, sub. 63; CropLife
Australia, sub. 14; NSW Farmers’ Association, sub. 72; WAFarmers, sub. DR226). For
example, the Producers Forum said that:
Australia’s Office of the Gene Technology Regulator (OGTR) is recognised as one of the bestin the world and along with Food Standards Australia New Zealand (FSANZ) provides us withsolid assurances that GM crops and foods are no less safe than their non-GM counterparts.
(sub. DR277, p. 2)

Similarly, CropLife Australia submitted that it:… firmly believes that both the OGTR and FSANZ are robust world-class regulators; and arerecognised globally for their expertise in gene technology regulation. This is evidenced by theamount of requests they receive to engage in regulatory capacity building, both in the Asian
region and globally. (sub. DR156, p. 2)

However, some participants raised concerns about the OGTR’s and FSANZ’s approach torisk assessment, as well as the health and safety of GM foods more generally (box 6.6).
The main concerns were that:•the use of the weedkiller glyphosate on GM crops is harmful to human health (Chris
Coughran, sub. DR93; Madge Australia, sub. DR224; Michelle McLaren, sub. DR256;
Susan Moore, sub. DR168)•

GM foods could contain new allergens (Gene Ethics, sub. DR243, personal responses
and views on gene technology)•

a precautionary approach or the precautionary principle is not being applied in theregulation of GMOs (Australian Food Sovereignty Alliance, sub. DR211; Chris
Coughran, sub. DR93; Gene Ethics, sub. DR243)•

regulator risk analyses rely on data provided by applicants rather than their own
scientific assessments and data (Gene Ethics, sub. DR243; Network of Concerned
Farmers, sub. DR128; Miguel Pez, sub. DR177)•

FSANZ does not require animal testing for GM food (Nathan Laurent, sub. DR133;
Madge Australia, sub. DR224)•

there is duplication between the processes and requirements of the OGTR and the
APVMA (CropLife Australia, sub. 14; Veterinary Manufacturers and Distributors
Association, sub. 79)•

the concept of ‘substantial equivalence’ is scientifically invalid (Gene Ethics,
sub. DR243; Madge Australia, sub. DR224; Michelle McLaren, sub. DR256).

Many of these concerns appeared to be based on a misunderstanding or lack of knowledgeof the relevant regulatory processes for GM technology in Australia. Insofar as this is thecase, more effective communication on the risk and benefits of GM technology could
increase understanding and acceptance of GM technology (discussed below).

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Box 6.6

Selected concerns regarding gene technology

The use of glyphosate on GM crops is harmful to human health
While many participants expressed general concerns about the health and safety of GM foods(for example, Michael Burns, sub. DR280; personal responses and views on gene technology;
Miguel Pez, sub. DR177; Estelle Ross, sub. DR100), some were concerned specifically with theuse of glyphosate.
Glyphosate is the weedkiller that some GM crops have been modified to be resistant against. In
2015, the International Agency for Research on Cancer, an agency affiliated with the World
Health Organization (WHO), released a monograph classifying glyphosate as ‘probably
carcinogenic to humans’ (2015, p. 78). However, in May 2016, a joint Food and Agriculture
Organisation (FAO) and WHO meeting on pesticide residues assessed the weight of evidence
regarding glyphosate, and concluded that it ‘is unlikely to pose a carcinogenic risk to humans
from exposure through the diet’ (FAO and WHO 2016, p. 2).
Many regulatory agencies have also concluded that glyphosate is unlikely to pose a
carcinogenic hazard or risk to humans (EFSA 2015; Health Canada 2015; Temple 2016; US
EPA 2016). In Australia, the APVMA’s assessment is that glyphosate does not pose a cancer
risk to humans, and is safe to use as per the label instructions (APVMA 2015c).

GM foods could contain new allergens
Genetic modification typically results in the expression of one or more new proteins in theorganism, and these new proteins may be allergens. For this reason, one of the main
components of FSANZ’s food safety assessment for GM foods is a consideration of thepotential allergenicity of the food (FSANZ 2016d). Each food is assessed on a case-by-casebasis, and so far no approved GM foods in Australia have been found to have allergenic effects(FSANZ 2016e; Victorian Government 2013).

A precautionary approach or the precautionary principle is not being applied
The gene technology regulatory scheme is by nature precautionary. Precautionary measures
are applied at every stage of the regulation of GMOs, including the need for risk assessments
before a licence is granted, and controlled licences that place restrictions on the growing of new
GMOs (this enables sufficient knowledge and experience to be gathered while minimising risks)(OGTR, sub. DR265). Uncertainty should not be used as a reason for restricting technologies
which have been shown to provide benefits to the community and where potential risks can be
managed.
Also, there is a difference between applying precautionary measures and invoking the
precautionary principle. The precautionary principle (as per the 1992 United Nations
Environmental Program Rio Declaration) is included in the Gene Technology Act, and applies
when there are threats of serious or irreversible environmental damage. To date, no suchsituation has been identified in the applications assessed by the OGTR (sub. DR265).
(Continued next page)270

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Box 6.6(continued)

Regulator risk analyses rely on data provided by applicants
In addition to critically evaluating the data provided by licence applicants (typicallybiotechnology companies), the OGTR gathers evidence from published literature, and consultswith members of the Gene Technology Advisory Committee and other agencies. The Gene
Technology Regulator also has the power to commission independent scientific research wherea gap in the literature is identified (OGTR, sub. DR256).
Further, when an applicant seeks approval for a new GM food, the data they provide to FSANZ
must be generated according to quality assurance guidelines based on internationally accepted
protocols, such as procedures consistent with Good Laboratory Practice (FSANZ 2016e). The
data must also stand up to external scrutiny, such as independent audits. FSANZ complements
data provided by applicants with information from the scientific literature, other applications,
government agencies and the public. FSANZ highlighted that paper reviews are a standard
scientific method of evaluation used by regulators around the world for a variety of products,
including food, drugs and agricultural and veterinary chemicals (FSANZ 2016e).

FSANZ does not require animal testing for GM foodIn 2007, FSANZ convened an expert panel to consider whether animal testing for GM foods
was required. The panel recommended that FSANZ continue its case-by-case assessment
based on the best available science (FSANZ 2007b). FSANZ does not require animal toxicity
testing because it considers that:In the majority of circumstances, animal toxicity studies with whole foods are not likely to contributeany further useful information to the safety assessment … (2007a, p. 17)

While animal toxicity testing can be useful in identifying potential adverse effects of chemical
substances, whole foods are a complex mixture of chemical substances. This means that it
could be difficult to attribute adverse effects observed in toxicity testing to a particular foodcharacteristic, including GM status (FSANZ 2007a). That said, where animal toxicity studies
already exist, applicants are expected to provide these to FSANZ as part of their application.

There is duplication between the OGTR and the APVMA
In some instances, GMOs or products could fall under the remit of both the OGTR and the
APVMA. Examples include veterinary GM vaccines and GM plants that have been altered to
encode pesticides. The Veterinary Manufacturers and Distributors Association (sub. 79) said
that in one case, a vaccine used in intensively farmed animals was required to comply with both
OGTR and APVMA requirements, resulting in a cost of more than $2 million.
Under their respective legislation, the APVMA and OGTR must consult with each other onapplications involving a GMO (in the case of the APVMA) or before granting a licence for a
dealing with a GMO (in the case of the OGTR). The OGTR (sub. DR265) said that wherever
possible, both agencies coordinate decision making.
The APVMA (sub. DR228) also said that it works closely with the OGTR to align common
requirements and ensure that there are no repeated assessments. It also said that it would
continue to seek advice from the OGTR as part of agvet chemical registration activities,
regardless of whether there were separate requirements under the two frameworks.
(Continued next page)

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Box 6.6(continued)

The concept of ‘substantial equivalence’ is scientifically invalid
When determining the safety of GM foods, FSANZ assesses if the food is ‘substantiallyequivalent’ to its non-GM counterpart. This concept is contained within the Codex Alimentarius— a set of harmonised international food standards developed by the WHO and FAO — and isused by many overseas regulators including the US Food and Drug Administration, theCanadian Food Inspection Agency and the European Food Safety Authority. In 2007, a joint
FAO and WHO Expert Consultation on Safety Aspects of Genetically Modified Foods of Plant
Origin re-evaluated the usefulness of the concept of substantial equivalence and concluded that
there were presently no alternative strategies that would provide a better assurance of safety ofGM foods (FSANZ 2007a).

However, other concerns were raised about issues broader than GM technology as a
production technique. For example, some participants associated GM technology withconcerns about modern agricultural production and distribution systems. Madge Australia
said that ‘agroecology, not industrial GM farming, will feed the world’ (sub. 92, p. 10),and advocated for:… a rapid and significant shift from conventional, monoculture-based and highexternal-input-dependent industrial production towards mosaics of sustainable, regenerative
production systems that also considerably improve the productivity of small-scale farmers.
(sub. 92, p. 11)
Some called for a shift towards organic systems or for support for organic farmers(Michelle McLaren, sub. DR256; Richard Nankin & Rosemary Cousin, sub. DR248;
personal views and responses on gene technology).
While some consumers may prefer organic produce, this form of production typicallyrequires more resources — in particular, land — and therefore may not be able to meet the
food supply needs of the population. Most of the world’s land that is suitable for farming isalready used for this purpose, and therefore increases in production (to meet growing
global demand for food) must come from higher yields (The Economist 2016). Yields fromorganic farming systems have been found to be lower than those from conventional
production systems (Seufert, Ramankutty and Foley 2012).
Some participants also expressed distrust in the institutions involved in the regulation,
production and distribution of agricultural produce. For example, Chris Coughran said that:
While GMO crops may not be inherently unsafe, from a strictly scientific point of view, thecontext of their deployment (i.e. the market, solely dedicated to the expansion of private
profits) must be considered a critical factor in the likely emergence of adverse effects on humanhealth and the Australian environment. (sub. DR93, p. 1)

272

REGULATION OF AUSTRALIAN AGRICULTURENegeen Nichols also said that:… consumers of GMO food are little more than guinea pigs in a global experiment designed tobenefit state and corporate stakeholders. (sub. DR94, p. 2)

This sentiment was commonly expressed by those opposed to GMOs in the personal views
and responses on gene technology received by the Commission.
Many were concerned that corporations involved in developing GMOs were engaging in
unconscionable, anti-competitive or fraudulent behaviour — for example, by ‘controlling’
the supply of seeds, suppressing information about harmful health effects, or manipulating
the media. 19
Madge Australia (sub. 92, sub. DR224) also said that there are conflicts of interest withininternational organisations and food safety regulators which result in assessments anddecisions that are not in the interest of human health and safety and the environment.
In contrast to concerns stemming from a misunderstanding or a lack of knowledge, thesetypes of concerns are likely to be more difficult to address through improved public
communication and engagement (discussed below).
The Commission considers that the regulatory frameworks and processes of the OGTR and
FSANZ are sufficiently rigorous to protect the health and safety of the Australiancommunity and the environment. These arrangements must keep pace with advances in
GM technology to continue to achieve their objectives. The Commission notes that a third
statutory review of the Gene Technology Act is due to commence in 2016 or 2017
(OGTR, sub. DR265).

Regulation to address market access and trade concerns
Under the inter-governmental Gene Technology Agreement 2001, state and territory
governments have agreed to maintain legislation that corresponds with the CommonwealthGene Technology Act (OGTR 2014). However, the agreement does not preclude states andterritories from introducing their own legislation to address market access and tradeconcerns associated with producing and marketing GMs, and most have done so. For
example, in 2003, after GM canola was approved for commercial release by the OGTR, allstates and territories except for Queensland and the Northern Territory enacted moratoria
on its cultivation. The moratoria on GM canola in New South Wales and Victoria were

19 Participants who were concerned that corporations involved in developing GMOs were engaging in

unconscionable, anti-competitive or fraudulent behaviour included: Michael Burns (sub. DR280); Gene
Ethics (sub. 90); Madge Australia (sub. 92); Richard Nankin & Rosemary Cousin (sub. DR248); Networkof Concerned Farmers (sub. DR128); personal views and responses on gene technology; MiguelPez (sub. DR177); Estelle Ross (sub. DR100); and Slow Food Hobart (sub. DR123).

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subsequently lifted in 2008 following recommendations by independent reviews. Western
Australia also repealed its moratoria legislation in October 2016.
Partial or complete moratoria on the cultivation of GM crops (including crops other thancanola and cotton) remain in New South Wales, South Australia, Tasmania and the ACT(figure 6.1), and some inquiry participants said that these have a negative impact on theirproductivity and competitiveness. For example, the Australian Dairy Farmers said that:… state-based legislation is unwarranted and represents a serious impediment to the adoptionof new technological advances evolving in the dairy sector. (sub. 63, p. 4)

The National Farmers’ Federation (NFF) also said that:
With much of the science community expelling the fears surrounding GM crops, thismoratorium acts solely to restrict the ability of farmers to choose their production means andmethods, and in doing so limits innovation and growth in the sector. (sub. 61, p. 15)

The rationale given for the moratoria is that they enable states to create a brand name that
confers benefits on producers. The South Australian Government stated that it:… has retained its prohibition on the cultivation of GM food crops including canola to ensurethat South Australia can retain its position in the global marketplace and retain one of theattributes that underpin the State’s economic priority Premium Food and Wine Produced in our
Clean Environment and Exported to the World. (sub. 57, p. 18)

Similarly, the Tasmanian Department of Primary Industries, Parks, Water andEnvironment said that its moratorium ‘is intended to position the State in the global
marketplace as a producer of food that is genuinely GMO-free’ (2013, p. 3).
There is mixed evidence about the benefits of such branding (box 6.7). However, thequestion of whether moratoria on GM crops are warranted depends, in the first instance, on
the ability of GM and non-GM production systems to coexist, rather than the benefits ofproducing non-GM products. If GM and non-GM systems can coexist, producers of
non-GM products would realise benefits regardless of whether GM products were in themarket.
Price premiums depend on the ability of producers to differentiate their products and tomarket these premium attributes. There is no clear case for governments to support
non-GM producers’ marketing activities at the expense of those who wish to grow
GM crops, and this is especially so given that, in many cases, consumer preferences (andhence demand) for non-GM foods are based on a misunderstanding about the health andsafety of GM food. Like mandatory requirements to label GM food, moratoria could
reinforce misplaced community concerns about the potential risks associated with
consuming GM foods (chapter 10).
In the absence of moratoria, non-GM producers could still command price premiums bycreating brands that are associated with premium attributes (among other things).

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Producers are free to market their products in any way they wish, as long as their claims
are not misleading (chapter 10).
Figure 6.1
WA GeneState and territory legislation and moratoria for GMOs

Technology Act
2006• No GM crop
moratorium• GM Crop Free
Areas Act 2003
repealed in
October 2016

NT Gene Technology

Act 2004• No GM crop
moratorium• No commercial
cultivation of GM crops

SA Gene Technology
Act 2001;
GM Crop Management
Act 2004• Moratorium on commercial
cultivation and transport ofGM crops and/or seed
• Exemptions for field trials
under specific conditions

Vic Gene
Technology Act
2001; Control of
GM Crops Act
2004• No moratorium• Commercial
cultivation of
GM canola

Complete moratorium

Qld Gene Technology Act 2001
• No GM crop moratorium• Commercial cultivation of GM cotton

NSW Gene
Technology Act
2003; Gene
Technology (GMCrop Moratorium)
Act 2003• Moratorium oncommercial
cultivation ofGM crops• Exemptions forcultivation ofGM cotton andcanolaACT Gene Technology(GM Crop Moratorium)
Act 2004• Moratorium oncommercial cultivationof all GM crops• Exemptions forcultivation of GM
canolaTas Gene Technology (Tasmania)
Act 2012;
GM Organisms Control Act 2004
• Moratorium on commercial
cultivation of all GM crops

Partial moratorium

No moratorium

Source: Adapted from GrainGrowers (2016).

TECHNOLOGIES275

Box 6.7

Mixed evidence of the marketing benefits of GM moratoria

Some states and territories argued that maintaining a GM-free status is an essential componentof their marketing and branding that allows them to obtain market access or a price premium indomestic and international markets. For example, during the second reading debate for the
Genetically Modified Organisms Control Amendment Bill 2014 (Tas), David Llewellyn said that:
Some years ago I was told by Mr Armstrong from Harvest Moon that he could export some of his
products into Japan in plain boxes but he could get a 10 per cent increase in the same products if theboxes listed Tasmania as a source for those products. It goes to show that we need to harness theopportunities that are available in this state to market our products. In doing that we need to live up to
the reputation that we have gained of being clean, quality and green in our marketing process. (2014)

Locke (2016a) reported that GM canola consistently sells for a lower price than non-GM canola,
with the 2015-16 harvest in Western Australia marked down by up to $50 per tonne.
WAFarmers also reported that the ‘premium for non-GM grain has varied from $10 toapproximately $65 [per tonne]’ (sub. DR226, p. 14). In addition, there is some evidence thatsome non-GM grains attract a higher price than their GM counterparts in certain nichehigh-income markets, where mandatory labelling for GM exists (Foster 2010).
However, evidence also suggests that in many instances, non-GM products do not command a
price premium at the bulk trade level. Reviews undertaken in both New South Wales andVictorian found that there was no evidence to indicate a market or price advantage forAustralian canola marketed as non-GM (Armstrong, Adams and Reeves 2007; VDPI 2007). And
Primary Producers SA submitted that:… the argument that the ban is gaining SA producers premiums is not supported by any real
evidence, and grain prices suggest otherwise. (sub. 41, p. 4)

The review of the moratorium in Tasmania also found that:
Tasmania’s markets for food and beverage products are on the whole ambivalent about the State’s
GMO-status. Within the two Asian markets considered, there is not a high level of recognition orunderstanding by consumers about GM foods. The underlying perception of GM foods in thesemarkets is that they are not good for human health, but consumers are not prepared to pay a pricepremium for GMO-free. (TDPIPWE 2013, p. 5)

Moreover, price premiums do not necessarily mean higher profits. Participants to the 2007
review of the Genetically Modified Crops Management Act 2004 (SA) pointed out that:… the financial benefits that are reported to exist with non-GM canola do not take into account thebetter gross margins that can be obtained with GM canola production. (2007, p. 5)

Can GM and non-GM production systems coexist?
The presence of both GM and non-GM crops in the same area of land introduces thepossibility that unwanted GM material could be found in non-GM produce, or vice versa.
This could occur in the field (box 6.8), during transport (GM Cropwatch, sub. DR113) orwhen produce is being processed at receival sites (box 6.9). Cross-contamination that
results in the loss of marketing advantages is a market failure known as a negative
externality.

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Box 6.8

The case of Marsh v Baxter

In Marsh v Baxter, organic farmers Stephen and Susan Marsh (the Marshes) lost their organic
certification because genetically modified canola grown in the neighbouring farm owned byMichael Baxter was blown by the wind onto the Marshes’ property. The Marshes broughtproceedings in the Supreme Court of Western Australia, alleging private nuisance and common
law negligence, seeking a permanent injunction and damages for economic losses of $85 000.
However, the case was dismissed. The reasons given were that:•a private nuisance had not been established, as there had been no unreasonableinterference by Mr Baxter in the Marshes’ use and enjoyment of their property•

a duty of care for purely financial losses is without precedent, defeating the action incommon law negligence.

The court also noted that Mr Baxter had used a well-accepted method for growing andharvesting genetically modified canola, and that the decision by the organic certifier (theNational Association for Sustainable Agriculture Australia) to revoke the Marshes’ organic
certification ran contrary to guidelines and rules under which it operated.
The plaintiffs unsuccessfully appealed the decision in the WA Court of Appeal. An application
for leave to appeal to the High Court of Australia was also dismissed.
Sources: Marsh v Baxter [2014] WASC 187; Marsh v Baxter [2015] WASCA 169.

Box 6.9

Cross-contamination during processing

In a member’s statement to the WA Legislative Council, the Hon. Darren West MLC recounted
his experience of canola cross-contamination at a Cooperative Bulk Handling receival site in
Avon, Western Australia. He was told that his canola would have to be processed as GM canola
due to contamination.
I [was] told, “Sorry to do this to you, but … one of the samplers has accidently thrown a bucket of
GM canola on top of your load of non-GM canola.” I now had this contaminated load of canola. I wasvery unhappy about that and I asked the manager of the Avon receival site whether we could remove
the GM canola from the top of my load of non-GM canola, because it was very easy to see; it was avery different colour. He informed me, “Don’t worry, you will still be paid the price for non-GM canola”,
which has a $58 premium over GM canola, “but you will have to tip that load of GM canola into the GM
stack, because we have zero tolerance for contamination by GM canola in our canola stacks.”(West 2015, p. 9268)

He estimated that the total cost of the reclassification of his canola was $1334.
Source: West (2015).

The ability of state and territory governments to impose moratoria should be based solely
on a demonstrated market failure regarding the coexistence of GM and non-GM production
systems. That is, states and territories should only impose moratoria on the cultivation ofGM crops if negative spillovers cannot be effectively managed, and if these spillovers
outweigh the benefits of GM technology.

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Evidence suggests that GM and non-GM systems can coexist.
•

Many participants 20 pointed to the ability of industry to manage the segregation of GM
and non-GM products along the supply chain. For example, CropLife Australia saidthat:
GM and non-GM canola has been grown side-by-side successfully and productively without
creating marketing issues. With 7 years under our belt of growing GM canola, there has notbeen one incident across more than 5.6 million tonnes of canola seed delivered domestically, or
more than 15 million tonnes delivered internationally, where an end user … has not received
what they had ordered in terms of the GM status. (sub. 14, p. 11)

Reviews of GM moratoria in New South Wales, Victoria and South Australia have also
found that industry is able to manage segregation throughout the supply chain(Armstrong, Adams and Reeves 2007; SA Genetically Modified Crop Advisory
Committee 2007; VDPI 2007).
•

Organic foods are produced in areas where GM crops are permitted. For example,
organic honey is produced in Victoria, despite there being no moratorium(VicHoney 2016). A 2007 review by the Victorian Department of Primary Industries
also noted that US production of organic corn and soybean has increased since theintroduction of GM varieties, and in Canada (where GM foods have been available
since 1994), the organic sector increased by 60 per cent between 2002 and 2007
(VDPI 2007).

Consumer law and common law also define some of the responsibilities of various parties
in managing the coexistence of GM and non-GM products.
•

Consumer law prohibits producers from making false or misleading representations —products marketed to consumers as ‘GM’ or ‘non-GM’ must be genuinely so.

•

Producers and those along the supply chain could be legally liable for losses that result
from the adventitious presence of their products — causes of action could include
common law trespass, negligence and nuisance (VDPI 2007). Although both actions of
nuisance and negligence in Marsh v Baxter were dismissed (box 6.7), the Commission
notes that each case is decided on its facts. Courts in Australia have previously foundthat, under certain circumstances, a duty of care exists for pure economic losses. 21

These arrangements are likely to be most effective when growers, handlers and otherparties with responsibilities for managing products can be easily identified. They may beless effective when this is not the case, such as when GM material spills onto roadsides
during transportation. However, the need to ensure that products are contained duringtransportation is not confined to GM products.
20 Participants who pointed to the ability of industry to manage segregation of GM and non-GM products
included: the Australian Dairy Farmers (sub. DR218); CropLife Australia (sub. 14); Grain Producers
Australia (sub. DR201); Pastoralists and Graziers Association of Western Australia (sub. 70); and the WA
Government (sub. 54).
21 See, for example, Perre v Apand Pty Ltd (1999) 198 CLR 180.

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Contractual arrangements, industry codes of practice or guidelines could also be used tofacilitate coexistence. For example, producers who enter into contracts to supply particular
products (whether GM or non-GM) are bound by the terms of those contracts and mustensure the integrity of their products. In addition, growers who wish to grow GM crops
could be required to sign licence and stewardship agreements with technology developers
that, among other things, require them to adhere to conditions relating to product integrity(both within the GM crop as well as for adjacent crops). An audit in Western Australia
found that growers who grew Monsanto’s Roundup Ready canola that year complied withthe conditions set out in their licence and stewardship agreements (Parliament of Western
Australia 2010).
In addition, buffers between properties (in the form of separation distances or physicalbarriers) could be used to manage the coexistence of GM and non-GM crops. Many local
governments have guidelines in place for determining the nature of buffers to deal withdifferent types of emissions, such as chemical spray drift, sediment and water run off(chapter 2). Similar arrangements could potentially be used to manage drift of GM seeds,
pollen or other material to adjacent properties.

FINDING 6.1

There is no economic or health and safety justification for banning approved
genetically modified (GM) organisms.
•

The Office of the Gene Technology Regulator (OGTR) and Food Standards
Australia New Zealand (FSANZ) assess GM organisms and foods for their effecton health, safety and the environment. Scientific evidence indicates that
GM organisms and foods approved by the OGTR and FSANZ are no less safe
than their non-GM counterparts.

•

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.

Moratoria are likely to impose net costs on the community
Several reviews and regulation impact statements (RISs) to evaluate the costs and benefitsof the moratoria have consistently failed to demonstrate net benefits. For example, the RIS
conducted by the Tasmanian Department of Primary Industries, Parks, Water andEnvironment to assess an extension of the Tasmanian moratorium until 2019 found thatmaintaining the moratorium would have a quantifiable net cost of $1.5 million (box 6.10).

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Box 6.10

Economic assessments of moratoria on cultivating
genetically modified organisms

Tasmania’s regulation impact statement for extending its moratorium
Tasmania’s regulation impact statement for extending its moratorium on genetically modified(GM) crops examined the costs and benefits of two options — maintaining Tasmania as a
GMO-free area or allowing the cultivation of GMOs.
•

A marketing advantage in domestic and international markets was noted as one of the main
benefits of maintaining Tasmania as a jurisdiction free of GMOs. The value of thatmarketing advantage was not quantified, but was assessed to be ‘not insignificant’.

•

The benefits of allowing GM crops in Tasmania were theoretically assessed as being
relatively small because only GM canola was suitable and available for commercial
production in Tasmania at the time.

•

The quantifiable net cost of retaining the moratorium for a further five years was estimatedto be $1.5 million, over 70 per cent of which were regulatory costs borne by the Tasmanian
Government.

Despite this assessment, the regulation impact statement concluded that:
In light of the strong stakeholder support for extending the moratorium and feedback from producers
who perceive that they gain a significant market advantage from the State’s GMO free status thebenefits of the moratorium, although difficult to quantify, are assessed as substantial. These benefits
are assessed as likely to exceed the cost of extending the moratorium for 5 years. (TDPIPWE 2014a,p. 4)

Review of Victoria’s moratorium on the cultivation of GM canola
In May 2007, an independent panel was established by the Victorian Government to review theState’s moratorium on the commercial cultivation of GM canola. The four-year moratorium wasestablished in Victoria in 2004 based on trade and market access considerations. The review
found that:•the moratorium imposed a direct net cost of $60-65 million to the Victorian economy•

extending the moratorium for a further eight years would impose a direct net cost of$110-$115 million.

The review panel recommended that the moratorium be lifted. The Victorian Government
accepted this recommendation and allowed the moratorium to expire in 2008.
Sources: TDPIPWE (2014a); VDPI (2007).

The Tasmanian Government extended the moratorium on the basis that the unquantified
marketing benefits were likely to exceed the costs. In addition, it claimed the presence ofsensitive information to justify not publicly releasing the full RIS and provided only asummary (TDPIPWE 2014a).
In contrast, Victoria’s moratoria was lifted following an independent review which foundthat the moratoria imposed a net cost on the Victorian economy (box 6.10). The review
identified the costs of the moratorium to include:•280

reduced yields of non-GM varieties compared to GM varieties
REGULATION OF AUSTRALIAN AGRICULTURE•

costs imposed by the use of more herbicides•

increased cultivation costs•

reduced ability of Victorian grain producers to adapt to changing circumstances andremain competitive over time, if the moratorium was extended (VDPI 2007).

Moratoria can also raise the operating costs of farm businesses.
•

The presence of a layer of regulation by state and territory governments, in addition toregulation by the Australian Government, imposes unnecessary costs on farmbusinesses operating across jurisdictions. Farm businesses wanting to use new
GM-related biotechnologies must effectively seek approval from two levels ofgovernment (AusBiotech 2014).

•

The inability to transport GM crops and seeds through certain states increases transport
costs. The Australian Seed Federation said that because of the moratorium in South
Australia, ‘canola seed companies/producers in the Eastern states and Western
Australia are now forced to ship GM canola seed by sea or move by road transport
through Darwin, avoiding the natural transport route through South Australia’(2011, p. 7).

The moratoria should be removed
New South Wales, South Australia, Tasmania and the ACT should remove their moratoria
on GM crops. State and territory governments should also repeal the legislation that
imposes the moratoria or gives them the discretion to designate their jurisdiction as aGM-free zone. This will increase certainty to businesses that the moratoria will not be
re-introduced in the future.
The removal of state and territory moratoria will result in a nationally consistent system forthe regulation of GMOs by the OGTR. To strengthen this system, state and territory
governments should automatically adopt into law any amendments made to the
Commonwealth legislation. This is the current approach in New South Wales and theNorthern Territory, and is an efficient means of maintaining uniform regulations andavoiding periods of legislative inconsistency (and uncertainty), which can occur as eachjurisdiction arranges for the passage of new amendments to the Commonwealth Gene
Technology Act (OGTR 2011).
The removal of the moratoria does not necessarily mean that there will be widespread
adoption of GM crops. Rather, farm businesses will be able to select the type of crops thatthey consider will maximise profits. In doing so, they will weigh up the costs and benefitsof growing GM crops, including price differentials, domestic and international consumer
demand, yields, and legal, financial and climate risks.

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Is more effective communication needed to address community concerns?
Although the moratoria aim to address market access and trade concerns, many
participants opposed their removal because of concerns about health and safety and thebroader social impact of GMOs (discussed above). There is a question about whether
governments can (or should) address these concerns — attitudes towards GM technology
are influenced by a complex array of factors (box 6.11).
It is not the role of government to promote particular technologies. However, governments
do have a role in addressing knowledge gaps that prevent consumers from making
well-informed decisions. This includes facilitating an accurate understanding of the risks
and benefits of GM technologies, and is analogous to the role of government in providing
information about vaccinations to counter misleading safety claims which can harm publichealth.
Previous reviews of the Commonwealth and Queensland Gene Technology Acts, as well as
participants to this inquiry, highlighted the need for governments and regulatory agencies
to provide more information about GM technologies and their regulation to address publicconcerns (Allen Consulting Group 2011 AFGC, sub. 28; Australian Food Soverignty
Alliance, sub. 27; Taylor, Mitchell and Sward 2013). However, providing information is
only one aspect of effective public communication, and it is unlikely to be effective on its
own. The OGTR and FSANZ acknowledged that risk communication is more thanproviding scientific and technical information — it also involves active engagement withstakeholders (box 6.12).
Risk communication is the main public engagement approach used by FSANZ and theOGTR, and is important in building public knowledge and informing decision making. As
the OECD recently said:
Without good risk communication, the public may underestimate some risks, and thus takeinsufficient precautions, and overestimate others, leading to sub-optimal allocation of
resources. (2016a, p. 13)

However, some evidence suggests that risk information alone can have a negative effect on
individuals’ perceptions of GM products (box 6.11). This is because knowledge about thepotential costs or threats to people or the environment can lead to negative attitudes
towards GM technologies, or reinforce pre-existing negative beliefs. Conversely,communicating the benefits of GM technologies, including economic, health andenvironmental advantages, is more likely to lead to positive attitudes (although thisdepends on the level of trust in the source and nature of the information). A mix of
information on the benefits and risks of GM technology, provided by trusted sources, islikely to be more effective in facilitating greater understanding of GM technology.

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Box 6.11

How are attitudes towards gene technology formed?

There are two broad classes of cognitive processes through which attitudes towards genetechnology are formed — ‘bottom-up’ and ‘top-down’ processes.

Bottom-up attitude formation
Bottom-up attitude formation occurs when attitudes towards a particular product are informed byknowledge about the product. This knowledge includes:•

information about risks — for example, a study involving 2486 university students in China
found that knowledge about the risks (actual and perceived) of GM technology to people or
the environment led to negative attitudes towards GM food (Zhu and Xie 2015)•

information about benefits — knowledge about the benefits (including economic, health andenvironmental advantages) of GM technology tends to be associated with positive attitudes(Zhu and Xie 2015). GM foods that provide more visible or direct consumer benefits (such as
improved nutritional content, lower prices and increased competitiveness of locally producedfood) are more likely to be acceptable to the public. Support for GM technology is also
higher when it is used for medical purposes compared to agricultural or industrial purposes(Instinct and Reason 2015)•

trust of information sources — information about the risks and benefits of GM technology ismoderated by consumers’ trust in the organisations providing the information (such as
scientists, media, government and non-government organisations). For example, Marques etal. (2015) found that, in Australia, levels of trust in scientists, watchdogs and regulators were
important predictors of consumer attitudes towards GM foods.

Top-down attitude formation
Attitudes towards gene technology that are formed through top-down processes draw uponhigher-order (and often abstract) values, attitudes and beliefs. This means that attitudes about
GM technology are embedded in, and influenced by, a broader landscape of personal values,
including general attitudes to nature, the environment, technology, science, globalisation, freemarkets and modern agriculture (Grunert, Bredahl and Scholderer 2003; Lucht 2015). For
example, a US survey found that the use of GM technology was less undesirable in processedthan fresh foods (Lusk and Norwood 2011). Similarly, consumers express greater aversion to
GM foods than to genetically engineered drugs (van der Hoeven 2015). These attitudes could
derive from broader views about nature and technology — such as a belief that ‘unnatural’processes should not be applied to ‘natural’ products (such as fresh food), but acceptance of
their application to ‘unnatural’ products (such as processed foods and drugs).

Interaction between bottom-up and top-down processes
For most consumers, attitudes towards GM products are influenced by a combination ofknowledge about GM products, as well as broader values, attitudes and beliefs. However, when
consumers have limited knowledge or experience regarding particular GM foods, they are more
prone to relying on top-down approaches (Bredahl 2001). For this reason, providing informationcan, to some extent, influence public attitudes, but is likely to have less effect where personalvalues are deeply rooted or strongly held (Frewer, Scholderer and Bredahl 2003; Grunert,
Bredahl and Scholderer 2003; Scholderer and Frewer 2003; Zhu and Xie 2015). One study
involving 1405 consumers from Denmark, Germany, Italy and the United Kingdom found that
information provision had very little effect on attitudes towards GM foods (Frewer et al. 2013).

TECHNOLOGIES283

Box 6.12

Risk communication by the OGTR and FSANZ

Both the OGTR and FSANZ employ risk communication as part of their risk analysis
frameworks. Risk communication is more than just providing technical and scientific information— it is an iterative exchange between decision-makers and interested and affected parties thatprimarily, but not exclusively, focuses on risks (and uncertainties). It is a two-way process that
acknowledges concerns raised by stakeholders, identifies how these concerns have beenaddressed, and involves mechanisms to receive and analyse feedback (FAO 2008). It is not anattempt to change basic values or beliefs (OGTR 2013).
An effective risk communication strategy facilitates transparency and trust in the regulatory
system for GMOs and GM foods, and provides decision-makers with access to information. It
also allows decision-makers to identify the types of information that stakeholders need to better
understand risks and uncertainties (FSANZ 2013c; OGTR 2013).
Consultation on applications form a large part of the OGTR’s and FSANZ’s risk communication
strategy. As part of the process for reviewing applications, consultation is conducted with
relevant government agencies, scientific and technical experts, and other interested parties(including the general public). Written submissions are also invited and taken into accountduring the risk assessment process. The OGTR prepares summaries that identify and address
the issues raised in submissions, and these are included as appendixes to the risk assessment
and risk management plans. FSANZ makes all submissions publicly available (FSANZ 2013c;
OGTR 2013).
When engaging with stakeholders on social and ethical issues, the OGTR can request theadvice of the Gene Technology Ethics and Community Consultative Committee. The committee
comprises 12 members with expertise in areas such as community consultation, risk
communication, ethics and law (OGTR 2016b).
The OGTR and FSANZ communicate risk information in many ways. For example, the OGTR
publishes its Risk Analysis Framework and maintains the GMO Record, which contains
information about authorised dealings with GMOs and GM product approvals, including licenceconditions and locations of field trials. FSANZ (2015e) also publishes its responses to studies
that claim to show that GM foods have adverse effects, or that have been interpreted by others
as being evidence of adverse effects.

The Commission considers that the removal of the moratoria and the repeal of theirenabling legislation provides an opportunity for governments to clarify misinformation andimprove knowledge about the risks and benefits of GM technologies. Effective
communication and public engagement on the risks and benefits of GM technology could
help build community confidence in regulators, and provide a basis for more informed,
evidence-based decisions and discussions about GM technology in Australia. It could also
reduce the likelihood of governments resorting to costly regulatory responses to addresscommunity concerns, such as mandatory labelling of GM products (chapter 10).
Developing effective communication approaches requires an understanding of the factorsthat influence attitudes towards gene technology, including perceptions and knowledge ofrisks and benefits, individual values and beliefs such as attitudes towards nature, theenvironment and globalisation, general receptiveness to science and technology, and trustin the institutions involved in developing and regulating GM products (box 6.11).
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A combination of communication approaches may be required, given the complexity ofviews and differences of opinion on GM technologies. This could include strengthening
the communication role of technology and food-related policy and regulatory agencies at
the Commonwealth and state and territory levels. It could also involve government
agencies more proactively consulting with trusted, neutral and credible third-party experts
or organisations, such as academics, research bodies and scientific agencies, including theCSIRO and/or the Office of the Chief Scientist. These experts may be able to assist in thedevelopment of more effective communication strategies, and could even participate indelivering them.
Different agencies and approaches may be required for different target audiences andpurposes. For example, Australian and state and territory government departments ofhealth and agriculture could play a greater role in communicating the benefits of GM
technology (rather than the OGTR and FSANZ), so that trust in the role of regulators inapplying scientific principles to regulatory assessments is not undermined. FSANZ and the
OGTR could also be more proactive in communicating the risks of GM technology
generally (and in a more easily accessible form), rather than only the risks associated withthe specific GMOs being assessed. As part of the process to remove the moratoria,
agencies should coordinate communication strategies designed to increase publicknowledge about the benefits and risks of GM technology, and the regulatory frameworkfor gene technology.
Communication on the benefits and risks of GM technology may not lead to an immediate
increase in public knowledge or acceptance of GM technology, as attitudes tend to change
slowly over time. And as noted earlier, some public concerns are not related to
GM technology per se, but rather to more general ethical concerns and beliefs.
Nevertheless, to the extent that opposition to GM technologies is based on
misunderstanding or inadequate information, more effective public communication andinformation provision could help to increase public acceptance of GM technologies.
Attitudes may also change over time through experience that reveals direct benefits to
consumers.

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RECOMMENDATION 6.1

The New South Wales, South Australian, Tasmanian and Australian Capital Territory
Governments should remove their moratoria (prohibitions) on genetically modified
crops. All state and territory governments should also repeal the legislation that
imposes or gives them powers to impose moratoria on genetically modified organisms
by 2018.
The removal of the moratoria and repeal of the relevant legislation should beaccompanied by coordinated communication strategies designed to increase publicknowledge about the benefits and risks to the Australian community from genetic
modification technologies. The Australian, state and territory governments, the Officeof the Gene Technology Regulator and Food Standards Australia New Zealand should
actively coordinate their communication strategies.

6.3

New breeding techniques‘New breeding techniques’ (NBTs) refer to a suite of recently developed biotechnologies,
including:•reverse breeding, which involves using a combination of techniques to create parental
lines that recreate an elite hybrid crop when crossed•

cisgenesis and intragenesis, which involve introducing traits or genetic material fromthe same or closely related species•

GM rootstock grafting, which involves the grafting of the vegetative part of a non-GM
plant onto the rootstock of a GM plant (FoE 2015).

NBTs allow for more precise changes to genetic material compared to previous genemanipulation technology. AusBiotech said that:
New breeding techniques show technical advantages when compared to ‘older’ techniques:some … allow site-specific and targeted changes in the genome … the use of new breeding
techniques [also] makes the breeding process faster, which lowers the production costs.
(sub. 20, pp. 7–8)

CropLife Australia also said that:
In most cases, new breeding techniques are innovative improvements and refinements oftraditional breeding methods used to optimise plant health, nutritional quality and yield.
(sub. 14, p. 9)

However, uncertainty about whether or not NBTs are captured by the definition of ‘GMO’
in Australian legislation is affecting its adoption. AusBiotech said that:
Biotechnology companies and plant and animal breeders are particularly concerned about thelegislative uncertainty of the GMO classification of new breeding techniques. The registration

286

REGULATION OF AUSTRALIAN AGRICULTUREcosts will be low if a technique is classified as non-GMO or very high if classified as GMO.
Therefore, the legal status of the new breeding techniques will influence the decision onwhether to use these techniques only for the introduction or modification of traits in productswith very high value or more extensively for a broad field of applications … (sub. 20, p. 8)

It also said that regulatory uncertainty is affecting the competitiveness of the agriculturalindustry (sub. 20).
Uncertainty about the GM status of NBTs occurs because, as the OGTR explained:… during the development of the [Gene Technology Act] is was felt that moving andrearranging genes between species constituted gene technology and therefore created GMOs,
whilst techniques that either mimicked natural processes or worked through natural
mechanisms did not create GMOs. At the time there was a clear distinction in this regard but
technology has advanced and there is no longer such a clear distinction. (pers. comm.,
27 May 2016)

FSANZ has also encountered similar issues regarding definitions under Standard 1.5.2 of
the Food Standards Code. This standard regulates food produced using gene technology.
FSANZ noted that when it began receiving inquiries about the regulatory status of various
NBTs in 2011, ‘it was not immediately clear whether … such techniques would be
captured by the current definitions’ (2013b, p. 6).

Efforts to clarify the GM status of new breeding techniques
To determine whether or not to classify NBTs as gene technologies under regulation, it isfundamental to consider what would be most scientifically appropriate. The Commission
heard conflicting views about whether or not NBTs should be regulated as
GM technologies (box 6.13).
In 2012, FSANZ convened an expert scientific panel to enhance its scientific knowledge ofseveral NBTs, and to gather scientific evidence on the nature of the food products derived
from them. The panel concluded that foods produced using techniques such as cisgenesis,
transgenesis and GM rootstock grafting should be regarded as GM foods and undergo
mandatory premarket safety assessment. However, other techniques such as oligo-directedmutagenesis and zinc-nuclease technology were similar to those used in conventional plant
breeding, and therefore foods produced using these techniques should not be considered
GM foods. The panel also considered that more information was needed on sometechniques (such as reverse breeding) to determine whether the foods produced using thesetechniques should be considered GM (FSANZ 2013b).

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Box 6.13

Participants’ views on whether new breeding techniques(NBTs) should be regulated as GM technologies

Participants’ views on whether NBTs should be regulated as GM technologies were mixed.
CropLife Australia said that:
Although the relevant Australian regulators (OGTR and FSANZ) have yet to reach a decision onwhether products developed using NBTs will be regulated as gene technology, CropLife is concerned
about the unnecessary regulation of products developed using NBTs simply based on the breeding
technique employed and not on the characteristics of the final products. In many cases, NBTs result in
products that are similar or indistinguishable from products developed through traditional breeding
methods. (sub. 14, p. 9)

AusBiotech (sub. 20, p. 8) also considered that NBTs do not pose a health or biosecurity risk,
and therefore urged a ‘light touch’ regulatory approach.
On the other hand, Friends of the Earth referred to NBTs as ‘new GM techniques’, and argued
that:… the current regulatory approach to GMOs should be the minimum requirement for these new
GM techniques … because it at least provides a basis for assessing any potential risks that result fromthe genetic engineering process. (2015, p. 7)

The OGTR is currently conducting a technical review of the Gene Technology
Regulations 2001 (Cwlth) to ensure that the regulation of dealings with GMOs remains
commensurate with risk, according to current science (OGTR, pers. comm., 27 May 2016).
It is expected that the review will improve clarity about whether or not NBTs should fallwithin the scope of the regulations. The OGTR has prepared a discussion paper canvassing
regulatory options for NBTs, and is currently seeking submissions from the public (2016a).
The regulatory experience regarding NBTs highlights the importance of ensuring that
regulations keep pace with technological advances. Regulations that lag behindinnovations can give rise to uncertainty, impose costs on businesses, and discourage
innovation. The OGTR acknowledged that:
Stakeholders wishing to ascertain the regulatory requirements associated with proposals
involving the application of emerging and new gene technologies are disadvantaged where theRegulator is unable to provide advice with legal certainty until requisite legislative amendments
are in place. (OGTR 2011, p. 4)

By contrast, regulations that are flexible and responsive facilitate the adoption of newtechnologies, and enable Australia to increase its productivity and competitiveness.
Regulators that are able to anticipate issues — through, for example, monitoring
international developments in technology and the regulatory responses of overseas
governments — are likely to be more effective in responding to developments. This
includes reducing the extent of regulation when developments in science are sufficient toabate uncertainties about the safety of new technologies.

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6.4

Regulation of drones

Farm businesses use drones for an increasing range of purposes, including remotemonitoring of water points, stockyards and feed availability. Drones can also be equippedwith sensors to diagnose animal health issues such as heat stress. As such, this technology
can improve farm profitability by reducing treatment costs and cattle stress (CCA, ALFAand SCA 2015). While the adoption of this technology in agriculture is presently low,
wider use in the future could lead to substantial productivity gains.
Some farm businesses argued that the regulations governing the use of drones imposed an
unnecessary burden. This includes the requirement that drones only be used within the lineof sight of the operator (CCA, ALFA and SCA 2015), which limits the use of drones onlarge farms and where cattle are located in remote locations.
Recent regulatory changes have made it easier for farm businesses to use drones as part oftheir daily activities. Private landholders (such as farmers) can now operate small remotely
piloted aircraft (less than 25 kilograms) on their own land without requiring an operator’scertificate or a remote pilot licence (CASA 2016). They are only required to notify the
Civil Aviation Safety Authority five business days before operating such aircraft(notification is valid for 24 months). However, they must adhere to a set of standard
conditions which includes a line of sight requirement.
Farm businesses have responded positively to the changes, with many choosing topurchase drones that enable them to check crops, stock and infrastructure (Foley 2016).

6.5

Access to telecommunications infrastructure

The lack of access to telecommunications infrastructure in regional Australia was acommonly reported source of frustration for farm businesses. For example, Larry Acton
said that:
There are long delays in repairing [telephone cable] faults … When we report a fault … theoperator suggests diverting the phone to our mobiles until repairs are done. There is almost no
mobile service in our area … also it means that our internet access for the computer, which iswireless, has to have a long aerial on the roof. (sub. 55, pp. 4–5)

The Australian Forest Products Association also submitted that:
Regional industries continue to face communications infrastructure constraints across phones,
data and radio networks that impact on important operational (e.g. harvesting, processing andmanufacturing) and emergency (e.g. firefighting and workplace health and safety)
communications. (sub. 11, p. 14)

Unreliable internet services were also raised as an issue during the Commission’s
consultations and case study interviews. One farmer told the Commission that they wereunable to access high-speed and reliable internet services despite the farm being within
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10 kilometres of a major population centre (appendix C). The farmer said that unreliableinternet services mean that emails containing information about important changes toregulation, or requests to comply with regulation, may never arrive. Similarly, responses torequests may need to be sent multiple times, or involve switching between devices
depending on what is working at the time.
Unreliable phone and internet connections can add to the transaction costs associated withcomplying with regulation. As such, they can contribute directly to the regulatory burden
felt by farm businesses. However, the Commission does not consider the availability oftelecommunications infrastructure to be a regulatory issue, in that it is not limited byregulation but rather depends on investment decisions by governments, industries and thecommunity.
The Commission notes that, in the Agricultural Competitiveness White Paper, theAustralian Government stated its commitment to enhancing access to communications
technology in regional areas by improving regional satellite services, improving coverageof the National Broadband Network, and improving mobile coverage through the Mobile
Black Spots Program (Australian Government 2015a). The Commission is also currently
conducting an inquiry into the future direction of a universal service obligation in thetelecommunications market, which will address issues relating to access totelecommunications (PC 2016b).

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7

Agricultural and veterinary chemicals

Key points•

Agricultural and veterinary (agvet) chemicals can improve the productivity, competitivenessand safety of farm businesses. Unnecessary barriers to accessing agvet chemicals should
be removed.

•

The regulation of agvet chemicals has been subject to numerous reviews, and subsequent
reforms, but concerns remain. The concerns are primarily about:− unnecessarily lengthy, complex and duplicative registration procedures− interjurisdictional inconsistencies, particularly in control-of-use regimes, which can makeit costly and confusing to comply with regulatory requirements.

•

The Australian Pesticides and Veterinary Medicines Authority could increase its use ofinternational assessments and decisions for products already registered by trusted
comparable regulators overseas.

•

Reforms to achieve a national control-of-use regime are currently underway. However,progress has been slow. In addition, the proposed scheme includes only minimalharmonisation of off-label use provisions.

Farmers use agricultural and veterinary (agvet) chemicals to protect their crops fromweeds, pests and diseases and to manage the health and wellbeing of their animals. In
2014-15, Australian farmers spent almost $1.5 billion on chemicals (or about 4 per cent of
total farm costs) (ABARES 2015a).
Agvet chemicals, while beneficial to farmers, can also potentially be harmful to humanhealth and the environment. For this reason, unregulated chemical use is not in the interestof the community. For example, on-farm chemical use can have negative spillover effects
on humans, animals or the environment. There may also be a role for government inaddressing information failures in the market for chemicals. For example, there can be
weak incentives for suppliers to communicate hazards and risks to users of chemicals.
Regulation of agvet chemicals that is effective and efficient can benefit both farmers andthe wider community by ensuring that:•farm businesses have access to agvet chemicals suited to Australian conditions•

available agvet chemicals do not have harmful impacts on human health and safety, andthe environment•

the level of chemical use in agricultural exports abides by the thresholds allowed in theimporting country.

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However, inefficient or ineffective regulations can unnecessarily slow down the approval
process, or fail to approve chemicals that would provide net benefits to the Australiancommunity. This can increase production costs and impede the productivity of Australian
farm businesses.
This chapter discusses the regulation of agvet chemicals, including who is responsible forwhat (section 7.1) and efforts to reform regulatory arrangements (section 7.2). The chapter
also examines areas of particular concern raised by participants. These include:•

the time and cost required to achieve chemical registration (section 7.3)•

inconsistencies in state and territory control-of-use regimes (section 7.4)•

difficulties in accessing chemicals for minor uses (section 7.5)•

labelling of agvet chemicals under work, health and safety regulations (section 7.6).

7.1

About agvet chemical regulation

Access to agvet chemicals in Australia depends on an array of regulations administered by
the Australian, state and territory governments.

The Australian Government is responsible up to the point of saleA national system of regulation applies up to the point of sale. The registration of all agvet
chemicals in Australia is regulated through the National Registration Scheme for
Agricultural and Veterinary Chemicals, a partnership between the Australian, state andterritory governments. The scheme is underpinned by an intergovernmental agreement
under which state and territory governments have conferred their power to the AustralianGovernment to regulate the supply of agvet chemicals up to the point of sale. States andterritories have also adopted a template Agricultural and Veterinary Chemicals Code
(Agvet Code). The Department of Agriculture and Water Resources (DAWR) has a role in
the governance and oversight of the scheme.
The Australian Pesticides and Veterinary Medicines Authority (APVMA) is anindependent statutory regulator, established in 1993 under the Agricultural and Veterinary
Chemicals (Administration) Act 1992 (Cwlth). It employs approximately 150 staff and iswithin the portfolio of the Minister for Agriculture. The APVMA regulates agvet
chemicals used by farmers, pest controllers, veterinarians, and other home or professional
users up to, and including, the point of retail sale (APVMA 2016b).
Unless exempt, an agvet chemical product must be registered by the APVMA before it canlegally be supplied, sold or used in Australia. Chemical products are assessed for theirimpact on human health, the environment and trade, as well as on their efficacy. Some
aspects of assessment are performed within APVMA after consultation with otheragencies, such as the Office of the Gene Technology Regulator.
292

REGULATION OF AUSTRALIAN AGRICULTUREThere are more than 11 000 pesticides and veterinary medicines currently registered inAustralia, including products for treating crop and garden diseases and pests, andmedicines for treating agricultural and companion animals (APVMA 2015a).

State and territory governments are responsible for control-of-use
State and territory governments are responsible for controlling the use of agvet chemicals
after the point of retail sale. This includes responsibility for:•ensuring that agvet chemicals are used legally (according to the APVMA’s
specifications)•formulating training requirements for licensing and the use of higher risk products•

licensing professional users•

monitoring licence compliance and chemical residues in produce and the environment•

conducting activities such as investigations, enforcement, compliance, education andextension.

7.2

Reforming the regulation of agvet chemicals

Problems with the regulation of agvet chemicals are not new. There have been a number ofreviews of, and reforms to, the regulatory arrangements for agvet chemicals in recent years(box 7.1).
In its Agricultural Competitiveness White Paper (2015a), the Australian Government
reiterated its commitment to improving access to agvet chemicals while maintaining
adequate protections for the health and safety of people, animals and the environment. To
that end, the DAWR is currently considering a range of reforms to better match regulatory
effort with risk, to improve the efficiency and effectiveness of agvet chemical regulationand to improve access to agvet chemicals (box 7.2).
Citing a report by ACIL Allen Consulting (2015), AusBiotech commented that:… when the performance of the [Pre-Application Assistance] was reviewed none of theveterinary industry participants indicated that they were satisfied with the administrativerequirements, timeliness, cost or quality of the response they received. In fact they felt that the
new arrangements provided a lower level of service that what was available before 1 July 2014.
While Industry was encouraged by the APVMA’s willingness to respond to its needs, its
execution of these changes fell well short of industry expectations … (sub. 20, p. 6)

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Box 7.1

Recent reviews of, and reforms to, agvet chemical regulation

Reviews of the regulatory arrangements for agvet chemicals in recent years include:•

a review of plastics and chemicals regulation undertaken by the Commission in 2008, whichfound that the operations of the APVMA were ineffective and inefficient. For example,
products that posed a low risk to public health and the environment were subject to lengthy
and complicated assessments and registration processes.

•

the review of the APVMA in 2011 by the Department of Agriculture, Fisheries and Forestry,
which found that:– the APVMA’s processes were inflexible and lacked clarity– a one-size-fits-all rather than a risk-based approach for applications was used
– unnecessary data requirements were sometimes imposed on applicants.

•

a 2013 study by the Australian Bureau of Agricultural and Resource Economics andSciences, which found that access to agvet chemicals for minor use was restricted byfactors such as the high cost of applying for a minor use permit.

•

the 2015 Agricultural Competitiveness White Paper, which noted that agvet chemical
regulation is often disproportionate to the risks that the products pose. The Paper argued
that this increases the cost of agvet chemicals and limits access to productivity enhancing
chemicals.

The operations of the APVMA have also undergone reform on several occasions.
•

In 2013, changes were made to the approval, registration and reconsideration of agvet
chemical products. The changes included implementing a risk framework to align regulatory
effort with chemical risk, and implementing and publishing guidelines that the APVMA must
adhere to.

•

In 2014, the agvet chemicals legislation was amended to remove the need for agvet
chemicals to be periodically re-approved and re-registered, and to improve access to
information about the APVMA’s processes.

•

In 2015, certain types of animal feed (previously classified as veterinary chemical products)
were excluded from regulatory assessment.

The purpose of these reforms were to improve the consistency, efficiency, timeliness andtransparency of the APVMA’s processes, to facilitate the ongoing registration of agvet
chemicals, and to improve the transparency and predictability of the APVMA’s decision making.
The Australian National Audit Office is currently undertaking an audit to assess theeffectiveness of the implementation of these reforms and the extent to which operational
efficiencies and reduced cost burden on regulated entities has been achieved. The audit is due
to be tabled in April 2017.
Sources: ANAO (2016b); Australian Government (2015a); APVMA (2014a); DAFF (2011a, 2011b); DAWR
(2015t); Gibbs, Harris-Adams and Davidson (2013); PC (2008a).

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Box 7.2

The reform agenda for agvet chemical regulation

The Department of Agriculture and Water Resources is considering a range of reforms to
improve agvet chemical regulation. In 2014 and 2015, it conducted several rounds ofconsultation to identify the main issues. The Department also recently published a series of
discussion papers, covering:•the use of overseas decisions as a basis for registration•

the scope of agvet chemical regulation•

the removal of efficacy and trade assessments•

crop grouping•

contestable provision of assessment services•

the streamlining of import and export regulation•

the APVMA CEO as a poisons scheduling delegate•

outstanding issues with legislation (DAWR 2016b).

The APVMA (sub. 21) noted that some reforms can be applied without the need for legislativechange. These include:•

better profiling of applications and the risks involved, and establishing faster pathways toregister products or make variations, including through online self-assessment, notifiablevariations and compliance with standards•

increasing the use of assessments conducted by comparable regulators both domesticallyand internationally•aligning technical guidelines and guidance material to those agreed internationally throughrecognised forums such as the OECD, the International Cooperation on Harmonisation ofTechnical Requirements for Veterinary Medicinal Products and the Codex Alimentarius•

seeking efficiencies in process through more contestable provision of assessment services
and streamlining internal business processes to speed up the assessment of applications.

However, other reform measures, such as establishing a co-regulatory system for agvet
chemical use, are longer-term propositions (DAWR 2016u).

More broadly, while CropLife Australia was supportive of the APVMA’s efforts toimprove its processes, it was critical of the role of DAWR.
… the APVMA has implemented a range of significant administrative and operational
efficiency initiatives that CropLife is optimistic will deliver some regulatory efficiency … It’s
about time the Department of Agriculture and Water Resources stops being an inhibitor to realefficiency reform and starts showing a similar willingness to deliver on the Minister’s own
drive and commitment to regulatory efficiency. (2016, p. 1)

The National Farmers’ Federation also contended that:
Poorly managed processes and a lack of strategic vision has led to confusion and additionalburden on the agricultural sector, without improved outcomes for human safety, theenvironment or farm input costs. (sub. 61, p. 13)

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Is wholesale change needed to deliver reforms?
The Commission sought feedback on the overall performance and appropriateness of theregulatory framework for technologies and agvet chemicals. As noted by the APVMA, thescope of products that it regulates has expanded due to advances in technology, an increasein generic products, changes to farming practices, and a shift to products for theincreasingly large companion animal sector, but ‘despite these changes, the regulatory
framework under which the APVMA operates largely requires the same approach toassessment and registration of products as it has the last twenty years’ (sub. 21, p. 2).
Most participants who responded supported the current regulatory arrangements andobjectives underpinning the APVMA’s operations. 22 For example, Cotton Australia said:
The current regulatory framework for agricultural and veterinary chemicals (includingtransgenic crops) performs well regarding delivery of efficacious product with well-defined risk
mitigation strategies, to industry. The framework is robust, science-based and risk-aligned.
Provisions to provide regulatory oversight for efficacy have enabled industry to develop robust
stewardship strategies with trait providers and chemical registrants, to ensure the longevity ofaccess to agricultural chemicals. (sub. DR262, p. 10)

And in the context of recent reforms, Ausveg said:
The regulatory arrangements and objectives of both the OGTR and APVMA are appropriate
and up to date. It must be noted that the APVMA has recently undergone a significant
restructure, on 1 July 2014, and they have not had sufficient time to implement all changes andmodifications due to backlog of chemical registrations and permits. There must be time allowed
for the APVMA to appropriately transition to the new model and design, without significant
modifications and engagement by the Government during this transitional period.
(sub. DR193, p. 3)

However, two participants said there was unnecessary duplication of roles andresponsibilities in the regulation of agvet chemicals — Accord identified duplication‘between Commonwealth entities, state and territory governments as well as some local
government bodies’ (sub. DR222, p. 1) as the main area of concern, whereas
GrainGrowers (sub. DR247) pointed to duplication between APVMA and work, health andsafety requirements (section 7.4).
On balance, the Commission considers that the overarching regime for regulating access toagvet chemicals is appropriate and in line with community expectations. That said, theregime should be monitored to ensure that it continues to be proportionate to the risks
associated with agvet chemicals and reflects advances in scientific knowledge. This should
include regular reviews of the APVMA, such as those outlined in box 7.1.
22 A number of participants provided feedback on the performance and appropriateness of the regulatory
framework for technologies and agvet chemicals, including Australian Lot Feeders’ Association(sub. DR294); Ag Institute Australia (sub. DR182); Australian Veterinary Association (sub. DR167);
Ausveg (sub. DR193); Cotton Australia (sub. DR262); University of Southern Queensland (sub. DR184).

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The Commission considers that improvements to the regulation of agvet chemicals is bestdelivered through a series of regulatory adjustments — including the reforms underconsideration by DAWR and the adoption of the recommendations in this chapter.
Such reform efforts have the potential to improve outcomes for farmers and the broader
community. However, the success of reform efforts hinges on implementation — including
whether or not the proposed reforms are implemented, as well as the manner in which thisis done. While governments have identified issues with, as well as steps to improve, theregulatory system for agvet chemicals, the implementation of reforms continues to be awork in progress.
These issues will be addressed in the Australian National Audit Office’s audit of the
APVMA, which is due to be tabled in April 2017 (ANAO 2016b) (box 7.1).

7.3

Excessive time and costs for registration

Some participants claimed that the process for registering agvet chemicals is unnecessarily
complex, time-consuming and expensive. For example, Voice of Horticulture said that:… Australia’s chemical registration system is still too slow, complex and expensive thatgrowers are being left without cost-effective alternatives to manage pests and diseases. Thereneeds to be a major overhaul of our current system to improve chemical access. (sub. 42, pp. 9–
10)

Costly and time-consuming registration processes can mean that some chemicals are only
available in Australia several years after they are available overseas (or they may not
become available at all). AusBiotech provided the example of the vaccine for Bovine
Ephemeral Fever virus:
A major international vaccine manufacturer submitted a change of site of manufacture variation
for a vaccine that had previously been sold in Australia. The vaccine for Bovine Ephemeral
Fever virus is used in the northern regions of the cattle industry. After two years thissubmission had not been dealt with and all existing vaccine supplies had either been sold or
reached their expiry date. This situation left the cattle industry exposed to this disease with notreatment available. Unfortunately this is not an isolated example and urgent reforms areneeded within the APVMA. (sub. 20, p. 6)

Timely access to the latest most cost-effective chemicals (while ensuring the safety of thecommunity) is critical for the competitiveness of Australian farmers. DAWR explainedthat a lack of access to agvet chemicals can result in:… Australian producers relying on older, less effective, or less tailored chemistries, where achemical solution is not available at all. The costs of farm production for Australian chemical
users are higher as a result. Limited chemical choice increases the risk of chemical resistance,increases reliance on chemistries developed before modern regulatory scrutiny, and increases
the cost of pests and diseases through reduced yield and poorer crop and animal health.
(2015d, p. 1)
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Farmers interviewed by the Commission also spoke about the potential effects of not being
able to access agvet chemicals — for example, one farmer suggested that he was at risk oflosing a chickpea crop because approved chemicals to control a particular fungus were notavailable (box 7.3).
Box 7.3

Case study: chemical registration and missed market
opportunities

The Commission interviewed a farmer who was sowing a winter crop of chickpeas in response
to a doubling of world prices following repeated failures of south Asia’s monsoon season. The
farmer said that a sudden Australia-wide increase in demand had meant that stocks of thechemical approved to control a particular fungus in chickpea crops had run out, and that thismeant he was exposed to the risk of an outbreak of this fungus wiping out his crop. While otherchemicals were available for controlling the fungus, they were only approved for use on crops
other than chickpeas (including lentils, which are a close relative of chickpeas).
According to the farmer, a major contributor to this problem was the lengthy and costly
regulatory approval process for registering new applications of existing chemicals with theAustralian Pesticides and Veterinary Medicines Authority. Australia’s relatively small market
means that the potential profits from obtaining costly regulatory approval in Australia often do
not outweigh the costs.
Source: Productivity Commission case study interviews (appendix C).

While there are many potential reasons for the time and cost of registering chemicals,participants highlighted that the APVMA was not meeting its statutory timeframes and was
not sufficiently considering overseas evidence in the registration process.

Failure to meet statutory timeframes
A number of participants criticised the APVMA for not meeting its statutory timeframes.
The National Farmers’ Federation, for example, said the APVMA:… has a consistent track record of failing to meet set approval timeframes, and the uncertainty
and expense of the approvals process acts as a deterrent to global chemical companies whenassessing markets for new products. (sub. 61, p. 13)

The APVMA is required to finalise all agvet product evaluations within statutory
timeframes. These vary from one to 18 months, depending on the type of application —timeframes for applications to vary an approval or registration are generally shorter thanthose to approve a chemical or register a chemical product.
APVMA performance statistics show that over the period July 2015 to June 2016,
68 per cent of applications were completed within legislated timeframes — well below
APVMA’s 100 per cent target. According to the APVMA, unexpectedly high levels ofstaff leave over the period meant that they were unable to meet the target (2016a). CPSU

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also said that performance was affected by insufficient resourcing and that this would only
get worse with APVMA’s move to Armidale.
APVMA’s performance has been affected by inadequate resourcing … APVMA previously
had struggled to find qualified staff to replace staff who have resigned … While there has been
improvement with APVMA getting back on track and meeting targets, as noted in the Report,
the planned move to Armidale will detrimentally affect APVMA … APVMA’s chief executive
Kareena Arthy is on the record saying it would be hard to rebuild a relocated agency without
scientists, most of whom refuse to leave Canberra. (sub. DR204, p. 6)

CropLife Australia attributed the APVMA’s poor performance to a lack of support fromthe DAWR.
The Department of Agriculture and Water Resources’ complete disregard for the impact of
their previous reform agenda, developed between 2010 and 2014, on the APVMA. The
transitional funding provided to the APVMA was also largely insufficient, particularly when aquarter of the amount provided needed to be paid back to the Department well before any
efficiency could be realised. (2016, p. 1)

There is some evidence that the APVMA’s performance (in terms of the time it takes tocomplete an application) has improved over the past five years. A review by external
auditors found that between the periods 1 July 2011 and 30 June 2014, and 1 July 2014 and
31 March 2016, the average timeframe improved by 3.2 months (Oakton Accounting andAssurance 2016).
The percentage of applications completed within the timeframe also increased from33 to 68 per cent. However, the review noted a bias in the sample due to the small number
of applications received (post 1 July 2016) for classes of applications within the timeframeof greater than 6 months.
The APVMA needs to be sufficiently resourced if it is to effectively undertake its duties.
This includes ensuring that the APVMA is provided with adequate funding, as well as
ensuring that it has access to adequate staff and skills to perform its functions. The
APVMA noted that it has initiated a range of activities aimed at improving efficiency
including:•recruiting more regulatory scientists to work on applications•

removing internal red tape involved in assessing applications and recording decisions•

a dedicated resource to focus on managing overdue applications (sub DR228, p. 4).

Making greater use of international evidence
One of the reasons for the time and cost required for chemical registration is the limited
use of international evidence in registration processes. The Australian regulatory regime
requires that chemicals are assessed and registered by the APVMA, even if they havepreviously been assessed and registered by an overseas regulatory authority.
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The Northern Territory Department of Primary Industry and Fisheries said:
There is currently an unreasonable burden to both industries and manufacturers withsubsequent delays from having to generate additional Australian research data for registration… The existing process is a brake to innovation and a drag on rural industry competiveness ininternational trade. (sub. 67, p. 2)

The Consolidated Pastoral Company also said that:
In addition to the direct cost to pastoralists for agricultural and veterinary chemicals there isalso a cost to business with new drugs that have been approved for use elsewhere, being forced
to undergo a very long and expensive approval process by APVMA in Australia.
(sub. 71, p. 37)

A farmer interviewed for this inquiry gave an example of where not recognising overseas
testing contributed to a chemical being unavailable in Australia (box 7.4).
Box 7.4

Case study: lack of recognition of overseas tests

The owner and operator of a large horticultural business in south-east Queensland told theCommission that, in Australia, it costs ten times what it does in the United States to register a
new chemical, but for only one tenth of the market. He said that companies sometimes do notbring new chemicals to Australia due to the high cost. As an example, he pointed to a recently
developed pre-emergent herbicide that could replace some older chemicals that are ‘harsh’ onmicroorganisms and fungi in the soil. The farmer told the Commission that this chemical has notbeen registered in Australia, but has been registered in New Zealand and is providing growers
there with a competitive advantage.
The farmer attributes the cost of chemical registration in Australia to the stringent and detailed
scientific testing administered by the APVMA. A frustration for the farmer is that the APVMA
does not recognise testing already conducted overseas, such as in the United States or Europe,
regardless of how stringent this is.
Source: Productivity Commission case study interview (appendix C).

The APVMA does take into account international data and assessments in its registration
processes (box 7.5) — it publishes a list of adopted international technical guidancematerial that is accepted for assessment by the APVMA for registration of agvet chemicals.
However, many participants saw merit in increasing the use of international evidence. 23

23 Participants supporting greater use of international evidence included: Accord (sub. DR222); AHBIC(sub. 34); Animal Health Australia (sub. DR250); Canegrowers (sub. DR169); Cattle Council of Australia(sub. DR290); CropLife Australia (sub. DR156); DAWR (sub. DR183, attachment); Environmental
Farmers Network (sub. DR174); GrainGrowers (sub. DR247); Grain Producers Australia (sub. DR201);
Horticulture Innovation Australia (sub. DR165); NSWFA (sub. DR161); NTDPIF (sub. 67); Herta Klein(sub. 38); NFF (sub. 61, sub. DR216); South Australian Government (sub. DR295); Tully Cane Growers(sub. DR170); WAFarmers (sub. DR226).

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Box 7.5

The APVMA’s use of international evidence

When approving and registering agvet chemicals, the APVMA considers four different types ofinternational evidence — data, assessments, standards and decisions. Each of these areconsidered differently.
•

Decisions — the APVMA does not accept the decisions per se of international regulators.
However, it accepts data, assessments and standards that contribute to a particularinternational decision.

•

Data — the APVMA accepts data generated according to a number of internationalguidelines, as long as they are relevant to the specific application for registration. Accepted
data include those generated according to the OECD test guidelines, the Food andAgriculture Organization of the United Nations (FAO) and World Health Organization (WHO)guidelines, and the International Cooperation on Harmonisation of Technical Requirements
for Veterinary Medicinal Products guidelines.

•

Assessments — the APVMA accepts specific assessments if the data supporting them are
made available. Accepted assessments include:– hazard assessments conducted by EU member states, Canada and New Zealand– risk assessments conducted by the FAO and WHO– risk assessments for products where the exposure assessment is comparable to one
conducted by another regulator.

•

Standards — the APVMA routinely uses international standards, including FAO standards
and specifications, and international methodologies for exposure assessment.

Source: APVMA (2015b).

For example, the Australian Dairy Farmers said:
The dairy industry welcomes the use of international data, assessments, standards anddecisions, where appropriate, to reduce the burden of regulation, particularly given Australia’s
position as a relatively small market for agvet chemicals. (sub. 63, p. 4)

Other participants, while supporting greater use of international evidence in principle, alsoemphasised the need to maintain rigour in the assessment process and to manage risks
appropriately in the Australian context. For example, the Tasmanian Farmers and Graziers
Association said:[TFGA’s] support is prefaced by the fact that this information from trusted sources should not
be wholly used to make a final assessment, but rather as a supporting factor in the completionof an assessment. Any question with regards to the rigour of an Australian assessment ofpesticides or veterinary medicines could potentially harm our trade in agricultural produce.
(sub. DR281, p 8)

Similarly, Queensland Farmers’ Federation said:
We support reforms that enable the APVMA to better access overseas data; however, this must
be balanced by the need to ensure that risk is appropriately managed in the Australian context.
While many individual growers would support a less stringent approach to chemical

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registration, it is important at an industry level to ensure that it meets the highest scientificstandards. (sub. DR217, p. 7)

The Australian Veterinary Association (sub. 26) supported recognising assessments
conducted by trusted foreign regulators to speed up the process of bringing new medicinesand chemicals to Australia. Goat Veterinary Consultancies also advocated for the adoptionof international decisions.
We should look to New Zealand which has similar agricultural systems. If a veterinary
medicine has been registered in New Zealand for 5 years and no problems have been identified
seriously enough for the veterinary medicine to be under review, then it should automaticallybe allowed to be registered in Australia or at least imported into Australia directly byveterinarians or for over the counter products … (sub. DR104, p. 3)

However, the APVMA will only use international evidence to the extent that it is relevantto the use of a product in Australia. As the APVMA pointed out:
Each regulator must make decisions as per the criteria set out in the legislation of theirjurisdiction. It must also consider conditions of approval, label requirements, and complianceand monitoring regimes needed to support the decision. These components are strongly
influenced by the different legislative, political, environmental and agricultural features of eachcountry within which the regulator operates. (sub DR228, pp. 2–3)

The APVMA provided the example that conditions placed on herbicides used in the EU
would probably not be automatically transposed to herbicide use in tropical Queensland
due to requirements of state legislation to protect the Great Barrier Reef (sub DR228, p. 3).
Cotton Australia said that it supported a risk-based approach to using evidence fromtrusted international regulators. However, it:… strongly recommends that the decision of international regulators should not be used as thesole justification for registering or cancelling product/active ingredient for the Australianmarket, particularly for unprotected cropping situations. (sub. DR262, p. 9).

The APVMA acknowledged that there is scope to increase the use of international
evidence and it is currently exploring these opportunities.
[T]he APVMA is looking to expand its use of international data and assessments, and has run aseries of consultations with industry over the last 18 months, with the most recent consultation
on more detailed guidance for industry on accepted international data, standards andassessments for agricultural and veterinary products closing on 17 June 2016 … The APVMA
is finalising the guidance material in consideration of submissions received for publication on
our website. (sub DR228, p. 2)

Greater use of international evidence by the APVMA would benefit farm businesses,
including quicker access to agvet chemicals available overseas, and reduced regulatory
costs through greater harmonisation with comparable overseas regulators. The Commission
supports such an approach in principle. This approach is also consistent with the AustralianGovernment’s commitment not to impose any additional requirements on products that

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REGULATION OF AUSTRALIAN AGRICULTUREhave been approved under a trusted international standard or risk assessment, unless there
is a good reason to do so (Australian Government 2014b).

RECOMMENDATION 7.1

The Australian Pesticides and Veterinary Medicines Authority should make greateruse of international evidence in its decisions on agricultural and veterinary chemicals(including by making greater use of data and assessments from trusted comparable
international regulators). Reforms currently underway in this area should be expedited.

7.4

Inconsistencies in control-of-use regimes

States and territories are responsible for controlling the use of chemical products after
retail sale. Control-of-use regimes differ across states and territories, and there aredifferences in the rules for ‘off-label’ uses. Off-label use refers to when a chemical is used
in a way other than what is stated on its APVMA-approved label. Labels include
instructions on the rate and frequency of application, and the types of crops on which thechemical can be used, among other things. In some states such as Victoria, off-label uses
are legal, subject to some restrictions (VDEDJTR 2015a). However in others such as New
South Wales, off-label uses are generally illegal (NSW EPA 2013b).
CropLife Australia (sub. 14) argued that it is difficult, confusing and costly to comply withmultiple state and territory control-of-use requirements.
Differences in control-of-use regimes may also have consequences for the chemicalregistration process (section 7.1). This is because control-of-use regimes must be
considered as part of the APVMA’s decision.
In Australia, the APVMA must consider state and territory legislation and control of use
regimes, environmental protection regimes, adverse experience reporting mechanisms and foodtesting systems, which all contribute to and impact upon a regulatory decision.
(APVMA 2015b, p. 12)

As such, multiple control-of-use regimes can add to the time and cost taken to achieve
registration. Inconsistencies in these regimes can also make it difficult for the APVMA tostrike the right balance in terms of risk. For example, a registration decision (that applies
across all jurisdictions) that accounts for a lenient control-of-use regime in one state may
appear to be overly risk-averse to farm businesses operating under a more stringent regime
in another state. This means that improvements to control-of-use regulation could also
result in improvements in the APVMA’s registration process.

AGVET CHEMICALS303

Many participants agreed that a harmonised approach to control-of-use regulation would
be beneficial. 24 For example, Animal Health Australia said:
Harmonisation of the control of use of AgVet chemicals should be an objective of theregulatory bodies with the aim of having a system in place in the next three years. Off-label use
currently differs dramatically between different jurisdictions, putting livestock producers
operating in states and territories that have strict off-label use regulations at a competitive
disadvantage. (sub. DR250, p. 9)

However, others suggested that harmonisation may not be supported if it resulted in loss ofaccess to critical products or increased the costs to farm businesses in certain jurisdictions(GrainGrowers, sub. DR247; Voice of Horticulture, sub. DR232; South AustralianGovernment, sub. DR295).
Concerns about inconsistencies in control-of-use regulations are not new. In 2008, theCommission found that there were significant differences in the content of state andterritory regulations regarding off-label uses, and the licensing and training of pesticide
applicators. Also, there was variability in the monitoring and enforcement of theseregulations (PC 2008).
Concerns about control-of-use regulations were also highlighted in submissions to theAgricultural Competitiveness White Paper and the House of Representatives Standing
Committee on Agriculture and Industry inquiry (Aerial Agricultural Association ofAustralia Ltd 2014; Agribusiness Yarra Valley 2015; King & Wood Mallesons 2014;
Nufarm Limited 2014). For example, Agribusiness Yarra Valley said that:
It is a crazy system when a chemical can be used to treat a bug on one side of the Murray but
not the other, or when a chemical can be used on a bug on one crop but not another.
(2015, p. 3)

In its review of chemicals and plastics regulation, the Commission recommended moving
to a national control-of-use regime for agvet chemicals (PC 2008a). A national regime was
expected to overcome the fragmentation and inconsistency of state and territory laws, andimprove the effectiveness of the National Registration Scheme in achieving consistent risk
management outcomes across jurisdictions. The Commission recommended that the use of
agvet chemical products be regulated by the APVMA, through the Agvet Code (to bedelivered by the states and territories). And, at a minimum, the regulation should include
uniform approaches to enforcing conditions of use on product labels, and the licensing andtraining of chemical users.

24 The following participants supported a harmonised approach to control-of-use regulation: ALFA

(sub. DR294); Animal Health Australia (sub. DR250); Cattle Council of Australia (sub. DR290);
CropLife Australia (sub. 14, sub. DR156); DAWR (sub. DR183, attachment); GrainGrowers Limited(sub. DR247); Horticulture Innovation Australia (sub. DR165); NSW Department of Primary Industries(sub. DR292); Voice of Horticulture (sub. DR232); WAFarmers (sub. DR226).

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Following the Commission’s recommendation, COAG directed the Standing Council on
Primary Industries to develop a national framework — involving a regulatory model,
funding model and an intergovernmental agreement — to improve the efficiency andeffectiveness of the regulation of agvet chemicals (DAWR 2015b). The initial plan wasthat, following the COAG agreement, implementation of the proposed models would takeapproximately 18 months.
While the national framework has been developed, implementation is another story.
Queensland’s Department of Agriculture and Fisheries said that it ‘is concerned that theprocess has slowed in recent times’ (sub. 58, p. 4). The Aerial Application Association ofAustralia also asserted that ‘COAG processes for the reform of chemical control-of-use
regulation have all but ground to a halt’ (sub. 12, p. 1).
The proposed scheme may also not fully address concerns about differences in allowable
off-label uses. The scheme harmonises some elements of off-label uses (for example,
registered pesticides can be applied to approved crops at a lower rate), but allows states
and territories to have varying off-label use provisions to respond to regional needs (Tim
Harding and Associates and Rivers Economic Consulting 2013). ABARES suggested that
this minimal harmonisation means inconsistencies between jurisdictions are likely tocontinue (Gibbs, Harris-Adams and Davidson 2013).
Where there are clear and demonstrated regional differences, regulatory frameworks
should retain flexibility to address them. However, as previously stated by theCommission:… much of the need for flexibility [in control-of use] derives from differences in environmentsthat do not correspond to state and territory borders and therefore, there is no justification forretaining these jurisdiction-specific regulatory approaches. (2008a, p. 226)

The Commission considers that there is scope to increase the harmonisation of off-label
uses, and governments should pursue this goal without delay. In addition, work on
implementing the national control-of-use regime should progress more rapidly with a firm
commitment from all jurisdictions. States and territories should aim to have the regime inplace by the end of 2018 — this will be ten years after the Commission’s review ofchemicals and plastics regulation. The lack of progress to date is disappointing.

RECOMMENDATION 7.2

The Australian, state and territory governments should implement a national
control-of-use regime (including harmonisation of off-label use provisions) for
agricultural and veterinary chemicals by the end of 2018.

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7.5

Access to agvet chemicals for minor uses

For some low-volume use chemicals, the registration and assessment costs outweigh thebenefits of commercialising new products. This can discourage businesses from registering
new agvet chemicals in Australia. However, where agvet chemicals are not registered,access may still be permitted for ‘minor uses’ through the minor use permit system.
Several participants said that the minor use permit system benefits farm businesses by
allowing them to use agvet chemicals without incurring the full costs of registration(AFPA, sub. 11; Voice of Horticulture, sub. 42). Agforce said:
The [minor use] permit system provides agriculture, local government and others with options
to control new emerging pests, diseases and weeds that are not currently on pesticide labels.
Niche agricultural products can also acquire minor use permits for their unique situation.
AgVet chemical companies rarely update pesticide labels as there is a huge associated cost.
Minor use permits fill this gap. (sub. 17, p. 7)

Even so, some participants said it was difficult to obtain access to chemicals for minor
uses, particularly for minor species such as goats (box 7.6). As well as hampering
productivity, this can have animal welfare implications for those species (chapter 5) — forexample, if access to pain relief medication is limited.
A number of participants said there was a need to streamline registration and approval ofminor uses (Australian Forest Products Association, sub. 11; NFF, sub. 61; Primary
Producers SA, sub. 41). For example, the Australian Forest Products Association said:
Further reform of agvet chemical regulation including … Streamlining of the minor use permit
approval process and red-tape reduction is needed. (sub. 11, p. 10)

The NFF also recommended that the Australian Government:… proceed with efforts to streamline the regulatory framework surrounding registration and useof agricultural and veterinary chemicals. (sub. 61, p. 13)

Some participants said that where products are registered for use in major species, the datarequirements for obtaining a minor use permit should be reduced (Dairy Goat Society ofAustralia, sub. DR97; Goat Veterinary Consultancies, sub. DR104). Others called forfurther government funding to support a minor use program and to facilitate access tominor use chemicals (CropLife Australia, sub. DR156; Horticulture Innovation Australia,
sub. DR165; NFF, sub. 61; NSW Farmers’ Association, sub. 72; Voice ofHorticulture, sub. 42).

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Box 7.6

Access to agvet chemicals for goats

Several participants expressed concern about the lack of access to veterinary chemicals forgoats. In particular, participants were concerned about:•an inability to access local anaesthetic and other pain relief medication for disbudding,dehorning, castration and tattooing procedures•

limited access to products for parasite control (including for worms and lice), and for
managing diseases•

lack of access to products for managing acidosis, to which goats are especially susceptible.

Difficulty accessing these products stems, in the first instance, from the lack of chemicals
registered for use in goats. This is because it is often not economical for manufacturers toregister products for use in minor species. This can lead to a reluctance to prescribe products,
even where it would be legal to do so:
Meloxicam injection [for pain relief] has recently been registered for use in cattle, sheep, pigs andhorses, but not goats. Meloxicam buccalgesic products are registered for cattle and will soon beregistered for sheep, but will not be registered for goats, due to lack of a large enough market. These
products can be prescribed by a veterinarian but as vets lack a Farm Animal Residue Avoidance
Database … service that vets have in the USA, many vets therefore lack the information about thewith-holding period (WHP) that must be given by law with the prescription and are reluctant to help
goat owners due to liability issues. (Goat Veterinary Consultancies, sub. DR104, p. 1)

It can also be difficult to obtain access to veterinary chemicals under the minor use permit
system and some control-of-use regimes.

Minor use permits
The cost of applying for minor use permits can be prohibitive, especially where the industry
affected is small. This is because the cost and risks associated with holding these permits
cannot be spread out across a large user base. Goat Veterinary Consultancies said:[A]n organisation or an individual must apply for this permit and hold it and many are very reluctant totake on this responsibility fearing liability if any residue is found in an overseas market and the market
then shut-down. Growcom holds many horticulture minor use minor crop and fruit chemical permits as
the Horticulture Australia Board does not want to hold these permits. (sub. DR104, p. 2)

Control-of-use regulation
In some jurisdictions, control-of-use regimes may also prevent off-label use of products ongoats, even where the product has been registered for use on similar species. In addition, someproducts are labelled with ‘do not use’ statements (e.g. ‘not to be used on dairy goats’),preventing the use of these products on goats. Often, ‘do not use’ statements are included
because the product has not been tested for residue levels or withholding periods on goats,rather than because there are established contraindications for that species.
Sources: Australian Dairy Goats (sub. DR120); Boer Goat Australia (sub. DR111); Dairy Goat Society ofAustralia (sub. DR97); Goat Veterinary Consultancies (sub. DR104).

The Commission agrees that there may be a case for government support for accessing
chemicals for minor uses. Priority should be given to areas where:•

access to chemicals has positive externalities, such as improvements in animal welfare

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•

access to chemicals provides a net benefit to the community, but no person ororganisation is willing or able to bear the cost of obtaining a minor use permit.

The Rural Industries Research and Development Corporation is hosting a project toincrease access to chemicals for minor uses (RIRDC 2016), and the AustralianGovernment has provided $8 million over four years to improve access to minor use
chemicals (Treasury 2014a).
Issues relating to accessing ‘minor use’ chemicals may also be ameliorated by
improvements to the chemical registration system (section 7.1). In particular, reducing thecost of registration (through the increased use of international evidence and improved
timeframes) can make it more attractive for manufacturers to register chemical products,
eliminating the need for chemical users to obtain minor use permits.

7.6

Labelling of agvet chemicals under work health andsafety regulations

Agvet chemical labels are approved by the APVMA, and reflect the risk of the product (asassessed by the APVMA) when it is used according to its approved use. Currently, agvet
chemicals are exempt from labelling requirements under work health and safety
regulations. The exemption was granted because it was previously considered that theregulatory framework for agvet chemicals (including APVMA-approved labels) adequately
protected the health and safety of workers (Access Economics 2010).
However, from 1 January 2017, the exemption will be discontinued, and agvet chemicals
used in the workplace will be required to be labelled in accordance with the Globally
Harmonised System of Classification and Labelling (GHS). This requirement is in addition
to APVMA requirements, and is part of broader reforms that will require GHS labelling for
all workplace hazardous chemicals in most states and territories (Safe Work
Australia 2016a). Including agvet chemical labels as part of these reforms follows several
adverse incidents involving chemicals that were not labelled according to the GHS(box 7.7).
APVMA-approved labels may not contain information about all of the intrinsic hazards ofa chemical product, but are based on the APVMA’s assessments of risk to the end user —that is, the labels are mainly directed at the point of application to crops, rather than atchemical users throughout the supply chain (Access Economics 2010; Safe Work
Australia 2016a). Where the APVMA has assessed that the risk of a particular hazard
being realised is mitigated by the inclusion of safety directions, information about intrinsic
hazards may not be required (Access Economics 2010).

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Box 7.7

Incidents resulting from the absence of GHS labelling on
agvet chemical labels

During Senate Estimates in February 2016, Safe Work Australia was asked to confirm whether
the additional requirement to label agvet chemicals according to the Globally Harmonised
System of Classification and Labelling (GHS) was prompted by any worker incident.
The question was taken on notice, and Safe Work Australia’s written response referred toseveral incidents where the absence of GHS labelling resulted in harm to the community.
In their response to the 2006 Consultation Regulatory Impact Statement for the hazardous chemicals
framework, WorkCover NSW highlighted several agricultural chemical incidents where APVMA
approved labels were identified as not communicating the hazard which resulted in the incident,
including a fatality caused by the use of carbon disulphide as a grain fumigant. The APVMA label
contained no information about the flammability of this chemical.
A recent incident involving a herbicide called ‘Hotshot’ has also highlighted inadequate labelling. The
health hazards which resulted in the hospitalisation of a bystander were not communicated on the
APVMA label. These hazards would have been communicated on a GHS label. (Safe Work
Australia 2016b, p. 1)

The APVMA, however, noted that carbon disulphide has not been registered in Australia as agrain fumigant since 2004 and, if it were registered today, the APVMA would requireflammability signal words. Also, it was not clear that the incident involving the herbicide Hotshot
would have been avoided with the GHS hazard and precautionary statements (sub. DR228).

By contrast, the GHS requires all intrinsic hazards to be communicated. Because
information about hazards is independent of any assessment of risk, GHS labelling allows
workplaces along the supply chain to conduct their own risk assessments to protect worker
health and safety. Access Economics said that:… the absence of hazard information on labels could prevent a workplace from undertaking an
acceptable statutorily-required workplace risk assessment, as this relies on the identification of
applicable hazards, or to implement appropriate risk controls. (2010, p. 16)

Some industry groups do not consider that the new arrangements will improve worker
safety, and argue that the additional requirements are costly and unnecessary(Bettles 2016). For example, Grain Producers Australia questioned whether the newarrangements would deliver a benefit to workplace health and safety.
[A]t no point has evidence been provided by SWA or the Department of Employment that an
investigation of a Workplace Health Safety incident has shown that lack of these additionallabels were a causal factor in the incident. Neither has evidence been presented which identifies
any systemic weakness in the current APVMA regulatory process with regards the current
hazard warnings or labelling decisions, making the actions being taken unnecessary.
(sub. DR202, p. 3)

Similarly, the Australian Veterinary Association said:
The current system of APVMA assessment and labelling is robust and successfully addresses
work health and safety risks. Any suspension in supply of medications due to the additionallabelling requirements could be counterproductive for animal health and welfare. Agvet

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chemicals showing APVMA registered labels should be considered to be already meeting theaims of the GHS. (sub. DR167, p. 4)

CropLife Australia submitted that:Compliance with two separate sets of fundamentally conflicting regulations is not only costly
for manufacturers, just one of our member companies expects the cost of compliance with theextra regulation to be in excess of $800 000, but it is likely to confuse users and subsequently
threaten worker health and safety. (sub. 14, p. 17)

Animal Medicines Australia said that GHS labelling requirements:… impose an unnecessary regulatory burden that contributes nothing to worker health or safety.
The provisions should be amended to recognise that the APVMA labelling process achieves the
purported aims of the GHS. (sub. 52, p. 10)

And the NSW Farmers’ Association said that the new requirements will:… create unnecessary red tape resulting in unnecessary expense that will be borne by farmers… GHS hazard statements may reflect hazards that are of negligible risk. (sub. 72, pp. 14–15)

To discuss these concerns and the implementation of the reforms going forward, a meeting
between Safe Work Australia members, DAWR and representatives from the agvet
chemical industry took place on 17 August 2016 (Safe Work Australia, sub. DR264).
Actions have been taken to mitigate the cost of the forthcoming changes, including:•a five year transition period, which commenced in January 2012 (APVMA 2014b)•

a full exemption from GHS labelling for certain classes of veterinary medicines agreed
by Safe Work Australia members in October 2016 (Safe Work Australia, pers. comm,
8 November, 2016)•clarity around the partial exemption from GHS labelling requirements, which applies
where the information required by the GHS is already required by the APVMA. The
only additional labelling requirements will be GHS hazard and precautionary
statements if they are not already communicated on the APVMA approved label (SafeWork Australia 2016a).

In addition, DAWR has initiated an external review that will focus on the potential
duplication of effort and unnecessary costs associated with agvet chemicals having tocomply with both agvet chemical legislation and work health and safety legislation(DAWR 2016t). The review will identify options to streamline and improve the current
regulatory approach, and make recommendations for preferred options. It will include
public consultation and is scheduled to be completed by mid-November 2016.

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8Biosecurity

Key points•

Australia’s biosecurity system is critical to maintaining the competitiveness of the agricultural
sector. The entry of serious exotic pests, weeds or diseases into Australia would have amajor impact on Australian farmers (including loss of agricultural production and access topremium export markets), the environment and the broader community.

•

Biosecurity is a shared responsibility between governments, industries and the community.
– The Australian Government manages biosecurity risks pre-border and at-the-border(including quarantine). It also coordinates responses to outbreaks within Australia.
– The states and territories are mainly responsible for managing risks post-border. Thislargely involves surveillance and diagnostics.
– Farm businesses comply with biosecurity regulations including, for example, fumigating
crops, controlling weeds, and treating infected animals, and contribute to broader
measures by industry such as responses to outbreaks.
– The community plays a role in alerting authorities to biosecurity risks.

•

The Biosecurity Act 2015 (Cwlth) took effect on 16 June 2016, replacing the Quarantine Act
1908 (Cwlth). The new Act introduced approved arrangements that are designed to provide
more flexibility for operators and recognise existing business processes. As such, the Act
should reduce agricultural businesses’ compliance costs.

•

Import risk assessments consider the level of biosecurity risk that may be associated with
the importation of a product, and identify appropriate ways to manage these risks. The mainconcern around these assessments is transparency. The Australian Government sought toaddress this issue through the development of Biosecurity Impact Risk Analyses.

•

Biosecurity requirements vary from state to state reflecting different risks (and therefore
priorities), but the differences can add to businesses’ costs, particularly when transporting
goods and accessing markets in other states.

•

While some differences in biosecurity requirements across jurisdictions may be justified,better coordination across jurisdictions could harmonise requirements. Significant progresshas been made towards a more co-ordinated approach, including through theIntergovernmental Agreement on Biosecurity, and the establishment of the National
Biosecurity Committee. The current review of the agreement is looking at the effectivenessof the agreement and avenues for improvement. It is important that the review considers
ways to involve industry more in decision-making. A national biosecurity strategy could
assist in identifying and gaining agreement on key risks and priority areas for investment.

•

Trespass on farms is unlawful and can lead to biosecurity risks. Reviewing the monitoringand enforcement of animal welfare standards and improving transparency around farms’operations (with the use of industry-led initiatives such as web cams), should reduce themotivation for trespass. Making the community more aware of the biosecurity risks that arise
from unsafely accessing farm land could also assist.

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8.1

Australia’s biosecurity arrangements

Biosecurity is about managing the risks of entry, establishment and spread of pests,
diseases and weeds that could pose a threat to animal, plant or human health or theenvironment (Australian Government 2015a). Effectively managing these risks isimportant not only for agricultural industries, but also for protecting the environment, thecommunity and economy.
Exotic pests, diseases and weeds can enter Australia via passengers, mail, air and sea cargo
or by natural sources (such as wind, sea or migrating birds). In its 2014 report, Australia’s
Biosecurity Future: preparing for future biological challenges, the Commonwealth
Scientific and Industrial Research Organisation (CSIRO) highlighted a number of trends— such as increased movement of people and goods, urbanisation and agriculturalintensification — that are placing Australia’s biosecurity system under increasing pressure(box 8.1). An expansion of agriculture in Northern Australia is also expected to increase
biosecurity threats, because of the proximity of neighbouring countries and the region’s
different ecoclimatic conditions (Australian Government 2015e).
Biosecurity risks are managed offshore, at the border and onshore, mainly by theAustralian, state and territory governments (figure 8.1).
Figure 8.1

Australia’s biosecurity systema

a Export regulation is discussed in chapter 14.
Source: Australian Government (2014a).

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Box 8.1

Emerging challenges for biosecurity

Australia’s geographic isolation provides protection from many external threats. However, a
CSIRO report in 2014 — Australia’s Biosecurity Future: preparing for future biologicalchallenges — highlighted a number of trends that are likely to place pressure on Australia’s
biosecurity system.
•

Increased movements of vessels, aircraft, people and goods across our border from a wider
range of countries and regions — increased global trade and travel will create newopportunities for pests and diseases to enter and spread across Australia.

•

Agricultural expansion and intensification — biosecurity will become increasingly importantas agriculture expands and intensifies to meet rising global food demand. For example,
while larger farming operations can generally better manage biosecurity risks compared withsmaller operators (in part because they are better informed and benefit from economies ofscale), the trend towards them may still require more stringent biosecurity practices due tofactors such as the larger amounts of waste that they produce and greater numbers oflivestock on their farms.

•

Urbanisation and changing consumer expectations — urban encroachment andperi-urbanisation create new biosecurity challenges. For example, lifestyle farmers often
have lower levels of knowledge about biosecurity risks and may be less likely to maintain
good biosecurity standards. Other changes in farming practices can have similar effects,
such as organic farming and free-range poultry. Free-range production systems can pose anincreased biosecurity risk as the birds have greater exposure to wild birds that carry disease.

•

Biodiversity pressures — the significance of biosecurity threats because of declining
biodiversity and redistribution of species will become clearer over the coming decades.

•

Declining resources — less biosecurity expertise and less biosecurity investment (withtighter government budgets) means improving the efficiency of biosecurity management
must come from greater use of technology.

Agricultural expansion in Northern Australia is also likely to generate new biosecurity risks. As
discussed in the Australian Government’s white paper on northern Australia, the north’s
proximity to international neighbours, extensive coastline and sparse population make itparticularly vulnerable to biosecurity threats, with most of Australia’s biosecurity outbreaks inthe past ten years occurring there. The growth of agriculture, mining and tourism industries
increases links with the rest of Australia, and with that the probability of a pest or disease
spreading to other regions.
Sources: Australian Government (2015e), Simpson and Srinivasan (2014).

Who is responsible for what?
The Australian Government is responsible for biosecurity activities offshore and at theborder. Key activities include:•

providing information overseas about Australia’s biosecurity arrangements•

conducting quarantine inspections and treatments overseas and at the border•certifying and permitting goods to enter Australia.

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The Australian Government also has a role in emergency responses to disease outbreaks
through arrangements with industry such as the Emergency Plant Pest Response Deed, theEmergency Animal Response Agreement and the National Environmental Biosecurity
Response Agreement (NEBRA) (COAG 2012b; DLA Piper Australia 2016a, 2016b).
These arrangements outline emergency responses and cost-sharing principles, andcomplement the activities of state and territory governments in managing biosecurity risks
within Australia’s borders.
The state and territory governments are mainly responsible for onshore activities, including
monitoring goods transported into the state or territory for both state-based and somenationwide threats.
The states and territories audit and inspect farm businesses for compliance with state-based
biosecurity regulations and some federal regulations. They also provide input to AustralianGovernment activities such as import risk assessments and responses to outbreaks. 25
The Intergovernmental Agreement on Biosecurity (IGAB) identifies the biosecurity roles
and responsibilities across the Australian and state and territory governments (except the
Tasmanian Government) (COAG 2012a). The agreement is aimed at strengthening theworking partnership between the Commonwealth, state and territory governments, andimproving the national biosecurity system. The National Biosecurity Committee has been
set up to implement collaborative projects to meet the national priorities identified in the
IGAB (box 8.2).
Local governments play a role in regional emergency pest and disease responses, and arealso responsible for municipal services such as disposal of biosecurity waste material(Beale et al. 2008). Some states’ and territories’ biosecurity regulations also have specificrequirements for local governments — for example, New South Wales’ legislation, theBiosecurity Act 2015 (NSW) requires local governments to manage biosecurity risks posedby weeds.
While governments play a major role in carrying out biosecurity activities, biosecurity isalso the responsibility of all industries, businesses and the wider community. Industries
play an important role in biosecurity risk management by reporting biosecurity risks that
may threaten their businesses (they often benefit from this so have an incentive to do so).
Government–industry partnerships, such as Animal Health Australia and Plant Health
Australia, facilitate a national approach to enhancing Australia’s management of
established pests and diseases. A number of industries are signatories to the animal andplant emergency deeds and share with governments the costs of emergency measures when
they arise.

25 Import risk assessments consider the level of biosecurity risk that may be associated with the importationof a good, and identify appropriate ways to manage these risks.

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Box 8.2

Instruments to facilitate a working partnership on biosecurity

The Intergovernmental Agreement on Biosecurity (IGAB)
The IGAB is an agreement between the Commonwealth and the state and territory
governments, except Tasmania, which preferred to retain the ability to determine its own importrequirements for produce entering from other states (Klumpp 2014). The agreement, whichcame into effect in January 2012, aims to strengthen the working partnerships between
governments, improve the national biosecurity system and minimise the impact of pests anddiseases on Australia’s economy, environment and the community. The IGAB identifies priority
areas for collaboration. They include:•consistent decision-making on investments in biosecurity measures•better sharing and collecting of data•

coordinated surveillance of pests and diseases.

The first deliverable under the IGAB was the National Environmental Biosecurity Response
Agreement. It sets out emergency response arrangements, including cost-sharing
arrangements, for responding to biosecurity incidents that affect the environment and/or social
amenity and where the response is for the public good.
Governments have also established the National Surveillance and Diagnostics Framework,
which aims to integrate funding and management of these activities across jurisdictions.
Australian Agriculture Ministers initiated a review of the IGAB to assess its implementation andthe effectiveness of its schedules. The review is also considering the capacity of the national
biosecurity system, and the suitability of the agreement to manage increased biosecurity risks
going forward. The existing cost-sharing arrangements and the potential for implementation of
new funding arrangements for biosecurity are also being considered. The review’s draft report isdue in late 2016.

The National Biosecurity Committee
The IGAB formally established the National Biosecurity Committee (NBC). The NBC identifies
and implements collaborative projects between governments that meet the IGAB’s priorities.
The NBC provides advice to the Agriculture Senior Officials Committee and the Agriculture
Ministers’ Forum on national biosecurity and on progress in implementing the IGAB.
The NBC is supported by sectoral committees covering animal and plant health, invasive plants
and animals, and marine pests. These sectoral committees provide policy, technical andscientific advice to the NBC.
Sources: COAG (2012a, 2012b); DAWR (2014, 2016p, 2016r).

Some industries have recognised that effective pest and disease management is in theirinterest and have coordinated industry-specific actions to manage biosecurity (one example
is the cherry industry, box 8.3). Businesses also comply with biosecurity regulations
including, for example, fumigating crops and treating infected animals.

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Box 8.3

Australian Cherry Industry Biosecurity Management
Programme

About 20 per cent of Australian cherries are exported to more than 20 countries, and theAustralian cherry industry is looking to increase its export share. To help achieve this, theindustry’s peak body, Cherry Growers Australia, is developing a Biosecurity Management
Programme aimed at providing confidence to all international markets that Australian cherries
meet countries’ quarantine requirements, and are of high quality.
The draft programme includes a full spectrum of management and quality principles in cherry
production, pest and disease management, research, education, training and market access.
These include:•

developing early warning systems to detect pests and diseases•

implementing a nationwide crop monitoring database to immediately highlight or detect any
emerging pest issues•

providing regular training and education for all growers on biosecurity and good practice•identifying future risks associated with climate change and shifts in the types of pests anddiseases affecting the industry.

Sources: Cherry Growers Australia (2015, 2016).

The community plays a role in alerting authorities to, and managing, biosecurity risks. As
the discussion paper for the review of the IGAB said:
Community understanding and acceptance of biosecurity risk is critical to the sustainability andoperation of the national biosecurity system. Australian governments and industry work
together to help the broader community, which includes landholders, travellers, scientists andnon-government organisations, understand what biosecurity means for them so as to encourage
participation and confidence in the national biosecurity system. (Craik, Palmer and
Sheldrake 2016, p. 19)

The importance of community efforts has been recognised in fruit fly eradication programs— in Mildura and Swan Hill fruit fly trap kits were distributed to households to help
manage pest control efforts (ABC 2015b).
Industry groups, universities, and research organisations also contribute to the knowledge
base around the risks from pests or diseases.

Regulations covering Australia’s biosecurity arrangements
Australia’s primary legislation for biosecurity (the Quarantine Act 1908 (Cwlth)) was
replaced by the Biosecurity Act 2015 (Cwlth) on 16 June 2016. The Act details thebiosecurity arrangements administered at the national level, and also allows for the
management of biosecurity risks in a manner that is consistent with Australia’sinternational obligations.

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The Department of Agriculture and Water Resources (DAWR) described the new Act as
representing:… a comprehensive modernisation of Australia’s biosecurity legislation. The Act has been
designed to be flexible and responsive to changes in technology and future challenges. The
legislation has been designed to reduce unnecessary red tape and provide a more flexible risk
based approach to compliance. (sub. 50, p. 9)

Each state and territory has its own legislation (table 8.1). New South Wales andQueensland have recently passed new biosecurity Acts and Tasmania is looking to develop
a new biosecurity Act (TDPIPWE 2016b).
Table 8.1

State and territory main biosecurity legislation

State/Territory

Legislation

New South Wales

Biosecurity Act 2015aAnimal Diseases and Animal Pests (Emergency Outbreaks) Act 1991
Non-Indigenous Animal Act 1987
Noxious Weeds Act 1993
Plant Diseases Act 1924
Stock Diseases Act 1923

Victoria

Livestock Disease Control Act 1994
Livestock Management Act 2010
Plant Biosecurity Act 2010
Catchment and Land Protection Act 1994
Biosecurity Act 2014
Plant Health Act 2009
Livestock Act 1997
Natural Resources Management Act 2004

Queensland
South Australia

Western Australia
Tasmania

Biosecurity and Agriculture Management Act 2007
Animal Health Act 1995
Animal (Brands and Movements) Act 1994
Animal Farming (Registration) Act 1994
Plant Quarantine Act 1997
Seeds Act 1985
Weed Management Act 1999
Vermin Control Act 2000

Northern Territory

Plant Health Act 2008
Livestock Act
Weeds Management Act
Plant Diseases Act 2002
Pest Plants and Animals Act 2005
Animal Diseases Act 2005

Australian Capital Territory

a The Biosecurity Act 2015 (NSW) is expected to take effect in 2017 and the other legislation will be
repealed at that time (NSW DPI 2015a).

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Several international agreements also underpin Australia’s biosecurity arrangements(box 8.4), including the World Trade Organization’s (WTO) Agreement on the Applicationof Sanitary and Phytosanitary Measures (SPS Agreement), which defines the concept of an‘appropriate level of protection’ (ALOP). This is the level of protection deemed
appropriate by a WTO Member establishing a sanitary or phytosanitary measure to protect
human, animal or plant life or health within its territory (WTO 2015). WTO Members are
required to take into account the objective of minimising negative trade effects.
Australia’s ALOP is expressed as ‘providing a high level of sanitary and phytosanitary
protection aimed at reducing risk to a very low level, but not to zero’ (DAWR 2016c).
Box 8.4

A number of international agreements underpin Australia’s
biosecurity arrangements

In addition to the World Trade Organization’s SPS Agreement, Australia’s biosecurity
arrangements are underpinned by:•

the Food and Agriculture Organization’s International Plant Protection Convention, which
establishes international standards on using phytosanitary measures to protect plant health(IPCC 2016)•

the World Organisation for Animal Health’s international standards relating to animal healthand zoonoses (which are diseases that can be passed on to humans from animals). The
SPS Agreement encourages signatories to base their sanitary measures on the World
Organisation for Animal Health’s standards (OIE 2016b)•

the United Nations’ Convention on Biological Diversity (Biodiversity Convention), which
guides regulations on conserving diversity within species, between species and of
ecosystems•

the World Health Organization’s International Health Regulations, which guide regulations
around public health risks that can threaten people worldwide (WHO 2005).

The Biosecurity Import Risk Analysis Guidelines 2016 describe the process that DAWR
follows when assessing proposals to import animals, plants and/or other goods(DAWR 2016h). The risk analyses consider the level of biosecurity risk that may be
associated with the importation of a good, and identify appropriate ways to manage theserisks.
Live plants and animals, and associated reproductive material, must also be listed as an
approved type under the live import list according to the Environment Protection andBiodiversity Conservation Act 1999 (Cwlth) before they can be imported (Department of
the Environment 2016). The Department of the Environment approves changes to the live
import list for animals, while DAWR does the same for plants.
Biosecurity arrangements are also shaped by regulations in other areas of policy, such as
food safety (chapter 10) and export certification (chapter 14).

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REGULATION OF AUSTRALIAN AGRICULTURE

Past reviews
The most recent comprehensive review of biosecurity and quarantine arrangements was theBeale Review (2008). 26 This review recommended wide-ranging reforms and many havebeen implemented, including a new Biosecurity Act, the IGAB, and the National
Biosecurity Committee.
The review advocated for a shift towards a more national approach to biosecurity to
improve the implementation of biosecurity activities, particularly surveillance anddiagnostics, and to help ensure jurisdictions’ requirements accurately reflect biosecurity
risks. It also recommended developing a list of national priority pests and diseases on thebasis of the likelihood of incursion and its impact.
An earlier review of biosecurity — Australian Quarantine: a shared responsibility (Nairn
et al. 1996) — introduced the framework of addressing biosecurity risks pre border, at theborder and post border. The Nairn report also promoted biosecurity as a shared
responsibility between Australian and state governments, businesses and the generalcommunity, which is an underpinning principle of the new Biosecurity Act.
More targeted reviews have looked at specific aspects of the biosecurity system, and thesystem’s response to outbreaks. For example, Matthews (2011) looked at Australia’s
preparedness for a foot-and-mouth disease outbreak. The review led to the development of
the National Foot-and-Mouth Disease Action Plan by the National Biosecurity Committee,
and the establishment of the Foot-and-Mouth Disease Taskforce (DAWR 2015a).
The Agricultural Competitiveness White Paper and the White Paper on Developing
Northern Australia also outlined government initiatives to spend $200 million to improvebiosecurity surveillance and analysis to better target critical biosecurity risks (including$12.4 million for Indigenous ranger groups in northern Australia) (AustralianGovernment 2015a, 2015e).

8.2

Why are governments involved in biosecurity?

Biosecurity has both public good properties and spill-over effects (externalities). A
pest- and disease-free environment is a public good. If providing such an environment wasleft to the private sector, this could lead to free-riding on the management efforts of others
and result in underinvestment in biosecurity activities. This failure of the market toadequately address pest and disease risks is a major reason for government involvement inbiosecurity.
26 In 2012, the Senate Rural and Regional Affairs and Transport Committee looked at the adequacy ofbiosecurity arrangements, and progress in the implementation of the Beale Review’s recommendations(SRRATRC 2012). The Senate Committee’s recommendations included prioritising the Beale Review’sreforms, and improving transparency around the import risk assessment process.

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Some pests and diseases can be effectively managed by individual farms. For example,
farmers undertake biosecurity activities to protect their own crops, flocks and herds. The
benefit of these activities also accrues to other landholders and the broader community.
However, other biosecurity risks can only be managed with a coordinated approach, andbiosecurity arrangements often involve international negotiations, liaisons andcoordination to develop conditions of entry into Australia. Farmers also benefit from apest- and disease-free environment and effective surveillance and monitoring, including forexample, improved access to export markets.
The efforts of individual farmers can be undermined when other landholders fail toprevent, manage or eradicate biosecurity threats. This can include threats which are present
in residential or community areas and can spread to agricultural land, affecting crops andherds; and farmers abandoning their land and leaving threats in place such as poorly
managed vineyards.

When should governments be involved?
Government involvement in biosecurity arrangements should depend on the extent of the
failure of the market to manage pest and disease risks, and the potential benefits to thecommunity of government intervention. There is also a strong case for government
intervention where the benefits of a service are spread throughout the community and it isdifficult to identify individual beneficiaries. An example is biosecurity arrangements at theborder, which benefit the entire community. The market may not adequately provide sucha service, and while the community can collectively benefit from the service, community
members have little incentive to coordinate. Governments also have the regulatory
authority to compel other parties to comply with biosecurity arrangements.
Where biosecurity measures affect a limited set of people, governments can play a lesser
role. Industry or individual farmers, for example, can be motivated to coordinate, fund andprovide biosecurity measures when the benefits are limited to those carrying out themeasure. Examples include the cherry industry’s biosecurity plan to improve its access toexport markets (box 8.3) or a farmer protecting machinery from damage caused by fireants. However, in some of these cases, governments can share responsibilities withindustry when it is better at coordinating stakeholders, or when the measure also affects thecommunity more generally.

8.3

Benefits and costs of biosecurity

Biosecurity activities confer benefits on the community, the environment and economy.
The community is protected from harmful diseases (some animal diseases are zoonotic and
can affect human health) and the natural environment is conserved, ensuring native plants
and animals are not threatened. Examples of biosecurity risks include avian flu, a virus that
affects poultry and can affect humans, and red imported fire ants which can harm native
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REGULATION OF AUSTRALIAN AGRICULTURE

plants and animals while also damaging agricultural equipment and being a nuisance toanimals and people.
As an island nation, Australia is free of many of the pests, diseases and weeds that arefound in other parts of the world. The South Australian Government described Australia as
having ‘an enviable pest and disease free status’ when compared to many of our trading
partners (sub. 57, p. 25).
A robust biosecurity system benefits Australian farmers by protecting Australia’s
reputation for quality and safe produce, and so is important for safeguarding access topremium export markets. For example, Australia’s foot-and-mouth disease free status hashelped it maintain access to premium markets for red meats (where prices are significantly
higher than for meat products originating from countries where the disease is endemic)(Hafi et al. 2015). Also, the quarantine conditions that Japan and Korea put on cherries
mean that only growers in Tasmania can meet them (Australian Government 2015a).
Keogh and Goucher suggest that biosecurity arrangements will become more valuable toAustralian farmers.
As Australian agriculture transitions from being a supplier of bulk agricultural commodities
towards being a preferred supplier of safe and high quality consumer products, the risks
associated with a breakdown in Australian biosecurity systems become much greater.
(2016, p. 1)

Farming yields can be higher because fewer crops and livestock are affected by pests anddiseases, and farmers’ production costs are lower because fewer pesticides and veterinary
services are required. A recent ABARES (2015) report found that Australia’s biosecurity
system improves the annual profits for the average farm by between $12 000 to $17 500(box 8.5).
Consumers also benefit from an effective biosecurity system. A study by ABARES
looking at the potential impacts on horticulture from exotic fruit fly found that some of theincreases in farmers’ production and marketing costs were transferred to consumers
through higher average market prices for horticultural products across Australia(Hafi et al. 2013). Market prices fell with the implementation of the Torres Strait Fruit Fly
Strategy, which involves detection of, and response to, fruit fly incursion in Torres Strait
islands before they enter the mainland.
However, making import regulations more stringent can reduce biosecurity risks, but also
increase the cost of imported inputs (such as animal feed or new crop species) andconsumer prices, which in turn can protect local industry from overseas competition. As
Beale et al. said:… Australian consumers have a legitimate interest in being able to purchase competitively
priced, quality foods produced safely in overseas countries. Biosecurity arrangements should
not lightly employ measures that interfere with these preferences. (2008, p. XVII)BIOSECURITY

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The value of Australia’s biosecurity system at the farm gate

Box 8.5

An ABARES study looked at the impact on farms’ profits from six significant biosecurity threats
when biosecurity arrangements were and were not in place. The likelihood of a threat becoming
endemic under each situation was calculated and the additional cost to farmers estimated. The
study included the costs that could arise from:•direct production losses (for example, reductions in the productivity of crops and livestockand output quality)•

additional expenditures on control measures, and damage mitigation•

market losses because importers refused infected products.

The results showed that the different diseases would have varying impacts on profits dependingon the type of farm. For example, for foot-and-mouth disease, the study estimated that profits in
pig farming would fall by 15 per cent. Other industries, however, would be less affected. For
example, citrus farmers’ profits were estimated to fall by 1 per cent if affected by red imported
fire ants.
Noting that broadacre farms typically do not farm a single product but several, combining
cropping and livestock, the study also looked at the impact of diseases on typical broadacre
farms, which generally could be affected by foot-and-mouth disease, Mexican feather grass,and Karnal bunt. The contribution of biosecurity activities to these broadacre farm profits ranged
from $12 000 to $17 500 per year (or 5-13 per cent of these farms’ gross margin).

16
14
12
10
8
6
4

FMD

MFG

KB

CG

HPAI

Citrus

Crops

Beef

Egg

ChickenCitrusTriticale

Wheat

Sheep

Beef

Pigs

Sheep

0

Dairy

2

Beef

% of annual farm enterprise profits

Contribution of biosecurity to annual farm profitsa

RIFA

Farm type and diesease/pest

a FMD: Foot-and-mouth disease; MFG: Mexican feather grass; KB: Karnal bunt; CG: Citrus greening;
HPAI: Highly pathogenic avian influenza; RIFA: Red imported fire ants.
Source: Hafi et al. (2015).

The National Farmers’ Federation (sub. 61) also said that the impact biosecurity
regulations have on the importation of animals, animal genetics, plants and associated322

REGULATION OF AUSTRALIAN AGRICULTURE

material that can be used to increase productivity in farming systems needs to beconsidered.
Businesses and the broader community can incur other costs, such as the cost of pesticides(although these costs would potentially be higher if a biosecurity system was not in placeor was ineffective). Many of the costs on businesses and the community are difficult toquantify because data are limited, and people’s preferences are hard to assess. These costs
include the time spent by businesses complying with regulations, and higher operating
costs because they need to implement more measures to address biosecurity risks.
Other regulations can also affect the cost of managing biosecurity risks. For example, somestate and territory moratoria on genetically modified crops (chapter 6) reduce farmers’
access to pest-resistant crops, requiring them to spend more on biosecurity measures.
While it is difficult to quantify the costs, a number of Australian studies indicate that thebenefits from biosecurity are large and likely justify the costs. For example:•

the Commission (2002a) estimated that there would be $13 billion ($18 billion at2016 prices) in revenue losses to the agricultural industry over a decade from amulti-state outbreak of foot-and-mouth disease which takes 12 months to contain. The
loss would be mainly due to lost access to markets and eradication efforts. The
Commission estimated that this would lead to a $8-13 billion loss in Australia’s GDP
over the period.

•

Buetre et al. (2013) estimated that a large outbreak of foot-and-mouth disease inAustralia would result in about $50 billion in revenue losses to the agriculture industry
over a decade. The larger impact when compared with the Commission’s study reflects
assumed additional market access requirements from trading partners following theoutbreak due to Australia’s time out of the market and loss of market share.

•

Hafi et al. (2014) found that while government funded biosecurity activities to tackle
red imported fire ants cost $411 million (over the period 2001–2012), without them, red
imported fire ants could cause losses of $8.5 billion over a 70 year period.

These analyses focus on the economic benefits relating to just a few diseases. The benefits
are likely to be greater when taking into account all potential biosecurity risks and thewider costs to the community.
Eliminating all biosecurity risks is not possible as there is always a risk that pests anddiseases are present in imports to some extent, and that they can enter with migrating
animals. As a result, biosecurity policy is about managing biosecurity risks (noteliminating them).

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8.4

Issues raised about biosecurity

Many participants to this inquiry commented favourably about Australia’s biosecurity
arrangements. The benefits to Australian farmers from our biosecurity system, including a
reputational advantage and access to premium markets, were also readily acknowledged(box 8.6).
Box 8.6

Positive comments on Australia’s biosecurity arrangements

National Farmers’ Federation:
A robust, efficient and science-based quarantine and biosecurity system is fundamental to maintaining
Australia’s enviable pest and disease-free status. The competitive advantage of Australian agriculture
is our ability to produce and supply high-quality, safe, trusted products, which are traceable from farmto consumer and driven by a well-structured and thorough biosecurity system. (sub. 61, p. 25)

Australian Pork Limited:
Australia’s favourable biosecurity status enables it to produce premium agricultural goods
competitively, efficiently and sustainably. Current biosecurity protocols make Australia one of only a
few countries that maintains a high disease-free status for pig herds … Biosecurity is critical to the pork
industry remaining cost competitive. Australia enjoys excellent pig herd health which underpins
productivity, profitability, animal welfare and ongoing management costs. (sub. 37, p. 4)

Voice of Horticulture:
Avoiding pest and disease incursions is critical to the viability of the horticulture industry. Australia’s
unique biodiversity and relative disease-free status must be maintained, along with horticulture’s
reputation as a supplier of fresh, high quality, clean produce. Freedom from many of the world’s major
pests and diseases provides a clear advantage in both domestic and global markets. (sub. 42, p. 20)

Canegrowers:
Continued effort in biosecurity is important for the productivity and profitability of the Australian sugar
industry. Stopping the entry, establishment and spread of exotic diseases and pests is vital for ourindustry’s future. If unchecked, yield losses would be high and devastating to industry productivity andprofitability. (sub. 22, p. 7)

Stephen Targett:Australia currently benefits from being free from a lot of the pests and diseases that are present in therest of the world. This is giving Australia’s products a decisive edge when competing on theinternational arena. Bee Mites, Bee tracheal Mites, Deformed Wing Virus (all bee related) and Footand Mouth Disease come to mind. Not having these pest and diseases reduces producer costs andhelps produce a clean and green marketable product that can be sold for premium. (sub. 5, p. 2)

The World Organisation for Animal Health (OIE) also recently complimented Australia’s
biosecurity system in its evaluation of Australia’s veterinary services. The OIE scored
Australia at the highest competency level of five for 38 of its 47 criteria on animal healthand biosecurity. The lowest level Australia received was three. The OIE said:
The evaluation results highlight Australia’s extraordinary commitment to biosecurity, serving
their national interests by maintaining their high animal health status. The very high level ofbiosecurity is founded on strong partnership collaboration and formal business arrangements
amongst jurisdictions and with the private sector, including primary producers, processors,
suppliers of inputs and laboratories. (Schneider et al. 2015, p. 1)
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REGULATION OF AUSTRALIAN AGRICULTURE

In addition, several participants commented positively on the new Biosecurity Act(box 8.7). The Consolidated Pastoral Company, for example, said ‘it is a good example ofregulatory reform where century old prescriptive legislation has been replaced with an Act
that provides for the efficient administration of the regime’ (sub. 71, p. 6).
Box 8.7

Favourable comments on the new Biosecurity Act and theconsultation process

National Farmers’ Federation (NFF):
The NFF has welcomed the impending replacement of the Quarantine Act 1908, with the Biosecurity
Act 2015. The NFF continues to work through the details of the new legislation with Government tostensure the regulations provide for a biosecurity framework that is fit for the 21 century.
(sub. 61, p. 25)

AgForce:
The underpinning regulations to the Biosecurity Act 2015, currently in development, will largely
determine success in managing biosecurity risk. AgForce commends the industry consultation process
instigated by the Australian Government Department of Agriculture and Water Resources whiledeveloping the regulations. The series of forums between the Department and the National Farmers
Federation Biosecurity Taskforce is providing excellent feedback loops for generating practical andeffective regulations. This is a good consultation model for generating other legislative and regulatory
instruments and is supported by AgForce. (sub. 17, p. 16)

Australian Veterinary Association:
The Australian Veterinary Association supports the planned implementation in June 2016 of the
Biosecurity Act 2015, which aims to introduce a more flexible, risk-based approach to biosecurity
regulation. It is critical that this new legislation and supporting regulatory arrangements are establishedin such a way as to protect Australia from threats to its animal and plant industries. (sub. 26, p. 5)

NSW Farmers’ Association:
NSW Farmers’ members have expressed a clear desire for the Australian Government’s regulation ofentry points of Australia to biosecurity risk to be conducted through a clear regulatory science
framework operating independently of political pressures.
This principle is in the process of being embedded in the Biosecurity Act 2015 (Cwlth) through thedevelopment of regulations which ensure that expert scientific advice is central to the development of
Biosecurity Import Risk Assessments (BIRA) through the oversight of a Scientific Advisory Group.
Further, the independence of a statutory position of Inspector General of Biosecurity of review of BIRA
provides a level of transparency that will ensure the primacy of science in the making of regulatory
decisions over the importation of produce into Australia. (sub. 72, p. 29)

Queensland Farmers’ Federation (QFF):
QFF and its members are supportive of the modernising of the system and the trend within the newbiosecurity legislation (both State & Commonwealth) to reduce red-tape and provide a more flexible
and risk-based approach. (sub. DR217, p. 8)

Australian Sugar Milling Council:
Biosecurity regulation in Australia appears to be headed in the right direction. Both the Australian andQueensland Governments now have modern biosecurity arrangements that have been introduced in2016, with other States considering closer alignment of their biosecurity legislation. (sub. DR234, p. 4)

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325

However, some concerns were raised, including:•the changed role for industry under the new Biosecurity Act•

the role of industry in decision-making•

import risk assessments•

the interaction between the Australian, state and territory governments•internal surveillance and diagnostics of biosecurity risks.

Each of these issues are discussed below.

The role of industry under the new Biosecurity Act
The new Biosecurity Act aims to promote a shared responsibility for biosecurity between
governments and industry (DAWR 2016g). Notably, it has streamlined the application
process to enable businesses to monitor biosecurity risks themselves. While the Quarantine
Act 1908 allowed for this, it required businesses to form an agreement for each biosecurity
activity that they carried out, and each premise that they assessed. The new Act’s approved
arrangements combine these separate agreements into one. The Australian Government
expects to conduct fewer audits of businesses, reducing their frequency from at least twice
to once per year, on average, although audit rates will depend on factors such as abusiness’s compliance and performance (DoA 2014a).
The approved arrangements account for most of the expected net reduction in compliancecosts on business, which based on the regulation impact statement, is estimated to be$6.9 million over ten years (DoA 2014a). Costs are also expected to fall because ofchanges to first point of entry requirements for vessels when they arrive in Australia(box 8.8). These reductions are partly offset by increased costs from changes to ballast
water regulations and the creation of an Inspector General of Biosecurity.
While some participants were positive about approved arrangements, the Community andPublic Sector Union (CPSU) flagged potential problems.
Many CPSU members have expressed concerns that the move away from Department-run
inspections towards self-regulation by industry participants may have adverse impacts on
quarantine outcomes. (sub. 6, p. 2)

In particular, the CPSU was concerned that the new legislation was not specific, providing
industry with too much leeway when carrying out inspections. The CPSU was also
concerned that allowing company employees to be biosecurity officers makes businesses
less accountable for risks, and may lead to conflicts of interests as a company’s profit
motive may conflict with its biosecurity responsibilities.

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REGULATION OF AUSTRALIAN AGRICULTURE

Box 8.8

Main changes introduced by the new Biosecurity Act 2015
(Cwlth)In addition to the changes arising from approved arrangements, the provisions of the new
Biosecurity Act 2015 (Cwlth) differ in several ways from those in the previous Quarantine Act
1908 (Cwlth). Changes include:•

allowing the Australian Government to permit vessels to apply for a standing approval toarrive at a port which has not been proclaimed as a first point of entry. The new Act also
provides greater transparency around the process of proclaiming a first point of entry•

introducing a civil penalty regime which allows for civil penalties, enforceable undertakings,
and infringement notices•

explicitly stating Australia’s Appropriate Level of Protection•

providing the Australian Government with greater powers to manage incursions and respondto emergencies. For example, the Director of Biosecurity can declare biosecurity zones andapply biosecurity measures within these zones. However, states and territories continue tohave primary responsibility for responses within their jurisdiction•

providing biosecurity officials with greater powers to gather information and manage
conveyances•

appointing an Inspector-General of Biosecurity who will undertake independent audits of the
Department of Agriculture and Water Resources’ biosecurity activities and risk management
to maintain or improve the integrity of the biosecurity system as a whole. The
Inspector-General will have powers to compel compliance and provision of information•

changing the way ballast water is managed. (Ballast water is stored by ships to stabilisethem during a journey. The water is taken on and discharged at different stages meaningthat marine organisms can be moved from place to place with this process.) The changes
bring Australia’s requirements in line with international conventions and create a single,
Australia-wide ballast water management regime. The main changes are to domestic ships’
management of ballast water.

Sources: Biosecurity Act 2015 (Cwlth); DAWR (2014a).

While assessing whether approved arrangements weaken Australia’s biosecurity is difficult
as the Biosecurity Act only took effect in June 2016, the risk is low. In particular,
businesses were able to apply to self-assess biosecurity risk under the Quarantine Act
1908. The Beale review in looking at this issue said:[The self-assessment arrangements] involve unnecessary administration with the requirement
for biennial and even annual re-registration processes, and a lack of recognition of businesses
with an excellent compliance history, for example, customs brokers with a long history ofadhering to the requirements of a compliance agreement. (2008, p. 74)

The Beale review recommended improvements to the self-assessment arrangements sothey would be more widely adopted and the regulatory burden for businesses with anexcellent track record of compliance would be reduced. The new approved arrangements
streamline the application process for businesses, reducing costs. Lower compliance costs
should encourage more businesses to enter approved arrangements (self-assessing
biosecurity risks are likely to be cheaper than government audits). However, Australia’s
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327

biosecurity could be weakened if businesses do not adequately assess their biosecurity
risks. This could occur if businesses’ interests conflict with Australia’s biosecurity
priorities.
However, businesses’ interests often align with Australia’s biosecurity objectives. Manybusinesses have their own biosecurity arrangements in place and, as a result, approved
arrangements can reduce overlap of governments’ and businesses’ arrangements. In thisway, approved arrangements can free up government resources to focus on other risks,
which can improve Australia’s overall biosecurity. Businesses also have a strong incentive
to notify authorities of threats outside of their properties as this can reduce the harm tothem.
That said, governments’ and businesses’ interests are not always aligned — for example, afarmer transporting cattle may not disclose the symptoms of a particular animal to avoid
the entire load from being quarantined or destroyed. As the CPSU noted, ‘it only takes one
business failing to adequately assess their biosecurity risk to lead to a biosecurity outbreakwhich has the potential to do significant economic and reputational damage to Australian
agriculture’ (sub. DR204, p. 3). As such, governments continue to play an important role inmonitoring and acting on biosecurity threats.
The effectiveness of approved arrangements relies on DAWR ensuring that approved
businesses’ objectives are aligned with Australia’s biosecurity priorities. The new civil
penalties under the Biosecurity Act provide DAWR with additional tools to effectively
manage businesses that undertake their own biosecurity activities. In addition, biosecurity
officers are now able to direct an approved business to carry out a biosecurity measure or
refrain from doing so. The Director of Biosecurity also has power to revoke a business’
arrangements.

Involving industry in decision-making
A greater role for industry in making decisions about biosecurity arrangements was
advocated by a number of participants. The Sheepmeat Council of Australia said:
Industry has much to offer in helping to protect Australia from biosecurity threats andmanaging existing incursion … The ‘shared responsibility’ advocated by Nairn and Beale isstill short of optimal realisation …
Traditionally industry has only been engaged in an advisory capacity; however, industry has asignificant interest in building awareness and capability in the agricultural sector to help inachieving these outcomes … (sub. DR245, pp. 5–6)

WAFarmers also said:
Industry currently has limited engagement with government on development of priorities,
policy and response strategies. However governments are increasingly pushing biosecurity
function and funding obligations back onto industry, without providing industry with the328

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opportunity to engage properly in the decision making process, or acknowledging the valuable
contribution industry experts can offer to this process. (sub. DR226, p. 19)

Submitters to the IGAB review put forward similar views in relation to the IGAB. For
example, Animal Health Australia said:
The current IGAB has been successful in bringing governments together to strengthen theirworking partnerships and investments to improve the national biosecurity system, but has failed
to fully realise its partnership opportunities with others such as industry …
There still remains no clear mechanism for industry to engage with [the National Biosecurity
Committee] on relevant areas of IGAB … (2016, p. 3)

Industry already plays a role implementing biosecurity measures, and contributes as part ofemergencies (such as through the Emergency Plant Pest Response Deed) and within
Animal Health Australia and Plant Health Australia.
The shared responsibility for biosecurity between government and industry has thepotential to involve industry more in decision-making. Industry is more likely to
implement biosecurity measures when they are involved in their design. Also, industry’s
on-the-ground knowledge can improve biosecurity measures, and allows for rapid
feedback on the effectiveness of measures. As Richards and Higgins said:
Shared responsibility improves engagement with groups of actors who may have had limited
previous input into biosecurity policy and programs. Such engagement is crucial forgovernments in better recognising how producers perceive and respond to pest and disease risk,
as well as how they make biosecurity workable in the context of (a) their experience of livingwith disease … and (b) the imperative to operate an economically viable and sustainable farm.
… The sharing of responsibility for biosecurity has the potential to foster a more polycentric
governance approach in which information from localised hubs of actors is passed upwards toauthorities rather than just being received from the top-down. (2016, pp. 5–6)

The IGAB review should look at ways to involve industry more in decision-making
processes.
Industry awareness of biosecurity and their responsibilities
While greater industry involvement in biosecurity can be beneficial, its effectiveness relies
on businesses knowing and carrying out their roles. As the National Biosecurity
Committee said:
Successful collaborative action to manage established pests and diseases, including those thatare considered to be nationally significant, depends on all stakeholders having an understandingof their roles and responsibilities. (2015, p. 8)

The Northern Territory Department of Primary Industries and Fisheries said that somefarm businesses may not understand their responsibilities:

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It is our view that some Australian primary producers do not fully recognise the increasing
threats posed by the pests and diseases nor fully appreciate the significance of biosecurity
programs in maintaining or enhancing market access, both domestically and internationally. In
order to help mitigate these increasing risks, an improved national approach to biosecurity isrequired. (sub. 67, p. 2)

If businesses do not understand their responsibilities they are unlikely to adequately
manage their biosecurity risks, and this could weaken Australia’s overall biosecurity
arrangements, harming other businesses and the community. As the CPSU said regarding
approved arrangements:
A business may have little or no understanding that a failure to inspect properly for biosecurity
risks could devastate an entire industry unrelated to the industry the business is operating in.
(sub. DR204, p. 3)

The Northern Territory Department of Primary Industries and Fisheries (sub. 67) noted thatwhile the move to individual property biosecurity management (rather than state andterritory based regulation) is about minimising regulatory burden, it also needs to berecognised that there is an inherent risk that a disease could become established on aproperty, spread to other properties and affect collective market access.
Smaller producers and hobby farmers can lack knowledge about biosecurity risks and may
not maintain good biosecurity standards (box 8.1). These farmers are often disconnectedfrom traditional agricultural networks, particularly as some may keep livestock and plants
without selling them. If pests and diseases establish on these farms (particularly thoselocated in peri-urban areas close to ports), and they spread, they can affect commercial
operations and weaken the biosecurity system.
The Commission heard little evidence that a significant number of businesses are unawareof the need for biosecurity. Because many businesses benefit from biosecurity efforts
and/or can face penalties for not complying with regulations, they have an incentive toknow their responsibilities.
Governments and industry groups are also often engaged in the biosecurity issues thatbusinesses face, developing management plans with stakeholders and conducting
information sessions. For example, the Livestock Biosecurity Network, an industry
initiative established by the Cattle Council of Australia, Sheepmeat Council of Australia
and Wool Producers Australia, seeks to provide livestock producers with the necessary
tools and information to manage disease, pest and weed events on livestock producers’
farms (LBN 2016). However, more may need to be done to inform small producers andhobby farmers about their responsibilities around biosecurity.
Shared responsibility requires clearly defined roles, responsibilities and accountability.
Several submitters to the current IGAB review noted that industry do not clearly
understand their role under a shared responsibility. For example, WAFarmers said:

330

REGULATION OF AUSTRALIAN AGRICULTUREWe don’t believe the components and function of the national biosecurity system areconsistently understood by industry stakeholders and to some extent government personnel …

(2016, p. 4)

And Plant Biosecurity CRC stated:
There is considerable confusion around the meaning of the term ‘shared responsibility’. A
schedule to the IGAB setting out the roles and responsibilities would improve the common
understanding of this term. (2016, p. 2)

In practice, making the distinction between who should be responsible for what is notalways straightforward. The Tasmanian Department of Primary Industries, Parks, Water
and Environment observed that:
The notion of shared responsibility is easily invoked because it speaks to principles of equity
and cooperation with which few people would argue. However, the practical application ofshared responsibility in biosecurity is difficult because it involves making concrete distinctions
between, and decisions about, public versus private goods, and therefore who ought to pay,
why, under what circumstances and how much. (2010, p. 97)

Industry confusion about their role under shared responsibility could harm the biosecurity
system, particularly as industry becomes more involved in decision making. There would
be benefit from more clearly defining governments’ and industry’s roles, and establishing aframework for engaging with each other.

Concerns about import risk assessments
DAWR assesses the risk of any proposed imports into Australia through either a review ofexisting assessments or a more formal Biosecurity Import Risk Analysis (BIRA)(DAWR 2016h).
A BIRA identifies the pests and diseases of biosecurity concern that may be carried by theimported goods, and assesses the likelihood that an identified pest or disease would enter,establish or spread, and the probable extent of the harm that would result. Economic
considerations are only ‘taken into account from matters arising from potential negativeand indirect impact of diseases and pests’ (DAWR, sub. 182, p. 5) from imported goods.
Wider economic considerations, such as the benefits to consumers from increased
competition after importing a good, are not considered. In principle, taking into accountthese wider considerations can be beneficial for the community overall, but doing so inpractice is problematic (Binder 2002; Snape and Orden 2001).
DAWR liaises with stakeholders when conducting BIRAs. Biosecurity measures areproposed if the assessed level of biosecurity risk exceeds Australia’s ALOP. If measures
cannot reduce the risk to an acceptable level, the good will not be imported. The Directorof Biosecurity makes the final decision on whether to allow the import of a good, and takes
into account the BIRA and its recommendations, any reports by the Inspector General of

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Biosecurity, which may be asked to review the BIRA process for a good, and otherrelevant information (DAWR 2016h).
BIRAs replaced earlier Import Risk Analyses and took effect under the new Biosecurity
Act in June 2016. Details applying to their operation are in the Biosecurity
Regulations 2016 and the Biosecurity Import Risk Analysis Guidelines (DAWR 2016h).
Some participants raised concerns about the transparency of BIRAs (Voice of Horticulture,sub. 42) and the role of the Scientific Advisory Group, which may be requested to examineand provide comments on any aspect of a BIRA. Participants noted that the Scientific
Advisory Group could benefit from external experts (AgForce, sub. 17) and suggested thatindustry should have the opportunity to appoint a scientific delegate (Voice ofHorticulture, sub. 42).
The Tasmanian Department of Primary Industries, Parks, Water and Environment also
noted that risk assessments do not adequately account for regional differences.
Of concern to Tasmania is that arrangements for import assessments under the Biosecurity
Act 2015 (Cwlth) adequately address regional differences. These differences may be due touneven distribution of susceptible hosts, significance of an industry on a regional basis, orclimatic and other environmental issues that may impact on the survival and spread of the pestor disease. If assessments adequately address these issues and importation conditions are set toreflect them, for example by only permitting imports into specific regions of Australia, thenTasmania may not need to undertake a separate import assessment or impose additional
conditions, which would result in significant savings to government and a saving to industry.
(sub. 62, pp. 7–8)

DAWR sought to address these issues as part of its review of Import Risk Analyses(DAWR 2015g). The review, which began in 2014, involved stakeholder consultation, andled to the new BIRAs.
Aspects of the BIRA process designed to address stakeholders’ concerns are:•additional details about the risk assessment process and methodology to improvetransparency (DAWR 2015d). DAWR is trialling biosecurity liaison officers who are
conduits between DAWR and stakeholders, informing and updating stakeholders about
ongoing risk assessments (Joyce 2016b)•

using external expertise in the Scientific Advisory Group and taking into accountstakeholders’ views (DAWR 2015d, 2016h)•

looking to improve transparency about the ways risk assessments take into account, andassess, regional differences (DAWR 2015d, 2016h). However, completely accounting
for regional differences can be difficult (discussed below).

As with other aspects of the new Biosecurity Act, the effectiveness of the BIRA process isdifficult to assess as the regulations and guidelines have only recently taken effect.

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Issues with state and territory regulations
Stakeholders raised concerns about difficulties operating across state and territory borders,
and reduced funding for surveillance and diagnostics activities.
Difficulties operating across state and territory borders
Biosecurity regulations vary across jurisdictions, as does the assessment of the risk arisingfrom particular products which may contain pests and diseases. NT Farmers described
Australia’s biosecurity regulatory arrangements as:… one of the most complex structures around, one which brings to play Federal, and Territory
regulations, as well as cross jurisdictional regulations. For example, regulation governingmarket access between the Northern Territory and South Australia, is onerous and creates an us
versus them mentality. (sub. 8, p. 1)

Different regulations can cause problems when businesses look to access other states’
markets or transport products between states. For instance, states have different regulations
relating to the movement of fodder and delays assessing other states’ fodder for biosecurity
risks has meant that some Tasmanian farmers could not adequately feed their cattle(Hanson 2016).
While pests, diseases and weeds do not recognise state borders (which points to the needfor a national biosecurity framework), diseases are often regional in distribution and thestates and territories do face different risks. As the Western Australian (WA) Governmentsaid:
WA has distinct requirements for biosecurity regulations which have driven the need forvariations to arrangements … applying in the eastern states of Australia. WA, because of its
relative isolation, has pest and disease free status that does not exist in the eastern states. This
gives the State access into valuable and emerging markets. (sub. 54, p. 32)

As a result, some regional variation in biosecurity regulations is appropriate, but issues canarise when jurisdictions evaluate their risks independently from each other.
Trade-restrictive regulations

States and territories aim to set regulations on goods arriving from interstate in line with an
ALOP, which states and territories (except Tasmania) agreed under the IGAB would beAustralia’s ALOP (COAG 2012a). Tasmania sets its own ALOP on goods, which like
Australia’s is ‘very low’ but can vary from the outcomes under Australia’s ALOP(TDPIPWE 2010). 27
27 Tasmania’s Department of Primary Industries, Parks, Water and Environment noted that ‘despite
expressing ALOP in similar terms and adopting similar methods for assessing import risk against it, it is

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However, jurisdictions can be motivated to implement trade restrictions throughregulations that are more conservative than the jurisdiction’s ALOP, or through othermethods, such as delaying approval for goods to be imported from other jurisdictions.
Trade-restrictive regulations generally protect a particular group, but can be detrimental toothers in the state (such as either producers or consumers) and those in other jurisdictions.
The South Australian Government said:
Some jurisdictions have implemented restrictive regulations that prohibit some commodities
being traded between states (e.g. potatoes). It is imperative that such restrictions are based on
sound evidence supporting the need to manage biosecurity risks only. Restrictive tradearrangements between states which have no biosecurity basis send the wrong message to ourinternational trading partners and significantly increase costs to growers and to consumers.
National leadership is needed to take action to resolve interstate trading that may be in excessof the ‘Acceptable Level of Protection’ (ALOP) under the Biosecurity Act 2015.
(sub. 57, p. 25)

Provisions under the IGAB should limit state and territory use of trade-restrictive
regulations. States and territories (except Tasmania) agreed under the IGAB to ensure that
their biosecurity regulations will be ‘the least trade restrictive possible and based on ascientific analysis of the risk of entry, establishment and spread of a pest or disease andapplied only to the extent necessary to achieve Australia’s ALOP’ (COAG 2012a, p. 8).
When a dispute arises, jurisdictions agreed to use a formal resolution process.
There is little information available on the effectiveness of these provisions under the
IGAB. The current review of the IGAB is looking at these arrangements and assessing
whether they should be revised, and if other arrangements are needed to effectively resolve
disputes (Craik, Palmer and Sheldrake 2016). It is important that the review look at the
impact of Tasmania’s decision not to participate in the IGAB on the Agreement’s
effectiveness.
Accounting for jurisdictions’ priorities

Even when state and territory biosecurity regulations accurately reflect their ALOP,
because jurisdictions make decisions independently (and may not consider the broader
economic impacts from interstate trade), the best outcome for Australia overall may not be
achieved.
Under the IGAB, states and territories agreed to permit a good into their jurisdictions if thegood’s risk meets the jurisdiction’s ALOP. Risk assessment for interstate movement ofgoods is similar to the national process carried out for imports — it combines thepossible for Tasmanian import risk analyses to result in different, and typically more conservative
conclusions about risk compared with those made for Australia as a whole’ (TDPIPWE 2010, p. 94).

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likelihood of a pest or disease carried with the good entering and spreading, and theconsequences of this.
This assessment does not generally account for broader economic impacts from a goodentering, such as the impacts on competition. Considering these impacts can lead todifferent outcomes: for instance, a good’s risk can be higher than a state’s ALOP, but thebenefits to consumers from lower prices and increased product choice may still yield a net
benefit.
However, a jurisdiction’s consideration of broader economic impacts may not be ideal forthe nation overall if it does not account for the impact of its decisions on otherjurisdictions. For instance, a state could be better off from restricting or regulating theentry of a good, but the benefits may not outweigh the costs to other states from losing
market access or complying with regulations. Cases like this reduce the welfare of theAustralian community, and suggest that a more nationally focused approach would bebetter.
Reduced funding for surveillance and diagnostics
Surveillance and diagnostics of pests and diseases is vital so that they are detected before
becoming established. Because the design and resourcing of the national system by theAustralian Government is premised on certain levels of state resourcing, jurisdictions
cutting back on biosecurity spending could put at risk Australia’s biosecurity system.
Some evidence suggests that state and territory surveillance and diagnostic activities have
weakened with reduced funding for biosecurity. In particular, a report by the Victorian
Auditor-General’s Office highlighted the potential impact of reduced biosecurity fundingin Victoria.
[The Victorian Department of Economic Development, Jobs, Transport and Resources’]
capacity to effectively detect, prepare for and respond to an emergency livestock disease
outbreak has been weakened by a decline in financial and staff resourcing for core biosecurity
functions. This decline has resulted in a significant drop in surveillance coverage and theincreased likelihood of a major disease outbreak going undetected until it has become
established. This would increase the scale and complexity of an emergency response. The
potentially severe economic and health impacts of such an outbreak in Victoria highlight theurgent need to address this risk. (2015, p. X)

The WA Government also submitted that a 2012 forum on biosecurity preparedness in thestate’s grains industry identified that ‘surveillance and diagnosis was consideredinadequate to maintain data sets for trade purposes and new market access submissions’(sub. 54, p. 35).
Reduced surveillance of biosecurity risks at the state and territory level increases thelikelihood of a disease outbreak going undetected until it is established. If this occurs,
states could impose more stringent regulations to compensate for others’ lax regulations,

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which would in turn make it difficult for businesses to transport products into or throughsome states.
However, the effectiveness of surveillance and diagnostics also depends on how efficiently
resources are used, and there appears some scope to improve this, particularly through amore coordinated approach between jurisdictions. As with regulations for moving goods
interstate, when states and territories act independently from each other, they have little
incentive to carry out surveillance and diagnostics activities that are beneficial to otherjurisdictions, but not to them. Also, they are likely to focus surveillance on theirbiosecurity priorities as they have limited resources to spend. This may not lead to an ideal
outcome for the national biosecurity system and the Australian community.
More generally, when deciding where to spend biosecurity dollars, governments mustchoose the most effective measure to tackle a threat. Determining the balance between
different types of projects is guided by the generalised invasion curve (figure 8.2).
Figure 8.2

Generalised invasion curve

Source: Agriculture Victoria (2016a).

There are four key types of action that may be appropriate at different stages of a pest or
disease incursion:•

prevention for keeping out pests and diseases from entering Australia (including
quarantine and offshore inspections)•

eradication to eliminate a threat within Australia, generally to prevent it fromestablishing•containment to restrict a pest or disease to a defined area and limit its spread andimpact336

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•asset-based protection for pests and diseases that are widespread so eradication andcontainment are unfeasible.

The returns on investment are different for the various phases of invasive species
management, with the highest return on investment generally achieved through preventing
entry of exotic and new threats, followed by eradication. Public benefits from protecting
private assets (the far right of figure 8.2) are generally lower when compared with otheractivities where government can play a role. As a National Biosecurity Committee
discussion paper recently said:
The benefits of managing an established pest or disease accrue predominantly to the owner ofthe land or the owner of the asset, so asset-based management may be the most cost-effective
for an individual and/or as the basis for collective action by a community or industry.
(2015, p. 5)

Many asset-based protection and containment measures fall under this category.
Eradication and prevention measures can also be implemented more cost effectively insome instances when governments and industry share responsibilities for funding andimplementation.
Scope for nationally coordinated policies under the IGAB
There are clear benefits to the Australian community from coordinating state and territory
regulations on moving goods interstate, and their surveillance and diagnostic activities.
Similar benefits would arise from a coordinated policy for other biosecurity measures, suchas containment and eradication measures.
A collaborative policy would benefit from states’ and territories’ capability to administer
biosecurity, and their understanding of state-specific issues. However, a collaborative
policy also requires national leadership, a point made by some inquiry participants. Grain
Producers Australia, for example, said that it ‘strongly supports the need to set thepriorities for the national investment on biosecurity. We would agree that clearer national
leadership would improve the Australian biosecurity system’ (sub. DR201, p. 4).
The IGAB takes steps towards a collaborative and coordinated approach for biosecurity
measures. For example, the NEBRA establishes national arrangements between
governments for responding to nationally significant biosecurity incidents, and theAustralian Government provides leadership (COAG 2012b).
Sectoral committees take a lead role in developing strategies under the National
Surveillance and Diagnostics Framework. The Framework was developed to facilitate an
integrated approach to the funding and management of surveillance, and its policy
principles are national strategies for surveillance and diagnostics and identifying priorities
for investment and promoting harmonisation of jurisdictional approaches (NBC 2014).

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The National Biosecurity Committee’s proposed policy for a national framework for
managing ‘nationally significant’ pests and diseases suggests that either government,
industry or the community can take a lead role depending on the circumstances(NBC 2015). The policy suggests developing a national management plan or strategy forthese threats, which would include those that affect Australia’s economy. A strategy could
include responsibilities for government, industry and the community, and part ofgovernment’s role would be to ‘apply nationally consistent regulatory measures only to theminimum extent necessary to manage unacceptable risks’ and ‘facilitate coordinated policy
across jurisdictions for the management of established pests and diseases’(NBC 2015, p. 9).
The review of the IGAB is looking at the effectiveness of the agreements and the policies
developed under it. It is important for the review to consider the effectiveness of thesepolicies in coordinating jurisdictions’ interests for the overall benefit of the Australiancommunity, and whether clearer national leadership (by the Australian Government or
another national body) could improve Australia’s biosecurity system.

Allocating resources to areas of greatest return
Several policies developed under the IGAB aim to allocate government resources tobiosecurity measures that provide the greatest net benefit. An example is the National
Surveillance and Diagnostics Framework, which aims:… to ensure that surveillance and diagnostics are supported by risk based decision making tohelp prioritise the allocation of government resources and investment to areas of greatest return,and to maximise the use of existing capability and infrastructure. (NBC 2014, p. 1)

Governments generally use cost–benefit analysis (CBAs) to assess whether to carry out abiosecurity measure, and will only embark on a measure if the project yields a net benefit.
The National Framework for Biosecurity Benefit:Cost Analysis was developed to guide
CBAs under the NEBRA. It consists of key requirements that a cost–benefit analysis
should address, with the aim of facilitating a consistent approach to analyses to help
achieve best practice (COAG 2012b).
While CBAs are useful for deciding whether to carry out a project, Kompas (2016) noted
problems when CBAs of biosecurity measures are viewed in isolation and not comparedwith the potential benefit from other projects. In particular, a biosecurity measure may
yield a net benefit, but still may not be the best use of resources. Another measure that
addresses the same threat, or even one that addresses a different threat, may yield a higher
return for each dollar spent, leading to a more efficient use of biosecurity resources.
Kompas advocated for investing in a ‘portfolio’ of biosecurity measures that produce thegreatest overall return given the total level of resources. A portfolio could include any
combination of measures that address risks across the different stages of a pest or disease
incursion (as shown by the invasion curve, figure 8.2). Choosing measures for the portfolio

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would depend on where each additional dollar could be best spent to reduce the overall
biosecurity risk to Australia.
The Queensland Biosecurity Capability Review (of which Kompas was a member of thereview panel) put forward a similar approach (Brooks, Glanville and Kompas 2015). The
National Biosecurity Committee has been exploring a portfolio investment approach whendeveloping a national biosecurity investment strategy (DAWR 2015r).
A portfolio approach appears the most efficient way to allocate limited biosecurity
resources. However, there can be limits to which measures can be compared, particularly
given the broad number of biosecurity threats and response measures, and limited available
data. This may explain the limited use of such analysis historically (Heikkila 2011).
However, wherever feasible, governments and industry should look at adopting a portfolio
approach to deciding where to spend biosecurity dollars.

Adopting new technology
Technology can also improve the efficiency of biosecurity measures. There are a numberof examples of governments, research organisations and industry using technology to
improve measures. For example:•

the Queensland Department of Agriculture and Fisheries uses helicopters fitted with
infra-red and thermal cameras to help identify red imported fire ant colonies. The
helicopters can monitor larger areas and save money when compared withground-based surveillance involving sniffer dogs and field officers visually checking
the ground (Queensland Department of Agriculture and Fisheries 2013)•

staff at quarantine stations and government departments use remote microscope
systems to upload images of infected plants which experts in different countries canaccess and help identify pests and diseases. This reduces the cost and time ofidentifying a pest or disease, which would otherwise be identified by physically mailingthe specimen to an expert (Thompson et al. 2011)•

researchers at the CSIRO are using tiny sensors on the back of bees to monitor bee
populations for biosecurity risks such as Varroa mite, which can destroy bee
populations, affecting farmers’ yields (CSIRO 2016b)•

the Victorian Department of Economic Development, Jobs, Transport and Resources
developed its ‘MAX’ data and case management system to help monitor disease
outbreaks. The system allows biosecurity officers to access and enter information on
the move, and contains analysis tools such as maps which can improve government’s
responses to outbreaks (VDEDJTR 2016c)•

governments and the livestock industry use the National Livestock Identification
System (NLIS) to identify and trace cattle, sheep and goats along the supply chain(NSW DPI 2016b). Livestock are usually tracked through a device or tag on the
animal’s ear, and a national database records animals’ movements. The Australian
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Meat Industry Council commented that the introduction of the NLIS ‘has also provided
the opportunity to manage many disease conditions with a targeted risk based
approach’ (sub. 77, p. 14). The NLIS also helps when responding to food safetyincidents and in ensuring suppliers meet other countries’ import requirements.
Continued and increased use of technology will improve the efficiency of limited
biosecurity resources.

Is a national biosecurity strategy needed?
While most jurisdictions have, or have previously had, a biosecurity strategy, there iscurrently no national policy statement or national biosecurity strategy agreed to by
governments, industry and the broader community (Craik, Palmer and Sheldrake 2016).
However, as the discussion paper to the IGAB review noted, ‘it has been suggested that the
IGAB has taken on the role of a “quasi-national strategy”’ (Craik, Palmer and
Sheldrake 2016, p. 18). But as Animal Health Australia said:[The] IGAB was developed by governments principally for governments to improve thenational biosecurity system by strengthening the co-ordination of government policy and theresources and working partnerships between governments. As a government to government
agreement the national goals and objectives and principles to underpin Australia’s national
biosecurity system continue to remain relevant … but it is nonetheless some way from being an
inclusive and national biosecurity strategy. (2016, p. 8)

A number of submissions to the IGAB review called for a national biosecurity strategy.
For example, the ACT Government said:
It would be timely to develop a national biosecurity strategy now that the Commonwealth
Biosecurity Act has been enacted. (2016, p. 1)

Animal Health Australia also said:
Minimising and managing future national biosecurity risks would benefit from the developmentof a national biosecurity strategy. A national strategy would assist in helping stakeholders gaina shared vision, a shared understanding of how the strategic priorities bring about theoverarching outcomes and importantly how their work/their investments fit with the bigger
picture. (2016, pp. 3–4))

A national biosecurity strategy could assist in identifying and gaining agreement acrossgovernments, industry and the community on the key risks and priority areas forbiosecurity investment at the national level. This can help to achieve a more strategic andanticipatory approach to investment. A strategy could also help transition the biosecurity
system towards greater shared responsibility, such as by:•better defining who is responsible for what•

helping to identify gaps in the system•

guiding how industry and governments will work together and resolve disputes.

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8.5

Other regulatory issues

Participants to this inquiry raised concerns about some specific regulatory issues,particularly interstate certification assurance and the risks that arise from farm trespass.
These are addressed below.

Interstate Certification Assurance
The Interstate Certification Assurance (ICA) scheme is a national scheme that allows
accredited businesses to self-certify the health of their plants to ensure their plant products
meet importing state or territory requirements. This provides an alternative for businesses
to being certified by government inspectors (and it can be less expensive).
The South Australian Government raised concerns about the ICA scheme:
The greatest biosecurity regulatory burden on agricultural business in Australia is through theInterstate Verification Certification Arrangements (IVCA) and Interstate Certification
Arrangements (ICA). These regulatory regimes implemented by each jurisdiction under theirrespective Plant Health legislation has created a labyrinth of regulation, processes andprocedures which restrict and in some cases stifles interstate trade in horticulture
produce. (sub. 57, p. 25)

However, few other stakeholders to this inquiry or the Agricultural Competitiveness White
Paper raised concerns about the scheme. This appears in line with ABARES conclusion in
its Review of Selected Regulatory Burdens on Agriculture and Forestry Businesses (Gibbs,
Harris-Adams and Davidson 2013). The review concluded that concerns about commodity
classifications subsided with government initiatives aimed at improving businesses’
understanding of the ICA scheme. The review also said multiple commodity classifications
are reasonable when they reflect the many factors that can affect a commodity’sbiosecurity status.
Measures developed under the IGAB should also facilitate more consistent regulations, andthe current review of the IGAB will assess whether it is helping to harmonise regulations.
There is also scope to harmonise regulations through the work of the Subcommittee on
Domestic Quarantine and Market Access and under the National Plant Biosecurity
Strategy. The Subcommittee comprises state, territory and Australian Government
representatives and Plant Health Australia, and aims to minimise regulatory burdens on
industry, and ensure regulations are coordinated and harmonised across jurisdictions(Subcommittee on Domestic Quarantine and Market Access 2016). The National Plant
Biosecurity Strategy is a 10-year plan for Australia’s plant biosecurity system developedby Plant Health Australia with one of its component strategies being to adopt a ‘nationallyconsistent plant biosecurity legislation, regulations and approaches where possible withineach state and territory government’s overarching legislative framework’ (Plant Health
Australia 2010, p. 7).

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Concerns about risks to biosecurity from trespass on farms
In the Agricultural Competitiveness Green Paper, the Australian Government said that‘stakeholders suggested, and the Australian Government encourages, that States andTerritories strengthen their laws to stop trespass on farms and to meet the challenges of
new invasive technology including surveillance devices’ (2014a, p. 23).
Concerns about biosecurity and reputational risks associated with trespass on farms werealso raised in this inquiry. For example, the Australian Veterinary Association said:
Farm trespass poses risks to biosecurity and disease control. It also may impact directly on thewelfare of the animals involved. (sub. DR167, p. 5)

Primary Producers SA said that:
Animal welfare has become a fertile ground for political activists. Intensive animal producers
should not have to live in fear of activists raiding them and creating bio-security issues.
(sub. 41, p. 4)

And the Victorian Farmers Federation said:
Farm trespass is a concerning trend in activism in Australia. Having groups trespass on yourproperty is a distressing experience. Farmers must then deal with additional concerns aroundwhether animals have been interfered with and if there is a biosecurity risk. (sub. DR189, p. 29)

Vegan Australia, however, disputed that farm trespass by animal activists significantly
increases biosecurity risks.
The argument that farm trespass, and in particular trespass by animal activists, significantly
increases biosecurity risk has no basis in evidence … Any stakeholders using biosecurity as ajustification for advocating tougher penalties for animal activists trespassing on farms must
provide evidence, and not merely rhetoric, demonstrating that these animal activists pose asignificant biosecurity risk. (sub. DR115, p. 13)

But others provided examples of disease outbreaks arising from activists entering
properties. For example, Australian Pork Limited said it is:… aware of at least two instances where pigs on two separate farms that were raided by
activists on subsequent nights, broke out with the same endemic disease, and for which they
had been free for several decades.
A disease incursion can result in many costs to animal health and welfare, and to the production
system. For pigs, the only way to resolve some endemic diseases is to depopulate the piggery.
For an average farm, this can result in costs upward of $1 million. (sub. DR282, p. 8)

Ausveg pointed to the quarantine controls required in response to trespass.
In cases of notifiable pest outbreaks, properties may be attributed a ‘linked status’ if trespassers
are known to have travelled directly from a quarantined property. The ‘linked’ land will
ultimately come under a quarantine arrangement, regardless of a pest detection on that property.
(sub. DR193, p. 4)

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Trespass is unlawful and undesirable, and landholders are entitled to legal protection
against it. Trespass can increase biosecurity risks. Solutions proposed by some participants
included implementing stricter farm trespass laws and penalties (Victorian Farmers
Federation, sub. DR189) and doing more around enforcing these laws (AUSVEG,
sub. DR193; Grain Producers Australia, sub. DR201). Others, however, argued that thelegal mechanisms in place are adequate (for example, Voiceless, sub. DR166). Animals
Australia argued that:… any focus on altering or bolstering trespass law would be misplaced; ‘trespass’ is in ourview merely a symptom of the legally sanctioned suffering caused to farmed animals …
(sub. 268, p. 12)

Stricter laws and penalties, and better enforcement to deter farm trespass, may simply betreating the symptom rather than the cause. As such, addressing activists’ underlying
motivation to trespass appears to be a better solution. Several participants agreed that thiswas the better approach. The RSPCA said:
We note the [Commission’s] draft report addresses concerns relating to farm trespass by animal
advocates. This is a very real concern as trespass activities have increased significantly inrecent years. We believe this is partly associated with a loss of confidence in government’s rolein monitoring and upholding animal welfare standards and therefore agree with theCommission’s observation [in its draft report] that ‘one way of reducing it is to remove themotivation for it’ by increasing ‘confidence within the community that livestock welfare
outcomes are being achieved.’ (sub. DR223, p. 5)

World Animal Protection also said:… the best strategy to discourage trespass is improved transparency and trust. Industry
initiatives to improve transparency through CCTV and web cams offer a good response to thisneed. Compulsory use of CCTV should be considered for stages of production where animal
welfare is particularly at risk. (sub. DR137, p. 12)

The community’s level of confidence in animal welfare outcomes is a wider animal
welfare issue and is addressed in chapter 5. The Commission recommends that state andterritory governments review their monitoring and enforcement of farm animal welfare
standards, and suggests ways to encourage industry-led initiatives, including quality
assurance systems, that can increase transparency around farms’ operations.
Implementing these initiatives can avoid potential regulatory costs which can arise fromadjusting trespass laws and have the potential to improve the community’s understandingof livestock industries’ welfare practices.

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Greater awareness of the risks from accessing farms
The Ag Institute Australia said rural land owners and managers can lack understanding of
trespass legislation and the biosecurity risks that arise from trespass, and recommended
that regulatory authorities implement education programs:[T]here is limited understanding of trespass legislation by rural land owners and managers.
Regulatory authorities, particularly those responsible for biosecurity and land tenure moregenerally, should consider increasing awareness of farm trespass issues, laws and theirrelationship to biosecurity risk, to land users, owners and other parties likely to trigger
biosecurity risks. (sub. DR182, p. 7)

Some participants also noted that workers from utility and mining companies that enter
properties unsafely (but often legally) can lead to biosecurity risks (Animal Health
Australia, sub. DR250; Australian Pork Limited, trans., p. 352; NFF, sub. DR216).
The Commission agrees that education programs about trespass laws and the biosecurity
risks that can arise from unsafely accessing farms can help reduce the biosecurity risks. An
example of such a program is Cotton Australia’s (sub. DR262) ‘come clean, go clean’program for the cotton industry to promote biosecurity protocol awareness to growers andfarm visitors. Companies should also coordinate with farmers when planning to accesstheir land.

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9Transport

Key points•

Given the large distances between many of Australia’s farms, intermediaries and end users,
an efficient and cost effective transport system is critical to the competitiveness of the
agricultural sector. Transport costs from farm gate to destination (both domestic andoverseas destinations) account for 21 per cent of farm gate value on average.

•

The majority of Australia’s agricultural goods are transported via roads. Differences in heavy
vehicle dimension and weight restrictions on road access, especially on local roads at thestart and end of a journey, force operators to use inefficient heavy vehicle combinations,limiting freight efficiency and productivity gains. This burden could be reduced by:– streamlining and simplifying road access arrangements– building a better understanding of road-user needs across the road network– over the longer term, establishing institutional arrangements to ensure road investments
are made where there is the greatest net benefit. Reform in this area should include
introducing direct road-user charging for selected roads, ensuring road revenues are
spent in ways that incentivise the efficient supply of roads, and creating Road Funds.

•

The creation of a national heavy vehicle regulator is a step in the right direction in improving
road access for heavy vehicles, but there remain inefficiencies in heavy vehicle regulation,with delays in processing road access permits a significant issue. The National Heavy
Vehicle Regulator should be reviewed to ensure that responsibilities are appropriately
assigned under the national system, and that the system is operating efficiently anddelivering benefits to road users and farm businesses.

•

The Road Safety Remuneration Tribunal imposed costs that were not commensurate with its
safety benefits. Its abolition reduced regulatory burdens for farm businesses.

•

The poor state of some rail infrastructure increases both journey times and the overall costof freight for agricultural producers, and can exacerbate pressure on road networks as
producers increasingly switch to road freight. While a number of factors have contributed tothis situation, progressing road pricing reform will help address concerns about the effect ofpricing distortions on investment in rail networks.

•

Efficient access to ports is crucial for agricultural producers as most agricultural exports aretransported by sea. Privatisation of major ports can lead to efficiency gains and be in the
public interest if undertaken appropriately, including ensuring that sale conditions do notseek to increase the sale price by conferring monopoly rights over port services to the buyer.

•

Current coastal shipping regulations which give preference to Australian-flagged ships fortransporting domestic cargo between Australian ports increase costs for farm businesses
reliant on sea freight. To improve the efficiency of coastal shipping services, barriers to entry
for foreign vessels should be removed to allow greater competition.

•

Farmers and the community would benefit from the removal of ethanol mandates and excise
arrangements, as these policies deliver negligible environmental benefits at a high cost.

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Access to efficient and reliable transport networks is essential for the competitiveness offarm businesses and is a significant determinant of agricultural productivity.
Transport costs from farm gate to destination (both domestic and international
destinations) account for 21 per cent of farm gate value on average (Goucher 2011).
Transport costs, however, vary by agricultural industry and destination, and can range from4 per cent to almost 50 per cent of farm gate price (Goucher 2011; Sheepmeat Council ofAustralia and Cattle Council of Australia, sub. 88, att. 1).
AgForce provided some examples of transport costs for livestock.
… transport of a 550 kilogram steer from Surat in southern inland Queensland to Yokohama,Japan represents 13.1% of the total farm gate value. Similarly, to deliver a live beast from
Queensland to Indonesia represents around 30% of the total farm gate price. (sub. 17, p. 9)

Agricultural supply chains can involve transport distances in Australia of over 1000 km(Goesch et al. 2015a) and, according to some participants, domestic transport can costmore than sea freight from Australia to some international destinations. The Export
Council of Australia, for example, said that:… to export 1 x 20ft container of beetroot door-to-door from Gippsland to the United ArabEmirates would cost approximately $12 000. The actual sea freight cost from Melbourne toJebel Ali would be in the vicinity of $4000, while the balance of $8000 is needed to cover theland based transport costs and the documentation costs for quarantine arrangements.
(sub. 74, p. 5)

All levels of government in Australia are involved in regulating transport networks.
Transport regulations are in place to ensure public safety and amenity, to promotecompetition and facilitate access to infrastructure.
This chapter looks at transport regulation in the areas of heavy vehicles (section 9.1), rail
(section 9.2), ports (section 9.3) and coastal shipping (section 9.4). Section 9.5 examines
the mandates and excise arrangements that are used to support the biofuel industry.
Some agricultural products (including fruit, vegetables, meat and seafood) are exported byair. Concerns about air freight were not raised by participants to this inquiry and as such,are not examined.
Governments also play a key role in the provision of transport infrastructure. Ways toimprove the efficiency of infrastructure provision were considered in detail in theCommission’s inquiry into public infrastructure (PC 2014c), and are beyond the scope of
this inquiry.

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9.1

Heavy vehicles

The majority of Australia’s agricultural goods are transported via roads (Tulloh andPearce 2011). Grains, milk, fruit, vegetables and livestock are all collected from farms andtransported by road to processing plants or end users. As the NSW Farmers’ Association
said:
Integral to the operation of a farm business is the use of road transport to freight farm produce
to either an intermediary, such as a grain receival site, saleyard or abattoir, or an end user.
(sub. 72, p. 22)

The agricultural sector accounts for about 27 per cent of the volume of road freight — in2013-14, the sector consumed about $1.1 billion of road transport services (ABS 2016d;
BITRE 2015b). About two-thirds of the food and livestock that are transported by road are
moved by articulated trucks (load carrying vehicles consisting of a prime mover with aturntable device for towing trailers), primarily by B-double, road train or single trailer
truck configurations (ABS 2015e, 2016j).
A wide range of regulations affect heavy vehicle operations. Regulations are largely aimed
at addressing negative spillover effects from heavy vehicles and their use of the road
network (including damage to roads and bridges, safety concerns, traffic congestion andnoise pollution). But while heavy vehicle regulations address legitimate safety and amenity
concerns, they may be more stringent than necessary to address concerns over social
impacts, or they could be administered in a way that places unnecessary burdens on
businesses. It is important to minimise any unnecessary regulatory burdens.

A national system of heavy vehicle regulation
Historically, states and territories adapted the national model law on road transport — theAustralian Road Rules — according to their individual needs and preferences. This
resulted in inconsistent heavy vehicle regulations between jurisdictions. A stocktake ofheavy vehicle regulations across the states and territories in 2011 identified
368 interjurisdictional variations, 34 of which had ‘medium or high’ economic impacts on
businesses (NTC 2011). Local governments can also make decisions about, or set
restrictions, on heavy vehicle access, which adds further regulatory complexity.
In 2009, the Council of Australian Governments agreed to establish a single national heavy
vehicle regulatory regime to cover all vehicles over 4.5 tonnes, managed by the National
Heavy Vehicle Regulator (NHVR). Its role is to administer a single set of national heavy
vehicle laws in all jurisdictions under the Heavy Vehicle National Law (HVNL), to ensure
the objectives of the HVNL are achieved — including promoting industry productivity andefficiency in heavy vehicle freight. To date, New South Wales, Victoria, Queensland,South Australia, Tasmania and the ACT are participating in the HVNL; Western Australia
and the Northern Territory are not.

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The objectives of establishing a national regulatory system are to deliver:… seamless national regulation of heavy vehicles that achieves the same outcome in the same
circumstances; and consistent and streamlined administration and service provision for the
regulation of heavy vehicles. (COAG 2011, p. 5)

The NHVR began operating in January 2013, and at that time provided the National Heavy
Vehicle Accreditation Scheme and Performance Based Standards (PBS) services. On
10 February 2014, the HVNL commenced in the six participating jurisdictions, and the
NHVR became responsible for all regulatory services under the HVNL. This includes
matters relating to vehicle standards, mass, dimensions and loadings, fatigue management,
heavy vehicle accreditation and on-road enforcement (NHVR 2016d).
One of the key functions of the NHVR is to act as a ‘one stop shop’ for heavy vehicle roadaccess permits in participating jurisdictions. That is, heavy vehicle operators who areplanning a journey that would take place in multiple participating jurisdictions apply to the
NHVR for permission to access roads, and the NHVR then obtains consent from all
relevant state, territory and local government road managers.

The regulations governing heavy vehicle road use are complex
Heavy vehicles can only use roads if they meet rules on dimensions (height, length andwidth), mass and loading. Restricted access vehicles 28 — a category which includes higher
mass limit 29 vehicles — do not have ‘as of right’ access to the road network and require a
NHVR notice or permit to operate on parts of the network.
In general, larger heavy vehicles like road trains are permitted in remote areas, but the sizeof permitted heavy vehicle combinations become progressively smaller as operators movetowards the coast (figure 9.1).
Heavy vehicle road access is further complicated by longstanding differences in state andterritory rules governing heavy vehicles. For example, even though under the HVNL all
participating jurisdictions allow ‘as of right’ access for B-doubles less than 19 metres long(or 21 metres in Tasmania), the accessible road network becomes restricted once thevehicle exceeds a certain mass limit which differs across participating jurisdictions. These
weight limits are published in a national notice made under the HVNL 30 as a collection of
28 Restricted access vehicles are vehicles that either do not comply with prescribed mass or dimension limits
under the HVNL (in general, wider than 2.5 metres, higher than 4.3 metres or longer than prescribed
lengths for the specified vehicle configuration, or exceed the allowable mass limits based on vehicle axle
groups) or are specific large combinations (including road trains, B-doubles and livestock carriers)(NHVR 2016h, 2016k).

29 The higher mass limit scheme allows particular heavy vehicles to carry additional mass provided that thevehicle is fitted with road-friendly suspension and that the operator holds NHVR accreditation(NHVR 2016e).

30 The National Class 2 Heavy Vehicle B-double Authorisation (Notice) 2014 (No. 2).
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schedules containing all access conditions applicable to B-doubles in each jurisdiction.
Each schedule also contains references to external documents that further specify theweight or time-of-travel restrictions on particular routes. NHVR national notices for othervehicle classes present information on access conditions in a similarly complex andlegalistic manner.
Restrictions on the use of certain roads are not new — indeed, there is written evidence ofsuch restrictions dating back to ancient Rome. 31
Figure 9.1

Road access as specified by Performance Based Standards(PBS) road classaa PBS vehicles are vehicles which have been assessed according to a set of safety and performancestandards. The PBS system is designed to provide operators with flexibility in vehicle design andoperation. Road networks of PBS level 1 is similar to general access. PBS level 2 is similar to B-double
routes. PBS level 3 is similar to type 1 road train routes. PBS level 4 is similar to type 2 road train routes.
Lower levels can access higher level routes.
Sources: Adapted from NHVR (2016g, 2016j).

Heavy vehicle road access regulations affect productivity
Heavy vehicle road access regulations can limit the ability of operators to transport goods
by road to their destination in the most efficient manner — either by the most direct route,
31 Land transportation, in particular, was heavily regulated in ancient Rome. Many streets were limited tosmaller vehicles — much like today where Australia has different routes for B-double and larger vehicles(Kaiser 2011).
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by the preferred vehicle type or during preferred times. The evidence presented to thisinquiry highlighted the burden of having different vehicle dimension and weight
restrictions across the road network — it forces operators to resort to inefficient vehicle
combinations, and can preclude opportunities to use more productive vehicle combinations(appendix C). This in turn adversely affects the productivity of farm businesses.
The National Transport Commission 32 gave the following example.
[In the Sunraysia region on the border of New South Wales, Victoria and South Australia, the]most efficient vehicle for transporting the grapes would be a road train, but these are notcurrently permitted on a stretch of highway linking two of the states … Consequently, wine
producers use less efficient semitrailers, leading to more trips, more emissions and higher
consumer prices … the cost to the wine industry [from using semitrailers instead of road trains]in the region, is around $1.6 to $2 million per annum. (NTC 2011, pp. 5–6)

Heavy vehicle operators must either employ a vehicle combination or loading method thatmeets all requirements along the route (the lowest common denominator approach), or
decouple larger heavy vehicle configurations outside the restricted area and continue on
smaller approved truck combinations (Larry Acton, sub. 55; Ausveg 2015b; Sheepmeat
Council of Australia and Cattle Council of Australia, sub. 88, att. 1; Retailer and Supplier
Roundtable Ltd 2014). In either case, transport and operational costs are increased (box 9.1).
Where regulatory settings support more extensive use of high productivity (restricted
access) vehicles, this has the potential to lead to improvements in the efficiency ofagricultural supply chains (Australian Forest Products Association, sub. 11; Ronda andAllen Harmer, sub. 15). The Australian Food and Grocery Council noted that:
While there has been a lot of focus on the use of high productivity freight vehicles on major
freeways, the collection of grains, fluid milk, fruit, vegetables and livestock from farms is a
critical opportunity for the use of [high productivity freight vehicles]. Industry acknowledges
the investment required to support high productivity freight vehicles, particularly in rural areas,
and the regulatory change [to heavy vehicle regulations] required. (AFGC 2014, p. 8)

Interjurisdictional inconsistencies remain a concern
Inquiry participants pointed to inconsistencies in heavy vehicle regulations between
jurisdictions. These inconsistencies remain despite the establishment of the NHVR and theadoption of the HVNL in six jurisdictions. Participants said that inconsistencies make it
difficult to transport inputs and agricultural products efficiently between farms anddelivery destinations. The National Farmers’ Federation (NFF), for example, said:… the move towards a single National Heavy Vehicle Regulator … is a step in the right
direction and will lead to productivity improvements across the nation, but there is still a lot ofwork required to implement consistent requirements across states. (sub. 61, p. 18)

32 The National Transport Commission is responsible for monitoring and maintaining the HVNL withadvice from the NHVR (NTC and NHVR 2016).
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Box 9.1

Heavy vehicle access restrictions in Queensland

Cattle freight routes
Cattle producers in Queensland can use road trains inland, but on the road network used tomove stock towards the coast (where most of the saleyards, feedlots and abattoirs are located)
only smaller heavy vehicle combinations are allowed (as shown in the figure belowa). Loads
might need to be broken down into smaller units, sometimes more than once, due to roadrestrictions. For example, moving cattle from Longreach to an abattoir in western Brisbane canmean downsizing the vehicle twice — once near Roma and again at Toowoomba. The inability
to use larger heavy vehicles for the entire journey increases transport costs considerably. By
one estimate, using a B-double for the entire journey to transport 120 cattle across 1000 km cancost about 37 per cent more than using a road train (Goesch et al. 2015a).

Road train access to Gladstone Port
Restrictions on road train access to Gladstone Port mean that all road train freight originatingfrom southern inland areas must drive north to Gracemere (near Rockhampton), and be broken
down to B-doubles before continuing to the port. The diversion is mainly because Sheepstation
Bridge on the highway connecting Biloela and Gladstone Port is unable to accommodate roadtrains. This diversion is estimated to double the travel distance (a further 100 km) from Biloela
for vehicles travelling to Gladstone Port (RDAFCW 2015). Allowing road trains on the highway
between Biloela and Gladstone could reduce the cost of live cattle transport on that route by
about $85 000 per year (CSIRO 2016d).
a The width of the line used to depict each road represents the frequency with which that road is used bycattle transport vehicles. Type 2 road trains are the largest, and B-doubles the smallest, of the three heavy
vehicle types displayed.
Source: Adapted from Goesch et al. (2015a).

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Similarly, the Queensland Farmers’ Federation said that ‘implementation of the NHVR has
not been seamless, and in many cases it has led to confusion, duplication and caused
delays’ (sub. DR217, p. 9). GrainGrowers argued that ‘unworkable inconsistencies inregulations between states … make it difficult to transport grain or oversize machinery
across state borders … The establishment of the National Heavy Vehicle Regulator has
been troublesome, particularly regarding different approaches by various compliance andenforcement bodies’ (sub. 73, pp. 13–14). Voice of Horticulture (sub. 42) provided several
examples of the effects of interjurisdictional variation (box 9.2).
According to the Australian Lot Feeders’ Association:… inefficiencies in heavy vehicle regulations would be significantly reduced with further
harmonisation of state regulation including for driver fatigue laws, weight/mass restrictions,effluent spill, use of road trains and B doubles. (sub. DR294, p. 14)

The Cattle Council of Australia advocated harmonisation of jurisdictional requirements,
noting that ‘transport is a major cost for beef producers, especially those located in thenorth of Australia’ (sub. DR290, p. 10).
Inconsistencies also persist because Western Australia and the Northern Territory are notcurrently participating in the HVNL. The Consolidated Pastoral Company said:
The three heavy vehicle transport systems still operating across northern Australia [in Western
Australia, the Northern Territory and Queensland] cause additional reporting and recording
requirements. This generates extra work and therefore extra costs, for businesses than would
otherwise be the case if a truly national system were in place. (sub. 71, p. 33)

NT Farmers said that ‘the movement of goods and machinery across jurisdictionalboundaries is the main concern’ (sub. 8, p. 2). Co-operative Bulk Handling (CBH) Groupsaid that in Western Australia, ‘a road pathway can pass through various State and Local
Government instrumentalities with each proffering a different [restricted access vehicle]
rating making it impossible for users to have any clarity regarding an acceptable consistentpathway for a particular vehicle configuration’ (sub. 36, p. 8). Similarly, AgForce called
for greater consistency in road ratings as a way to improve road network access.
Inter-jurisdictional (local and State Government) harmony for the rating of road networks to
improve the freight-efficient movement of agricultural products, so that costly changes tovehicle configurations and loads do not have to be made at borders and to simplify thecompliance task for drivers of heavy vehicles. (sub. 17, p. 10)

The NFF suggested that consideration be given to wider-ranging reform, such as creating‘a system in which agricultural supply routes in farming areas are automatically classed as
open access for heavy vehicles unless road managers give cause as to why this should not
be the case’ (sub. DR216, p. 37). A similar outcome to that advocated by the NFF could beachieved when roads are gazetted for high productivity vehicles access (see below).

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Box 9.2

Some insights into the effect of interjurisdictional variationsin heavy vehicle regulations

Voice of Horticulture provided an example of the way that variations in heavy vehicle
regulations restrict opportunities for more efficient freight movement.
… a vertically integrated horticultural business based in Shepparton, Victoria, operates a fleet of heavy
vehicles transporting fruit from their packing shed to a number of interstate wholesale markets andsupermarket distribution centres. Their B Doubles [under Victorian laws] are able to operate up to a68[.5] tonne gross vehicle weight … However, to access the Brisbane Market and Brisbane distribution
centres the trucks must use NSW roads, and the NSW State regulations stipulate that without
operating the Intelligent Access Program (IAP) the maximum allowable weight under the Concessional
Mass Limit (CML) is 64.5 tonnes. Consequently all trucks departing Shepparton to either NSW or
Queensland must use the lower maximum weight of 64.5 tonnes, which reduces efficiencies and sales
volumes, and adds to both costs and extra vehicles on the roads … to gain the higher 68 tonne permit
for NSW the company would have to invest in additional hardware and systems in order to comply withthe requirements of the NSW IAP. Investment of this kind is seen as wasteful and duplicates the costs
already invested to achieve Victorian Accreditation … (sub. 42, p. 17)

Voice of Horticulture also pointed to interjurisdictional variations in conditions for increased
mass limits (such as enrolment in the Intelligence Access Program described in box 9.5) thatlead to inefficiencies.
Maximum load restrictions are also a significant issue for many growers and exporters of dense
products and differences in maximum load restrictions between states have a real impact on theefficiency of transport through wasted container space … Horticulture exporters usually use 40 footcontainers weighing 13 tonnes when empty for transporting product. However, because of weight
restrictions horticulturalists cannot fill the container without exceeding maximum weights. The
container has a capacity of 30 tonnes but can only yield 24.3 tonnes due to weight limits – 5 tonnes
short. (sub. 42, p. 17)

Commenting on the additional burden that arises because states and territories are able to
make derogations to the Heavy Vehicle National Law, it said:… a number of states, such as NSW, have introduced variations to the national model. This simply
defies the point of harmonisation. For example, operators from NSW that choose to trade interstate willcontinue to face the paperwork juggle to ensure that compliance with both state and national laws are
met. (sub. 42, p. 17)

Local government ‘first and last mile’ restrictions
Local governments manage about 80 per cent of Australia’s 811 000 km of public roads(AustRoads 2010). They determine which restricted access vehicles are permitted to use
their roads, and the conditions under which such vehicles must operate. The HVNL
recognises local governments as road managers (NHVR 2013), so vehicle operators requireconsent from local governments to access local roads (however, as noted above, the NHVR
acts as a ‘one stop shop’ for interstate journeys — heavy vehicle operators contact the
NHVR, which then obtains consent from all relevant road managers including local
governments).
Concerns about restricted access for high productivity vehicles on the local roads used at
the start and end of a freight journey are often referred to as the ‘first and last mile’
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problem (ALGA 2016). Many participants commented that the first and last mile problem
is limiting improvements in freight efficiency (box 9.3).
Box 9.3

Concerns raised about local government restrictions

The National Farmers’ Federation claimed that restricted access for high productivity vehicles
on local roads used at the start and end of each journey — often termed the ‘first and last mile’problem — is limiting improvements in freight efficiency.
Inefficiencies abound when a truck or truck configuration cannot drive the full distance of a freight
journey; this is the ‘first and last mile’ issue. The next generation of freight vehicles or ‘interoperable
high productivity vehicles’ (long, double stacked trains and B triple or super B double trucks at higher
mass limits) offer improvements in freight efficiency but their use is currently restricted. (sub. 61, p. 18)

The Australian Livestock and Rural Transporters Association raised concerns about the basis
upon which local governments restrict heavy vehicle road access.
Many local road managers simply deny access because of unfounded or ill-informed concerns about
safety or local amenity impacts. Decisions about [high productivity vehicle] access should be based onengineering principles, network design and measurable impacts, not underlying attitudes towards
industry or heavy transport. (sub. 47, p. 8)

The Pastoralists and Graziers Association of Western Australia expressed similar concerns.
In the agricultural areas of Western Australia movement of livestock, grain harvests, fertilizer andagricultural lime sands starts and finishes on local roads. Local government authorities are not always
adequately resourced to operate these roads, and preservation of the road to avoid maintenanceexpenditure is often a priority over their use for economic activities. (sub. 70, p. 7)

The Queensland Audit Office found that many stakeholders shared this view.
Stakeholders told us that some local governments do not have the resources and expertise readily
available to make evidence-based consent decisions [on heavy vehicle road access] that often requirea technical assessment of risks to the relevant infrastructure on those roads. (QAO 2016, p. 4)

And Australian Dairy Farmers pointed to access approval delays at the local government level.
It appears that many councils have not classified roads within their jurisdictions … or do not possess adetailed understanding of the load‐restrictions, to determine whether the road may or may not be used
by PBS vehicles. This is causing lengthy time‐delays when processing companies are seeking toregister new milk collection vehicles on regional roads. (sub. 63, p. 5)

The Commission heard that many access decisions made by local governments areunnecessarily risk averse. This risk aversion may stem from an absence of information:
local governments can be reluctant to grant greater heavy vehicle access to local roads
because they do not know the level of heavy vehicle traffic, and the associated risk ofaccidents and road damage, that will result. Meanwhile, the benefits of increased heavy
vehicle movements primarily accrue to transport operators.
There is just not necessarily an understanding of the frequency or the type of use for either
general access freight vehicles or agricultural implements on those local roads to allow thosedecision makers to [act] confidently … (NHVR, trans., p. 549)

Local government restrictions can reduce the effectiveness of state and territory
governments’ efforts to increase heavy vehicle productivity. For example, the New South
Wales Livestock Loading Scheme was introduced in 2012 to address longstanding
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concerns by livestock businesses, including the Australian Lot Feeders’ Association(ALFA 2014), that differences in loading limits for livestock transport limit the efficiencyof livestock transport across state borders. (Victoria and Queensland have volumetricloading limits for livestock vehicles.) However, according to Transport for NSW (2015),
local government restrictions on higher mass limit vehicle access mean that the accessible
road network does not provide adequate connectivity for the scheme to be successful.
Lengthy processing times for road access permits
Heavy vehicles are required to obtain permits to access many roads, to minimise risks topublic safety and infrastructure from their use of those roads (NHVR 2016b). Despite the
NHVR’s role as a one-stop shop for operators to apply for road access permits forinterstate journeys, many inquiry participants (including AgForce, sub. 17; ALRTA,
sub. 47; Cotton Australia, sub. 23; Office of the NSW Small Business Commissioner,
sub. 4) considered the process of obtaining road access permits to be unnecessarily lengthy
and onerous.
The delays are in part caused by the requirement to obtain explicit consent from all roadmanagers (including local governments) under the HVNL. The NHVR is required to obtainroad managers’ consent even ‘for vehicles that pose a lesser impact on the network thanvehicles that are currently afforded access’ (NHVR, sub. DR192, p. 3).
Several participants (including ALRTA, sub. 47 and Cotton Australia, sub. 23) considered
the statutory timeframe of 28 days for processing permits to be too long, particularly forprimary industries. Others reported incurring financial and productivity losses, including
contractual penalties, while waiting for road managers to issue permits (QAO 2016).
The 28 day period for permit processing under the HVNL has been designed in response to
the requirement that the NHVR obtain consent from every relevant road manager eachtime a permit is applied for. Of the permits processed by the NHVR, the majority of the
28 day period is taken up by state and local government processing — it took an average of
23.5 days to process heavy vehicle access permit applications in 2014-15. About 4 days
were taken up by the NHVR and the remainder (equally) by state or local governments(NHVR 2015a).
The systems used by local government to assess high productivity vehicle road accessapplications are often not well developed (PC 2012b), which can increase the time taken toprocess access permits. According to Cotton Australia, some local governments have only
recently become aware of their responsibilities as road managers.
While in theory the advent of the National Heavy Vehicle Regulator is meant to streamline
transport movement approvals … it has also led to an increase [in] local governments requiring
the issuing of permits for local road movements, as they become more aware of their role asroad managers. While some road managers are better than others, the fact remains that they
have 28 days to respond to applications made through the NHVR, and this does represent anunjustified burden on road users. (sub. 23, p. 16)
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And delays by a single road manager can affect the entire journey. This can be particularly
critical when harvesting is underway. As Cotton Australia said:… permission to move a cotton picker from southern Queensland to northern New South Wales
was delayed for weeks, simply because one council the picker had to travel through had not
responded. (trans., p. 282)

The Queensland Audit Office said that ‘the NHVR was not effective in supporting local
government road managers to prepare for processing the volumes of heavy vehicle requests
relating to their roads — some had not been involved in processing permits before the
HVNL, despite the previous road access laws requiring them to [do so]’ (QAO 2016, p. 5).
In response to industry concerns about delays in processing permit applications when the
NHVR first took over this task in 2014, permit processing for travel wholly within stateborders was temporarily handed back to the relevant state road agencies (except in
Tasmania). According to the Queensland Audit Office, this situation arose because the
NHVR agreed to implementation timeframes for assuming responsibility for processing
road access permits that:… were overly ambitious. [The NHVR] did not allow sufficient time to plan and deliver the
new access management arrangements successfully. Funding was also uncertain due to thedifferent arrangements entered into with the states and territories. (QAO 2016, p. 6)

It is uncertain when these functions will be returned to the NHVR — governments aremonitoring the temporary arrangements and are yet to decide when those arrangements
should end (NHVR 2016a). While it was predicted that the NHVR could take until 2018 todevelop mature processes (NTC 2014), the Queensland Audit Office found that ‘the
NHVR has learnt its lessons and demonstrated it is prepared to delay rollout of the new[road access permit management] system if it is not ready’ (2016, p. 20).
In contrast to the delays experienced with the transition to the NHVR, in Western
Australia, the Commissioner of Main Roads has the power to issue permits (local
government approval is not required). The Western Australian Government said that this:… allows WA to ordinarily issue permits within a 24 hour period. Mains Roads WA has
collaborated with local governments to develop a series of networks and pre-approved routes
which are matched to the various heavy vehicle types, rather than seek individual approvals[from] local governments, who do not have the resources to process permit requests. (Western
Australian Government, sub. 54, p. 24)

However, producers in Western Australia reported similar delays in processing road accesspermits, in part because roads have not been approved for heavy vehicle access (Regional
Development Australia Wheatbelt WA, sub. DR176; Western Australian Farmers
Federation, sub. DR226).
The Western Australian Government said that if Western Australia was to adopt thenational law it could ‘create additional regulatory burden for farmers, particularly in
relation to road access and heavy vehicle driver fatigue’ (sub. 54, p. 25). The Livestock
and Rural Transport Association of Western Australia shared these concerns (sub. DR172).
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The Northern Territory Department of Primary Industry and Fisheries also said that the
introduction of the HVNL in the Northern Territory would need to be considered inrelation to the Land Transport Standards which ‘will place further restrictions on thetransport industry’ (sub. 67, p. 4).
Other issues in heavy vehicle regulation
Livestock transport regulations

Some transport regulations, especially those relating to livestock transport, have aparticular impact on the agricultural sector. The NFF highlighted inconsistencies in fatigue
management regulations and animal welfare requirements for transport of livestock, andnoted that drivers ‘are required to comply with both fatigue management laws and also
standards for transport of livestock, in regions often without facilities to rest livestock
within the specified period’ (sub. 61, p. 18).
In September 2015, the NHVR introduced the Livestock Transport Fatigue Management
Scheme. The scheme ‘provides a pre-approved template Advanced Fatigue Management
accreditation system designed to give livestock and rural transporters the flexibility torespond to the dynamic, uncertain and complex livestock transport task’ (NHVR 2015c,
p. 4), and has been welcomed by the industry (ALRTA 2015). To the extent that thisscheme increases flexibility and reduces administrative burden, it should make it easier for
operators to comply with both livestock transport and fatigue management regulations.
Time-of-travel restrictions

In many jurisdictions, there are time-of-travel restrictions which limit the hours or days on
which heavy vehicles are permitted to operate. For example, certain classes of vehicles are
not permitted on some roads between sunset and sunrise, or on public holidays.
As most agricultural goods are perishable, limitations and differences in time-of-travel
regulations can impede productivity and increase operating costs (Retailer and Supplier
Roundtable Ltd 2014). For example, across New South Wales, Victoria and Queensland,different time-of-travel restrictions apply to different heavy vehicles, with night travel
regulations in New South Wales being the most restrictive of the three states. Requiring
heavy vehicles to travel only during daylight hours or in certain specified time periods canalso exacerbate road congestion, particularly along major routes that lead to key ports or
airports that are shared with light vehicles (Goesch et al. 2015a). Limiting stock pick-ups
to daylight hours can also compound the effect of other restrictions on stock movement
times, such as the limited opening hours of quarantine facilities.

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Concessional farm vehicle registration

Primary producers are eligible for reduced vehicle registration fees in all states andterritories. In general, vehicles are eligible if they are primarily used for the purpose offarm production and seldom travel on public roads. For example, South Australia provides
for restricted primary producer registration for agricultural vehicles, subject to travel
within certain distances (South Australian Government 2015).
However, the application process for concessional registration for agricultural vehicles canbe time consuming. For example, in Tasmania, applicants must physically attend
government offices to complete a statutory declaration, which can involve two hours oftravelling (TDPIPWE, sub. 62, att. 1). Requirements to register and obtain permits for
multiple agricultural vehicles also impose considerable burden (Cotton Australia, sub. 23).
There may be scope for governments to streamline and simplify application requirements.
This could involve allowing multiple vehicles to be registered in one application or
removing requirements to attend government offices in person, which would help to ensurethat concessions provide their intended benefits.

A disconnect between road revenues and expenditure
Variations in heavy vehicle access regulations can be efficient, as the road network
operating environments differ across the country. However, it is important that variation isminimised, so that the road network supports moving goods as quickly and efficiently as
possible, particularly given the perishable nature of many agricultural products.
One reason for road access restrictions, particularly on local roads, is the disconnect
between road revenues and government expenditure on upgrading and maintaining road
networks. Heavy vehicles are a significant contributor to road wear and tear and roaddamage, and the shift from rail to road freight has exacerbated the pressure on local roads(section 9.2). As the Commission said in its inquiry into public infrastructure:
Under current arrangements, investment in roads is subject to political pressures arising fromannual budget processes and election cycles. Decisions are often based on inadequate andnon-transparent information and assessment of the costs and benefits of road projects.
(PC 2014c, p. 20)

And as Terrill, Emslie and Coates said in a report prepared by the Grattan Institute:
Too often, politics comes ahead of the public interest. Too much has been spent on highways
that are not especially important to the economy, but are popular with local voters. Decisions
on particular projects are dubious or made on the basis of weak or undisclosed business cases.
The Commonwealth and Victorian governments spent $438 million on the Geelong to Colacroad, not a project of national economic significance … Although governments have funded
many worthwhile projects over the past decade, the overall investment has been poorly
directed. (2016, p. 2)

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The disconnect between road funding and expenditure means that there is no mechanism todirectly allocate road-related revenues to road investments. It is therefore difficult for roadmanagers to recover the full cost of supplying, maintaining or upgrading roadinfrastructure so that it is suitable for heavy vehicles. As a result, road managers, including
local governments, restrict heavy vehicle access to protect road assets.
Also, almost 60 per cent of local governments are in rural and remote areas, where there
are fewer residents and smaller revenue bases to support regulatory functions (Nguyen etal. 2013; PC 2012b). Recent experience with the Roads to Recovery (R2R) Program andthe Bridges Renewal Programme suggests that local road managers sometimes cost shift
when Australian Government funding is made available for roads (that is, they substituteR2R program funds for their own expenditure on roads) (ANAO 2010, 2016a).
Consequently, local government expenditure on roads may not always be at the level
necessary for asset maintenance and renewal.
Participants to the Commission’s inquiry into public infrastructure reported that local
governments frequently neglect basic maintenance (PC 2014c). Participants to this inquiry
echoed those concerns. NSW Farmers’ Association, for example, noted that ‘the resources
available to many local councils in New South Wales are not commensurate to the size ofthe road network that they manage’ (sub. DR161, p. 22). As noted below, the closure ofparts of rural rail networks has also increased pressure on road networks. And according to
the Peri Urban Group of Rural Councils, in Victoria:
Roads and bridges funding already consumes half of the capital works budgets for each of thePeri Urban Councils. The maintenance and [upkeep] of unsealed roads is a significant issue in the[Victorian] peri urban region and all rural and regional areas of Australia. (sub. DR220, p. 6)

Reducing the burden of heavy vehicle road access regulations
The introduction of the HVNL and the creation of a national regulator were important firststeps towards removing unnecessary restrictions and variations in heavy vehicle
regulations. But the NHVR is still a work in progress — the objective of seamless national
regulation of heavy vehicles is still some way off, and state and territory governments havean important role in ensuring that this is achieved. To this end, more needs to be done to:•remove unnecessary restrictions and variations in road access conditions•

address gaps in information about heavy vehicle access decisions and the state of theroad network•

work towards the introduction of direct road-user charging over the longer term.

Under an ideal heavy vehicle road access regulation system, access conditions and permit
requirements would be consistent across the road network. Permits and conditions would
also only be required when there is a material risk to public safety or infrastructure that can
only be managed, or amenity objectives that can only be achieved, on a case-by-case basis.

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Removing unnecessary restrictions and variations
Increase the number of roads assessed and approved for use by heavy vehicles

One way to reduce road access restrictions is to increase the number of roads formallyassessed and approved for use by high productivity vehicles, particularly on local roads.
Generally, these approvals are published as gazette notices, which are government
declarations that particular classes of vehicles are permitted on particular routes or areas,from which they would otherwise be prohibited.
Making greater use of gazette notices would enable more efficient road access —removing the requirement to obtain a permit for the roads specified in the gazettal notice
would mean freer access to those roads by all heavy vehicle operators.
The NHVR is also seeking to reduce permit processing times by encouraging roadmanagers to grant pre-approvals of access (NHVR 2015a; trans., p. 554). Pre-approvals
allow the NHVR to issue permits without seeking additional road manager consent(NHVR 2016k). The NHVR is using ‘heat maps’ — which show where demand (andblockages) for road access permits are located — to target efforts to assist road managers
in the impacted areas (NHVR 2016f).
Schemes such as those in place in Queensland and South Australia (box 9.4) can also
reduce the need for, and time taken to, obtain road access permits.
Box 9.4

Examples of initiatives to reduce road access restrictions

Initiatives are underway in some states to reduce heavy vehicle road access restrictions.
•

In South Australia, road users can initiate road assessments for proposed roads for gazettal.
Once an applicant obtains a road assessment from an authorised assessor and clearancesfrom the local government road manager for the proposed route (and from the railway
authorities if level crossings are involved), the applicant can lodge a final report with theSouth Australian Department of Planning, Transport, Energy and Infrastructure for approvaland gazettal (SADTEI 2008).

•

Through the Road Alliance initiative (QDTMR and LGAQ 2013), the Queensland Departmentof Transport and Main Roads funded all Performance Based Standards route assessments
on both state and local government roads in Queensland, along with other routes deemed
important (PC 2012b). The Queensland Government is also working with the agriculturalindustry to increase transport efficiency by reducing the need for permits, through a range of
special access schemes for the agricultural sector (QDTMR 2013; Queensland Departmentof Agriculture and Fisheries, sub. 58).

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Better information about usage patterns and vehicle telematics (see below) could help
alleviate communities’ and local road managers’ apprehension about potential increases inheavy vehicle traffic on approved roads (NHVR, trans., p. 550) — such as those expressedby Regional Development Australia Wheatbelt WA members.
The majority of traffic on these final miles will be from the people actually living on theseroads and if we allow, even under permit conditions, large vehicles to travel on unsuitableroads, it is these farmers and their families that will be at risk … It is not only the risk ofcollisions and run offs, but also the detrimental impact of heavy vehicles on poorly constructedroad surfaces, and the resulting damage that could cause accidents. (sub. DR176, p. 3)
Greater harmonisation will also assist

Increased harmonisation between jurisdictions would help to minimise regulatorycompliance costs, and ensure that productivity enhancing measures in one state are notundermined by regulatory constraints in an adjacent state.
Many participants supported greater harmonisation, 33 though the Livestock and Rural
Transport Association of Western Australia made the important point that ‘an
improvement in productivity and efficiency should be the main objective of national
regulation, not national regulation itself’ (sub. DR172, p. 2).
While some variation to cater to local conditions is necessary, the focus of harmonisation
should be on removing unnecessary regulatory inconsistencies. One such example is theMulti-State Class 1 Load Carrying Vehicles Mass Exemption 2016 Notice (No. 1), madeunder the HVNL. In addition to not being national in coverage (as it contains therequirements of only three of the six participating jurisdictions), the notice provides formass limits to be calculated differently in different jurisdictions: mass limits in New South
Wales are based on each 8-tyre axle grouping, while mass limits in South Australia are
based on overall axle spacing.
The legalistic nature of the current national notices means they may be difficult for
operators to understand.
… [the national notices,] I’m not sure they’re necessarily the right way of expressing [roadaccess] information into the future. They tend to be, you know, fairly legalistic documents thatare published on the commonwealth government gazette website, and they have to be read bysomeone trained in it. (NHVR, trans., p. 556)

Consolidating the notices into a single national notice would minimise compliance effort
for the heavy vehicle industry (provided the requirements contained in the notice are truly
national, and are not simply a list of each jurisdiction’s requirements).
33 Participants who supported greater interjurisdictional harmonisation of heavy vehicle regulations
included: the Australian Lot Feeders’ Association (sub. DR294); Cattle Council of Australia(sub. DR290); Cotton Australia (sub. DR262); GrainGrowers (sub. DR247); and the Livestock and Rural
Transport Association of Western Australia (sub. DR172).
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Replacing a number of jurisdiction-specific notices and initiatives with single national
notices that apply across states and territories is already part of the NHVR’s work program(NHVR 2015a). If implemented in a truly national fashion, in time this should reduce thenumber of permits road users need to obtain to use the road network. It would also reduce
the effort that transport operators must invest to ensure that they are compliant with thedifferent requirements published in each of the notices. Ensuring that road users canidentify the road access conditions that apply to the road network through the online
NHVR journey planner (see below) would further reduce road users’ compliance burden.
The NHVR acknowledged that interjurisdictional differences in regulations persist, but
said that harmonisation is complex to achieve and a staged approach is required(NHVR 2016h). More critically, the NHVR is reliant on participating jurisdictions to fulfil
their role in the harmonisation process. The NHVR noted that it:… is entirely dependent upon the will of its participating jurisdictions to negotiate a way toconsensus when harmonising notices. Without the active cooperation of participating
jurisdictions, the NHVR is unable to deliver these vital national reforms. (sub. DR192, p. 2)

The NHVR recently committed greater resources to the harmonisation process, including
establishing a national harmonisation team (NHVR, trans., p. 555). The effectiveness ofthese efforts can be considered as part of a broader review of the NHVR
(recommendation 9.4).

FINDING 9.1

Despite the commencement of the Heavy Vehicle National Law and the establishmentof the National Heavy Vehicle Regulator, there remain significant variations andinefficiencies in heavy vehicle regulation, including costly delays in processing roadaccess permits.

RECOMMENDATION 9.1

States and territories that are participating in the Heavy Vehicle National Law should,
as a high priority, increase the number of routes that are assessed and gazetted forheavy vehicle access. Permits should only be required in locations where there are
significant risks to public safety or infrastructure that must be managed on acase-by-case basis.
There are arrangements in South Australia to allow road users to propose andundertake road route assessments for gazettal, and in Queensland to fund road routeassessments and gazettals on both state and local roads. These arrangements should
be considered for adoption in other jurisdictions or expansion in respective states.

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Addressing information gaps
A better understanding of road access decisions is needed

The NHVR only has full visibility over road access decisions for the permits it processes.
This is about 12 per cent of all permits, with the remainder processed by participating state
and territory road managers (NHVR 2015a; QAO 2016). As such, no single agency has
good information about the majority of road access permits issued in Australia. And, notall state road managers are aware of all the access decisions made by local governments.
For example, access permit processing is highly decentralised in New South Wales — thedelegation from the NHVR gave all road managers (including local governments) in thatstate powers to issue access permits (NSWRMS 2016).
Information about road access outcomes at the national level is incomplete. Without
sufficient visibility of road access decisions across the road network, the NHVR has
limited ability to assess and monitor how long access decisions take, where access isapproved or denied, what is approved or denied, or the reasons for denial. This limits the
NHVR’s capacity to improve the consistency of road access decisions.
A better understanding of road access decisions would allow the NHVR to:•target current pre-approval efforts at high demand routes across the road network•

identify road managers and areas that need more support•

identify roads in need of investment across the road network (see below)•build transparency in the timeliness of access processing•

help to tailor permit requirements and permit validity periods to the risk profile of theroad route or vehicle type, so that operators are not ‘simply going and recycling permit
applications which are granted in 88 per cent of cases’ (NHVR, trans., p. 553).

The NHVR could work with participating jurisdictions to collect road access permit dataon a regular basis. Such efforts would be in line with the Queensland Audit Office’s
recommendation for the NHVR to ‘monitor and periodically review the reasons given byroad managers for refusing consent and assess whether they are consistent, evidence-basedand clearly explained’ (QAO 2016, p. 7).
Other ways to help the NHVR build a better understanding of access decisions across theroad network should be assessed as part of the review of the NHVR (recommendation 9.4).
Building an evidence base for road investment priorities

Building an evidence base on the condition of public roads and bridges by compiling roadasset registers would help with prioritising investment needs and the transparency ofdecisions. It could allow road investments to be directed to where they would achieve thegreatest net benefit, and ultimately minimise the need for road access restrictions. Better
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information could also contribute to public confidence that road revenues are being
invested effectively.
Developing a national set of road asset registers, and expenditure plans, is part of a shift
towards a national ‘forward looking cost base’ for setting heavy vehicle charges(Fletcher 2016, p. 14). This strategy follows from the (now ceased) Heavy Vehicle
Charging and Investment (HVCI) reform project, which recommended the development ofroad asset registers and assessments of road conditions according to agreed standards(QDTMR 2015). The first edition of the road asset registers and infrastructure ratings,
along with investment plans, for designated key freight routes was published by early2016. The key freight routes identified — mostly highways — covered about 46 000 km(6 per cent) of the public road network. The intention is for future editions of the road asset
registers and expenditure plans to be progressively extended beyond key freight routes
over the next two years (TIC 2016).
Including local roads in future editions of the road asset registers will be essential for
addressing the first and last mile problems affecting farm businesses. Some good examples
include:•Western Australia’s regional freight transport network plan, which involved identifying
significant local government impediments to a continuous freight network(WADT 2013)•

South Australia’s Change@SA 90 day project, under which the South AustralianGovernment worked with primary industries to create a priority list of last mile andaccess issues. According to the South Australian Government and Livestock SA, thisprogram led to increased high productivity vehicle access and productivity
improvements (SADPI 2015; South Australian Government, sub. DR295; Livestock
SA, sub. DR303).

Data on road use could feed into road asset reports to justify investment decisions, andinstil road-user confidence that they will benefit from future reforms to road charges.
Identifying important access points would also ensure road modifications do not adversely
affect farm vehicle movement (such as the installation of guard rails on a road blocking
access to an adjacent property, reported by one of the farmers who participated in theCommission’s case studies — appendix C).
Better data on road-user needs would complement road asset reports by identifying where
investments are needed to meet user demand. This information is necessary to direct
investments even if a transition to full mass-distance-location pricing does not take place,and should be easier to obtain once vehicle telematics become more widespread (seebelow).

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More information is becoming available on road-user needs, which will in turn help toidentify where road investments would generate the greatest net benefit.
•

The interactive online journey planner 34 developed by the NHVR allows operators to
map routes and request access permits for proposed routes. The data from the journeyplanner and ‘heat maps’ could be used to identify roads for extending the key freightroutes, and to inform planning and investment decisions.

•

Simulated maps of road use, such as modelled agricultural commodity freight routes
using the National Livestock Identification System data (Goesch et al. 2015a;
Higgins 2013) or CSIRO’s TraNSIT model (CSIRO 2016c), could further inform roadinvestment decisions to meet farm business needs.

•

The Transport and Infrastructure Council (2016) endorsed AustRoads’ framework
which provides ‘an opportunity for [private industry] to invest in public roads directly
where it is a primary beneficiary of the upgrade’ (AustRoads 2015, p. i). Although it isunclear how extensively this framework has been adopted in practice by governments,
private investment in public roads provides a clear signal of users’ needs and should be
encouraged.

Introduce direct road-user charging
Currently, heavy vehicle charges are based on averaged annual road expenditure, and arecollected through a combination of registration fees (collected by state and territory
governments) and fuel-based charges (collected by the Australian Government) — known
as the pay-as-you-go (PAYGO) framework.
There are several shortcomings with the current heavy vehicle charging system.
•

It does not provide price signals to road users about the cost of road provision, or to
suppliers about where users want road investments to be made.

•It is inequitable, as those who use the road network infrequently effectively
cross-subsidise those who impose higher costs on the network through their greater useof it. Some farm businesses can be disadvantaged under the system as, while they often
have heavy vehicles, they do not necessarily use those vehicles on long trips.
According to the NFF (2010), farm businesses generally own at least one heavy
vehicle, but these vehicles travel less than 5000 km per year on average. Also, ‘road
train registration fees are subsidising infrastructure spending on parts of the networkfrom which they are prohibited’ (ALTRA, sub. 47, p. 10).

•

It is complex, and, in combination with these shortcomings, has ‘resulted in a pricing
framework that impedes productivity within the land freight transport sector’ (Freighton Rail Group, sub. DR266, pp. 7).

34 The online journey planner is available at http://gis.nhvr.gov.au/journeyplanner/.
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A direct (or more cost-reflective) road-user charging system would support better roadinvestment decisions. Direct road charging systems could lead to more efficient
infrastructure use and provision because road managers would be better informed about thedemand for road capacity and quality. (However, some roads will always need to be
funded by the government on community service grounds.)
Direct road-user charging could remove price distortions in the choice between transportmodes and drive appropriate investments along the supply chain. Not only could roadpricing reform improve road networks, it could also provide price signals for modal choice
between rail and road and reduce bottlenecks around ports (ACCC 2013a). For example, as
the West Wimmera Shire Council (sub. 49) pointed out, the poor condition of road
networks leading to the Port of Portland has a significant effect on agricultural producers.
Cost-reflective pricing could address such concerns by facilitating an efficient level ofinvestment in road networks that lead to ports.
More cost-reflective road pricing could involve adjusting charges for pavement wear basedon axle configuration, as damage is related to a truck’s weight per axle (Winston andMannering 2014). This pricing adjustment could incentivise the uptake of truck designs
that minimise pavement damage.
The shift to a mass-distance-location charging model (which requires the monitoring of
total distances travelled, road use and actual vehicle mass) has been recommended
previously by the Commission and other organisations (HVCI 2014; NCA 2014;
NTC 2008b; PC 2006a, 2014c). New technologies, such as vehicle telematics, will provide
opportunities for such cost-reflective road pricing (Harper et al. 2015; PC 2014c), andallow road managers to enforce safety standards efficiently (box 9.5).
While the Australian Government has stated its support for the Competition Policy Review(Harper Review) recommendations on more cost reflective road pricing for heavy vehicles,
it has not committed to direct road-user charging (Fletcher 2015b, 2016). The Transportand Infrastructure Council acknowledged that more direct user charging is needed to fully
close the link between the needs of heavy vehicles and the charges they pay, but is of theview that these linkages can be improved within the current heavy vehicle charging system(TIC 2016). The Australian Government is also considering the establishment of an
independent price regulator for heavy vehicle road charges, with work underway toidentify potential steps to transition to independent price regulation by 2017-18(Fletcher 2016; TIC 2016) — this is in line with recommendations by the Harper Review(Harper et al. 2015) and the HVCI reform project (HVCI 2013).
The Commission’s view is that there would be substantial gains from transitioning to amore direct road-user charging system for heavy vehicles. There is also a limit to the extent
that the current road charging system can be altered further to reflect actual road use andexpenditure (NTC 2013).

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Box 9.5

Intelligent Access Program

The Intelligent Access Program (IAP) is a voluntary national program that is built around using
vehicle telematics and Global Navigational Satellite System technology to monitor participating
heavy vehicles’ compliance with road access conditions. The objective of the IAP is to give roadmanagers the confidence to allow heavy vehicles access to the road network.
The IAP remotely collects data on the time, speed and location of heavy vehicles through an
in-vehicle unit supplied by a certified IAP service provider, or through existing in-vehicle units
that have been certified for delivering IAP services (TCA 2016).
In New South Wales and Queensland, operators running at higher mass limits are required toenrol in the IAP, to enable monitoring of operator compliance with approved routes, times andspeeds (NHVR 2016e). While the focus of the IAP is currently on compliance (road authorities
currently only receive data on access breaches), intelligence gathered via vehicle telematics
would be valuable for informing road investment decisions and logistical coordination of freight
to resolve bottlenecks. The Swedish Transport Administration (Trafikverket) is also trialling the
IAP technology as part of its national program of heavy vehicle reform (Walker 2016).
The National Heavy Vehicle Regulator (NHVR) is looking at how telematics could be used to
improve driver safety, and noted that ‘the introduction of telematics will be a significant step
forward in the modernisation of heavy vehicle regulation in Australia’ (sub. DR192, p. 1). The
NHVR is currently developing a discussion paper on heavy vehicle operator incentives tovoluntarily participate in regulatory telematics as a first step towards a national telematics
strategy.

While some industry groups are opposed to direct road-user charging (Australian Lot
Feeders’ Association, sub. DR294), other are cautiously supportive. 35 A key concern is theimpact on regional areas and producers. For example, the NFF called:… for further detail on what this model may look like and evidence based analysis on theimpacts of the model on farmers. It must be demonstrated that the new model is more
beneficial to primary producers than the current reduced registration fees and fuel excise … thiswould most likely involve the retrofitting of costly technology. (sub. DR216, p. 39)

An important step in the transition to a more efficient and effective approach to theprovision and funding of roads should be the establishment of Road Funds (dedicatedbodies responsible for managing the allocation of road revenues to road projects) by state,
territory, or groups of local governments. Road Funds can be viewed as a move towards
clear governance arrangements that are focused on incorporating the interests of road users
in the process of allocating road funding, and subjects funding decisions to wider public
scrutiny (PC 2014c, p. 315). Hypothecating road revenues in a way that better reflects
road-user needs is an important part of this transition, as this would help convince road

35 Support for the principle of road-user charging was expressed by: AgForce (sub. DR246); Cotton
Australia (sub. DR262); CCA (sub. DR290); GrainGrowers (trans., p. 476); Livestock SA (sub. DR303);
NFF (sub. DR216); NSW Farmers’ Association (sub. DR161); Queensland Farmers’ Federation(sub. DR217); WA Famers (sub. DR226).
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users that the reforms are aimed at more efficiently and effectively allocating roadrevenues.
Road Funds, and the importance of hypothecation of road revenues to the Fund, arediscussed in more detail in the Commission’s inquiry reports on road and rail freight
infrastructure pricing (PC 2006a) and public infrastructure (PC 2014c). The proposedmodels for collecting and distributing road revenues developed by the ceased HVCI project
should also be considered in the road pricing reform process.

RECOMMENDATION 9.2

The Australian, state and territory governments should pursue road reforms to improvethe efficiency of road infrastructure investment and use, particularly through theintroduction of direct road-user charging for selected roads, the creation of Road
Funds, and the hypothecation of revenues in a way that incentivises the efficient
supply of roads.

Regulations for moving agricultural machinery on public roads
Many agricultural machines exceed prescribed mass and dimension limits, and areconsequently restricted access vehicles that require permits to operate on public roads.
Multiple permits can be required to move agricultural machines on public roads.
•

Road access permits. Permits for moving agricultural machines on public roads areissued by:– relevant state or territory road authorities and local governments, for moves entirely
within New South Wales, Victoria, Queensland, South Australia and the ACT– the NHVR, for moves within Tasmania, and between participating jurisdictions– the NHVR and the road authorities of Western Australia or the Northern Territory,
for moves between participating jurisdictions and Western Australia or the Northern
Territory.
There is also a system of gazettal notices, under which the gazettal notice replaces thepermit for certain specified types of machinery. Permits might only be granted fordaylight hours (such as in New South Wales).

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Third party approvals or permits. Where the dimensions of the vehicle might interferewith public infrastructure (such as railway lines or overhead wires), the applicant mustseek approval or permits from relevant third parties, such as utility companies and rail
companies, before the road access permit is approved. Permits from third parties can berequired each time the machine is moved, and can be valid only for a specified timebracket on the particular day.

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In some cases, a condition of the road access permit will be that a pilot vehicle or police
vehicle must accompany the machine on public roads.
Restrictions on moving agricultural machinery impose a considerable burden
Many participants, while acknowledging the importance of ensuring the safety of otherroad users, expressed considerable frustration with the requirements for moving oversized
agricultural machines on public roads. 36 The NFF said that:
Agricultural equipment and vehicles are increasing in size and dimension, making the transportand movement of equipment more complex. Travelling on and crossing critical, major andminor roads … is becoming more restrictive. Safety is imperative, however it needs tocomplement farming activities, cropping cycles and harvest timeframes. (2014a, p. 12)

And Regional Development Australia Wheatbelt WA said that:… it is essential that farmers are able to move machinery between farm locations with minimal
regulatory paper work and operational disruption. This has grown as an issue due to theincrease in the land area of Wheatbelt farms … With the increase in size many farm businesses
have found themselves working locations within the same area but not directly adjoining theoriginal property and having to access the road network to undertake farming operations.
(sub. DR176, p. 4)

Participants expressed concern that the conditions on the permits can be restrictive and theprocess to obtain them time consuming and inflexible (box 9.6), including for third-party
railway crossing permits (GrainGrowers, sub. 73). According to a farmer from southern
New South Wales (sub. 83), in one instance, moving an agricultural machine over
14 kilometres in western Sydney required three pilots, a police escort, letter drops tobusinesses and residents, and liaising with two local governments and a motorway owner.
The process of obtaining permits can be lengthy, and takes time away from productive
activity. The farmer from southern New South Wales said that:
Farmers have to jump through the same hoops as a business in the city … I obtained my permit
after at least 20 hours of office work that took me away from my farm business. I spent hours
on the phone with various people trying to work out what I had to do to comply and then hours
writing the documents and filing out the forms required … In many instances [farmers] havethe physical escorts and flags etc but just haven’t done the paperwork to get a permit.
(sub. 83, att. 1, p. 1)

36 See for example: Agforce (subs. 17 and DR246); Australian Sugar Milling Council (sub. 68); Karen
Baines (sub. 13); Canegrowers (sub. 22); Cotton Australia (sub. DR62); Farmer from southern NSW(sub. 83); Grain Producers Australia (sub. DR201); Office of the NSW Small Business Commissioner(sub. 4); Jonathan Pavetto (sub. DR227); Regional Development Australia Wheatbelt WA (sub. DR176);
University of Southern Queensland (sub. DR184); Voice of Horticulture (sub. 42); Wimmera
Development Association (sub. 19).
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One cotton farmer who the Commission interviewed said that he no longer offers thefarm’s heavy vehicles for contracting work because registering them and obtaining therequired permits for moving them on the roads is too difficult and costly. The farmer said
that this was a significant forgone business opportunity, and it reduced competition in thelocal market for contracting services (appendix C).
Box 9.6

Regulatory requirements for moving oversized agricultural
machinery in Capella, Queensland

For a producer in Capella to move an agricultural machine — that is 7 metres wide and4.8 metres high — for 25 km, the following were required:•transport permits — two permits were required from the Department of Main Roads (thedepartment): one for the machine, and another for the route taken. Each permit was issued
by a different section of the department, and needed to be obtained each time the machine
was moved•

railway crossing permits — a permit was required from Queensland Rail and the applicationneeded to be lodged four days in advance. A new permit was required if the move ended up
occurring outside of the nominated time frame. An uncomplicated move, with no overhead
wires and infrequent train services (that ran twice a week), costs $100 as the department
had to confirm when the train ran. If the department deemed it necessary to send out aflagman the cost would have been $300•

police escort — two police drivers needed to be dispatched from the Emerald police station
because the machine was 7 metres wide. The cost — $118 per police officer, and 88 cents
per kilometre per police vehicle (calculated from the time the police officers depart from andreturned to the Emerald police station). The total cost — about $500•

local government permit, Telstra permit and Ergon Energy permit. These permits lasted
12 months but needed at least five working days to process.

Source: Ivan Gowlett, pers. comm., 5 May 2016.

The need to obtain permits can also delay agricultural activities that are time sensitive. For
instance, planting takes place when rain arrives, and machines need to be moved acrossnumerous paddocks at short notice. This can lead to significant logistical problems andassociated costs. AgForce said that:
Agricultural producers face unnecessary costs associated with waiting for these permits, such as
costs to delayed production and the additional time and energy used in following up
applications that should have been processed promptly. Alternatively, they are faced with therisk of operating without a permit due to the serious threat of losing a crop if it cannot be
harvested prior to impending adverse weather such as a significant rainfall event. (sub. 17, p. 9)

The NSW Farmers’ Association argued that the regulations governing the movement ofoversized agricultural machines in New South Wales are excessively risk averse.
… many of these movements are presently considered to be ‘High Risk’ by the NSW Roads
and Maritime Service (RMS). This is regardless of the actual risk posed by the permutation of
the machinery combination and the road route undertaken … a requirement exists to contact the
NSW Police regarding escort requirements a minimum of five days prior to the planned
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REGULATION OF AUSTRALIAN AGRICULTUREmovement and to obtain approval from a Rail Infrastructure Manager if the movement involves
traversing a railway crossing. During the time sensitive planting window the period of timerequired prior to approval constitutes a major cost to a farmer’s productivity, or to a contract
planting operator’s ability to work. (sub. 72, p. 23)

In contrast, the Livestock and Rural Transport Association of Western Australia pointed
out the risks that machinery can pose to other road users, and noted that its ‘members
repeatedly raise concerns about near misses on rural roads when encountering agriculturalequipment being towed’ (sub. DR172, p. 2).
Cotton Australia questioned the rationale behind permit renewals.
Currently, there are many examples where the farmer must apply for [oversized agricultural
machines] permits either on a per-trip basis or an annual basis, and when due for renewal they
are in effect automatically renewed (expect for the fact that an application still has to be made).
(sub. 23, p. 16)

Curfews on moving agricultural machinery also interfere with farming activities. For
example, restrictions on night travel in New South Wales preclude balers from being
moved in time for baling hay before dawn, which can limit the efficient operation of hay
baling contractors.
Scope to increase flexibility?
There does appear to be scope to increase flexibility for moving oversized agricultural
machines without impacting public safety. As a farmer from southern New South Wales
put it:The only disruption that is caused by a slow moving [oversize or overmass] farming plant on
the road is that other drivers may have to slow down for a couple of minutes until the farmer
can move over to the side of the road. Drivers are on the whole very courteous and patient andI’m sure the threat of these movements to public safety has been over-stated andover-regulated. (sub. 83, att. 1)

A relevant example is night travel for agricultural vehicles wider than 2.5 metres, which is
not permitted in New South Wales, but is permitted in Victoria (NHVR 2015d;
VicRoads 2012). The question has to be asked as to why those vehicles can be safely
driven at night in Victoria but not in New South Wales.
Agricultural machines (and other vehicles) should be afforded the greatest flexibility formoving on public roads, once any impacts on public safety, amenity and infrastructure are
addressed. In locations where noise and infrastructure constraints (such as the presence ofoverhead wires) are not concerns, restrictions for agricultural machines could be replacedwith precautions to alert other drivers to the presence of the agricultural machine, or beallowed exemptions from permits during cropping season. Concerns over recovering thecost of any eventual damages caused by agricultural machines could be better addressed
through requiring adequate insurance cover for the vehicle, rather than through stringent
conditions on the movement of agricultural machines.
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There are ways to reduce the time and cost burden for obtaining permits to move oversized
agricultural machines. In particular, permit validity periods could be extended for low risk
routes.
•

The reason for requiring a permit from the NHVR or road manager for each journey foroversized agricultural vehicles is unclear. Multi-journey permits could be issued or
exemptions could be made for vehicles that regularly undertake the same journey,particularly if that journey only covers a short distance.

•

Navigating machines around fixed infrastructure, such as power or telephone lines,
along the same route could be done without requiring new permits for every move.

•

Rail authorities could issue permits that have a longer validity, or allow machinerymovements at fixed locations and time periods in line with train timetables.

There are a range of measures in place to increase flexibility for moving oversized
agricultural machines at both the state and national levels which could be considered for
wider adoption. For example:•

a trial is underway between the Queensland Government, canegrowers and the NHVR
to facilitate the movement of oversized vehicles within restricted zones during the crop
cycle (Canegrowers 2016)•

the New South Wales Government has introduced an exemption (published as a NHVR
notice) from mass and dimension regulations for all farmers and contractors
transporting silage trailers, which aligns with Victorian regulations. The exemption
allows a laden silage trailer up to three metres wide carrying feed to travel up to 25 km(although not at night)•

oversized agricultural machines in South Australia are exempt from permits so long as
operators comply with a code of practice that sets out the conditions of travel withinvarious zones (SADTEI 2008)•

there are a number of NHVR notices that exempt agricultural machines (and otherrestricted access vehicles) from prescribed mass and dimension limits or travel
conditions (such as bans on travelling on public holidays). The NHVR is also targeting
routes expected to experience large numbers of heavy vehicle movements, including
for oversized vehicles, for local governments pre-approvals (NHVR 2016i).

A cotton farmer said that he was pleased with the recent approval of a new trailer
technology that expands the loads each truck can transport from 12 to 18 round cotton
modules — a 50 per cent productivity increase. He pointed out that tailoring restrictions on
weight, height and size to local conditions can improve safety and productivity(appendix C).
Increased use of state and national gazette notices could provide greater flexibility in travel
conditions that have a significant impact on farm businesses, and potentially eliminate theneed to apply for permits for agricultural machines.

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In addition, a national notice for agricultural vehicles is scheduled for development.
According to the NHVR, the notice will ‘include exemptions for local movements’ andwill aim to promote ‘the shift towards gazetted access over permitted access’(sub. DR192, p. 3). However, the timeframe for the creation of the notice remains
uncertain, as do details of the ways in which it could benefit the agricultural sector.

RECOMMENDATION 9.3

The National Heavy Vehicle Regulator, road managers, and relevant third parties(such as utilities and railway companies) should ensure that requirements for moving
oversized agricultural machinery are proportionate to the risks involved. To achieve
this they should, wherever possible, make greater use of gazettal notices or otherexemptions for oversized agricultural machinery, and issue permits that are valid for
longer periods and/or for multiple journeys.

Heavy vehicle driver safety regulation
Heavy vehicle operators are required to comply with a number of driver safety regulations,
including driving hours and fatigue management, which are necessary to achieve thestandards of road safety that the community expects.
The driver safety requirements of the HVNL apply to drivers in participating jurisdictions(box 9.7) where almost 90 per cent of all truck-related fatalities occur (Safe Work
Australia 2014). Jurisdictions that have not adopted the HVNL have their own heavy
vehicle driver safety regulations.
•

Heavy vehicle operators in Western Australia are subject to its fatigue management andchain of responsibility regulations (WAMR 2015).

•

The Northern Territory does not regulate driving hours, and regulates driver fatigue asa workplace health and safety hazard. Only 2 per cent of all truck-related fatalities
occur in the Northern Territory (Safe Work Australia 2014).

A wide range of other state-based regulations govern heavy vehicle safety, including
roadworthiness inspections, use of safety stations, safe following distances, limits on
stopping in built-up areas, inspection of driver log books, and speed limits(NSWRMS 2015; NTDT 2014; QDTMR 2016; Queensland Government 2015; South
Australian Government 2016; WARSC 2015).
From 2012 until April 2016, there was also a separate road safety remuneration (RSR)
system. As part of that system, the Road Safety Remuneration Tribunal (RSRT) madeorders prescribing minimum remuneration and other entitlements for road transport drivers(both employees and contractor drivers), as well as conditions for loading and unloading
vehicles, waiting times, working hours, load limits, payment methods and payment periods
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(RSRT 2013a). Compliance with RSR legislation was administered by the Fair Work
Ombudsman.
Views on driver safety regulations
As farm businesses are heavily reliant on heavy vehicles to transport goods, heavy vehicle
driver safety regulations can have significant implications for farm businesses’ operating
costs.
Participants raised relatively few concerns with the driver safety requirements of the
HVNL or the requirements of non-HVNL jurisdictions. The NSW Farmers’ Association(sub. 72) and the NFF expressed concern about the chain of responsibility requirements,
with the latter saying that ‘the costs (and continuing regulatory creep) imposed on
businesses by the chain of responsibility and fatigue management rules in relation to heavy
vehicles is an ongoing concern’ (sub. 61, p. 19). Voice of Horticulture also raised concerns
over regulated rest breaks, which ‘add substantially to the cost of low value horticultural
produce and reduce the produces freshness in the market, further eroding grower returns’(sub. 42, p. 18). While there remain areas for improvement, recent reforms (box 9.7)
should help to address these concerns.
Ausveg said that ‘drivers transporting live cattle have special dispensations due to thewelfare of the cargo. Highly perishable goods such as vegetables should be allowed thesame concessions’ (2015b, p. 6). However, there is no case for extending special
provisions put in place to support minimum standards of animal welfare duringtransportation to products other than animals. Delivering fresh produce to its destination
more quickly entails only private benefits. Heavy vehicle operators who desire greater
flexibility in work–rest hours can choose to become accredited to do so under the NHVR’s
advanced fatigue management system.
The main driver safety issue for participants was the RSR system. Key concerns included
that the RSR system overlapped with other regulations, and increased costs without
commensurate safety improvements.
The Australian Livestock and Rural Transporters Association, for example, said that the
RSRT was ‘a most concerning source of new and unnecessary red-tape in the agriculturaltransport supply chain’ (sub. 47, p. 3). It pointed to particular difficulties that theagricultural sector faced in complying with the RSRT’s remuneration orders (box 9.8). The
Western Australian Government (sub. 54), Sheepmeat Council of Australia and Cattle
Council of Australia (sub. 88), the Limestone Association of Australia (sub. DR152) andthe Consolidated Pastoral Company (sub. 71) also expressed concern about the effect of
the RSRT’s decisions on the cost and efficiency of transporting agricultural goods.

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Box 9.7

Fatigue management requirements under the Heavy Vehicle
National Law

Under the Heavy Vehicle National Law (HVNL) and the associated Heavy Vehicle (Fatigue
Management) National Regulation, drivers are required to keep work diaries and adhere to
maximum work and minimum rest hours.
The HVNL provides for fatigue management exemptions (permits and notices), which enable
operators and drivers to apply for exemptions relating to work and rest hours, work diary andrecord keeping if they cannot reasonably work under the legislated fatigue management
requirements.
The HVNL also prescribes a ‘chain of responsibility’, under which anyone with influence over atransport task — including employers, exporters, producers, corporations involved inconsigning, packing, loading or receiving goods — is deemed to be part of the supply chain andshares responsibility for compliance with the HVNL.
After the HVNL came into effect several changes have been made to reduce the burden
imposed by its fatigue management requirements.
•

Reforms to chain of responsibility requirements replaced the obligations for all parties in the
chain of responsibility with a set of Primary Duty of Care over safety aspects of the transporttask. Prior to the reform, all parties had to comply with multiple duties for separate areas
such as speed and fatigue, which led to confusion about which parties were responsible foreach obligation (NTC 2015).

•

The National Heavy Vehicle Regulator has introduced voluntary electronic work diaries — anelectronic device that records the driver’s work hours — as an alternative to written work
diaries (NHVR 2015b).

•

Primary producers delivering goods within 160 km have been exempted from work diaryrequirements (which is usually required for travel over 100 km) (Commonwealth ofAustralia 2015b). However, some issues remain with the implementation of this exemption,
including that it precludes the pickup of farm inputs as a part of the return trip
(NSW Farmers’ Association, sub. DR161, p. 24) (though the NSW Farmers’ Association also
noted that the National Heavy Vehicle Regulator is working to extend the exemption to
include these types of journeys). In addition, farmers may not always be aware of how thesystem operates in practice, including the availability of exemptions (TDPIPWE, sub. 62;
TFGA, sub. 16).

The NSW Farmers’ Association considered that:
Even though the RSRT was relatively short lived, it threatened the livelihood of small businessowner drivers and created significant confusion and uncertainties in the industries that rely on
them, including agriculture. The creation of the RSR system was flawed and the same mistakeshould not be allowed to occur again. (sub. DR161, p. 23)

The NFF also said that the Road Safety Remuneration Act 2012 (Cwlth) did not ‘ … meet
the test of ‘good regulation’’ (sub. 61, p. 19).

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Box 9.8

Rural transporters report difficulties complying with Road
Safety Remuneration Orders

The Australian Livestock and Rural Transporters Association said that:
The 2014 [Road Safety Remuneration Order] requires written contracts between hirers and contractors
before work is undertaken and mandates the use of detailed safe driving plans for all long-distancework. These are new requirements that result in increased paperwork without any significant benefit forthe operator.
Very little of the work of most livestock or grain carriers is done under an ongoing written contract. Jobs
are more often allocated on a piece-meal basis, as they arise, including during seasonal highs such as
the grain harvest. While some carriers have retainers to handle, say, all product moving between aparticular feedlot and a certain abattoir which may be amenable to a written contract, most work is
ad hoc and at short notice.
Rather than being continuously located at ‘the end’ of a sub-contracting chain, small rural operators
often share work amongst each other and find that they are constantly changing roles. On one day,they will be the ‘prime contractor’ handing off some work to ‘a mate that I trust’ and, on the next day,they will act as a sub-contractor, bringing in a backload for ‘a mate who can’t get out this way’ toservice his usual client.
This reciprocity and the continuing exchange of roles in rural sub-contracting creates a market that isquite different to that found, for example, in the long-distance ‘general freight’ business that runs eachnight on Australia’s East Coast highways. (sub. 47, p. 4)

The safety benefits of the RSR system did not justify the costs
The RSR system was in place for less than four years, and the road safety remuneration
orders it imposed 37 were in place less than two years or were never enforced(FWO 2016a). It is therefore necessary to draw on the literature, in conjunction withparticipants’ views, to consider any benefits that may have arisen from the RSR system.
In this context, an examination of the relationship between remuneration and driver safety
behaviour would point to ways that the RSR system could have potentially improved roadsafety outcomes. However, the nature of the relationship has not been clearly established.
•

The literature suggests that remuneration can be a reflection of the heavy vehicle
driver’s qualification and skills rather than a factor leading to safer driving. For
example, Belzer, Rodriguez and Sedo (2002) concluded that transport companies thatpay more can afford to be more selective and to hire better quality drivers. (Thefollow-up study, by Rodriguez, Targa and Belzer (2006), confirmed this finding.) The
Federal Motor Carrier Safety Administration in the United States also noted that:… a number of studies purport to draw a relationship between driver compensation and safety
outcomes, for example, that increased pay is associated with a reduction in crashes. The
reviewers offer a cautionary note to these assertions: generally, it is not possible to understandthe true nature of the relationship between these two factors. Specifically, it may be unclear

37 The Road Transport and Distribution and Long Distance Operations Road Safety Remuneration
Order 2014, and the Contractor Driver Minimum Payments Road Safety Remuneration Order 2016.
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whether cash bonuses for safe driving are responsible for higher pay, or that offering better pay
at a company improves its ability to recruit and hire greater numbers of quality drivers.
(FMCSA 2007, p. vi)•

The effects of increased remuneration on safety outcomes are inconclusive. The
concern that financial pressures have implications for safety led to research comparing
employee and owner–driver groups, because owner–drivers were thought to be under
greater financial pressure than employee (or union) drivers. However, there was noconclusive evidence that owner–drivers are more accident prone, and at least threestudies (Cantor et al. 2013; Dammen 2005; Williamson et al. 2009) found that they
have fewer accidents than other driver groups. Indeed, owner-drivers are likely to havea greater incentive to maintain and care for their trucks as they bear the full cost of
accidents and breakdowns (Cantor et al. 2013). One of the reviews of the RSR systemfound that:… while the research shows a link between low remuneration and unsafe on-road practices
such as speeding and driving excessive hours, it does not appear that the detrimental effects
noted in the research are being translated into poor road safety outcomes as there is no
significant difference between the safety performance of owner drivers, small operators andemployee drivers. (Jaguar Consulting 2014, p. 81)

The limitations of the literature were summarised in the regulation impact statement for thecreation on the RSR system (box 9.9).
Given there is little evidence to suggest that regulatory intervention over remuneration in
the road transport sector would improve road safety, regulated minimum rates would likely
impose unjustified costs.
Anything higher than a price floor, under which drivers can achieve cost recovery for inputs
plus receive an income that meets living standards, may go above what is needed to reduce
adverse economic incentives that spur unsafe behaviour and therefore place an unnecessary
burden on industry. (PwC 2016, p. 53)

The costs of complying with the RSR system were also considerable — the most recent
review of the RSR system estimated that the two orders imposed by the RSRT would have
imposed costs in excess of $2 billion over the period 2012–27 (PwC 2016).
An inquiry into the effect of the 2016 order (which mandated minimum payments forowner–drivers) by the Australian Small Business and Family Enterprise Ombudsman
showed that it had a considerable impact on owner drivers. Many owner drivers reported
losing work before the Payments Order commenced, and that some are still struggling after
the Payments Order to regain sustainable levels of work and to recover financially.
[The Payments Order] exacerbated the competitive pressures already faced by owner drivers …
[The impact of the Order] on individual owner drivers and small businesses was significant,with financial hardship and stress placed on personal relationships and mental and physicalhealth. (ASBFEO 2016, p. 4)

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Box 9.9

The regulatory process in practice: the Road Safety
Remuneration System

The Road Safety Remuneration (RSR) system was established in response to a reportpublished by the National Transport Commission in 2008. Known as the ‘Safe Payments’ report,
it found there was a link between driver remuneration and safety outcomes, and recommended
that the link be addressed through regulatory intervention (NTC 2008a). In response, theAustralian Government established the RSR Tribunal under the Road Safety Remuneration Act
2012 (Cwlth). The Tribunal commenced operation on 1 July 2012.
There were several flaws in the process of establishing the RSR system.
•

There was no conclusive evidence of a link between remuneration and safety, making it
unclear whether regulating remuneration was an effective way to improve safety outcomes.
– The Safe Payments report acknowledged the lack of evidence that payments directly
cause crashes, but urged that ‘discussion should not be limited to a simple analysis ofcrash data’, as economic pressures have implications for safety (NTC 2008a, p. 19).
– The regulation impact statement for the creation of the RSR system found that data werelimited and studies were inconclusive about the extent to which remuneration and safety
are related.
There is some research to suggest that the remuneration for drivers is a factor in safety
outcomes, however data at this point in time is limited and being definitive around the causal link
between rates and safety is difficult. (PwC 2011, p. 3)

The regulation impact statement for the RSR system found that it would lead to net
economic costs but also noted that the assessment did not take into account the potential
economic benefits of addressing any market failures (including low market power orbarriers to exit from the industry). Although it recommended establishing the RSR
Tribunal, it noted that further investigation was needed before determining safe rates.
•

At the time of the creation of the RSR system, fatality rates involving heavy vehicles were
improving. They had improved between 2002 and 2007 (the year that the Safe Payments
report was produced), and continued to improve before the commencement of the RSR Act
in 2012 (DITRD 2007, 2013). In this climate of improvement, there was no justification forsuch a strong regulatory response in the form of price regulation.

Given the Safe Payments report and regulation impact statement pointed to the inconclusive
link between remuneration and safety, independent research to build an evidence base aroundthis link should have been prioritised before establishing a specialised body.
Reviews of the RSR system were completed in 2014 (Jaguar Consulting 2014) and 2015
(PwC 2016) to assess the regulatory burden on the road transport industry, and whether roadsafety outcomes can be more appropriately addressed through existing regulations. The reports
were not publicly released until April 2016 (DoE 2016). Both reviews reiterated concerns about
the lack of conclusive evidence around the links between remuneration and safety, that the
RSR system leads to net economic costs, and overlapped significantly with existing driversafety regulations (such as those governed by the National Heavy Vehicle Regulator and state
workplace safety regulations).

In addition, the RSR system created ‘confusion and uncertainty’ (PwC 2016, p. 21), andthis uncertainty ‘continues beyond abolition of the Tribunal and the Payments Order’(ASBFEO 2016, p. 24).

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A particular area of uncertainty was the interaction between the RSR system and otherrelevant regulations. For example, the Road Transport and Distribution and Long DistanceOperations Road Safety Remuneration Order 2014 (RSRT 2013b) — which required safe
driving plans for managing fatigue and speeding — overlapped significantly with the
HVNL and Western Australia’s chain of responsibility regulations. Aspects of the RSR
orders on pay, leave and protections against unfair conduct also overlapped with the Fair
Work Commission responsibilities and other existing regulations (including theIndependent Contractors Act 2006 (Cwlth), the Owner−Driver (Contracts and Disputes)
Act 2007 (WA), and the Owner Drivers and Forestry Contractors Act 2005 (Vic)). Whilesome aspects of this overlap could have been avoided had the RSRT adequately considered
existing regulatory systems when making orders, in practice this did not occur(PwC 2016).
The use of RSRT funding by the NHVR
When the RSRT was abolished, the Australian Government announced that its funding($15.6 million over four years) would be transferred to the NHVR for implementing
practical safety measures (Treasury 2016a). The NHVR is using the additional funds toaccelerate safety programs that have been in development, including integrating heavy
vehicle monitoring sites into one national system (the national compliance information
system), undertaking a heavy vehicle roadworthiness survey throughout Australia, 38
developing industry codes of practice guidelines (which clarify how industries could
prevent breaches of the HVNL), and providing education about chain of responsibility
obligations (Chester 2016; NHVR 2016c, 2016m, trans., pp. 550-552).
Other ways the NHVR could allocate this funding towards improving driver safety include:•

conducting an evidence-based evaluation of where state and territory regulation needs
to be strengthened or streamlined to improve driver safety, including in Western
Australia and Northern Territory, to ensure all cross-border safety issues are addressed•

gathering available data (such as data from the Intelligent Access Program) to identify
and target safety-improvement efforts at high-risk locations or behaviours. Data canalso help to tailor safety strategies to different types of heavy vehicles, as different
vehicles have different crash profiles (BITRE 2016).

Safety is important. It is essential that any additional expenditure by the NHVR results inclear and demonstrable benefits to heavy vehicle driver safety, or to broader community
goals such as road safety or robust information to support efficient infrastructure
investment.

38 The national compliance information system and roadworthiness surveys aims to include Western
Australia and Northern Territory, though these jurisdictions are not part of the HVNL (NHVR,
trans., p. 552).
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It has been announced that the Productivity Commission will review the national transport
regulation reforms, including the HVNL and NHVR (NTC nd; PC 2012a), although thetiming of this review is still to be confirmed. Timely reviews of new regulatory systems areimportant, and areas for improvement in the national system — including ways in which
new funds allocated following the abolition of the RSRT could best be used by the NHVR
to improve road safety in all states and territories — could be identified through that
review. The review will also be an opportunity to assess the funding requirements of the
NHVR for road safety, as it was not demonstrated at the time of abolishing the RSRT that
the NHVR can effectively and efficiently use the funds for the purposes of road safety.

FINDING 9.2

The road safety remuneration system (including the former Road Safety Remuneration
Tribunal) imposed costs on businesses, including farm businesses, without
commensurate safety benefits, and its abolition has reduced this burden.

RECOMMENDATION 9.4

The Australian, state and territory governments should review the National Heavy
Vehicle Regulator (NHVR) as part of the planned review of the national transport
regulation reforms. The review should:•

assess the efficiency and effectiveness of heavy vehicle regulations, including thescope to improve the allocation of responsibilities under the national system•

identify ways in which new funds allocated following the abolition of the Road
Safety Remuneration Tribunal could best be used by the NHVR to improve roadsafety in all states and territories.

9.2

Rail

Grains, sugar, fertilisers and other bulk products make up 8 per cent of the rail freight task
in Australia (BITRE 2014). The grains industry is particularly reliant on rail transport, withmost grain transported from grain producing regions to ports in the same state (Tulloh andPearce 2011). About 5100 km of operational railway were dedicated to grain haulage in2013-14 (BITRE 2015c).
Rail can be an expensive mode of transport for farm goods. In some cases, the rail freight
cost component of exporting is greater than the cost of shipping from the port to the export
destination — such as when exporting wheat or cotton from New South Wales to Asia
(Australian Farm Institute 2011; Goucher 2011).

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REGULATION OF AUSTRALIAN AGRICULTUREThere can also be considerable differences in rail freight costs in different jurisdictions due
to each region’s unique cost structures (Stretch, Carter and Kingwell 2014). For example,
CBH said that:
In Victoria, the cost of below rail access of railing grain from Dimboola to port (300 km) is>$1.90 per tonne. In Western Australia, the below rail access cost of railing grain from
Merredin to port (300km) is >$7.90/t. (sub. 36, p. 6)

In some cases, speed and weight restrictions have been imposed due to the poor conditionof parts of the rail network. As the Freight on Rail Group said:… across many regional networks in Australia … service quality due to lower track standards
and a lack of investment has adversely impacted on the competitiveness of the remaining rail
freight services – particularly, transport of bulk commodities like grain. (sub. DR266, p. 10)

Rationalisation of branch lines that are largely dedicated to grain is expected to continue(Nguyen et al. 2015). These factors, among others, have contributed to the switch from rail
to road freight (see below).
While some stakeholders (including the NFF, sub. DR216) called for greater
harmonisation of rail networks to make rail freight more competitive, harmonisation islargely a commercial decision for rail network owners. Considerable financial investment
would be needed to harmonise physical parameters of the rail network — including rail
gauges and loading limits — but the economic returns of doing so could be relatively low.
The optimal level of harmonisation depends on the costs of having different standards and,because rail assets are long-lived, harmonisation might only be viable when theinfrastructure is being renewed (BITRE 2006).39
Reducing the distortion in price signals between road and rail services would ensure themarket has the right incentives to make efficient investments towards harmonisation.

Price distortions between road and rail services
Privatisation of rail freight services has been a feature of reforms in the rail sector.
However, price distortions between road and rail services remain. Most roads remain
unpriced and this increases competitive pressure on rail freight.
Pricing distortions contribute to transport inefficiencies
Commercial rail network providers have difficulty recovering the costs of investments as
the price they can charge is effectively capped by the cost of road transport (which, as
39 Rail operators are able to harmonise aspects of their operations if they so choose. The Rail Industry
Safety and Standards Board (RISSB) — a body jointly funded by government and industry — develops
and promotes the uptake of harmonised rail industry standards, rules and codes of practice for application
across Australia (RISSB 2016).
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noted above, is not always priced on a cost-reflective basis) (Goesch et al. 2015a; Harper et
al. 2015). The price distortion between road and rail services has contributed to persistentunderinvestment in rail infrastructure, leading to transport bottlenecks for some
agricultural producers (although rail networks are also subsidised and the relative pricedistortion is unclear). It could also deter appropriate investments from harmonising or
integrating rail network infrastructure in the long term.
The move from rail to road transportation for many goods has been influenced by anumber of other factors, including technology and changes in preferences. For example,
just as canals and inland water transportation were displaced by the development ofrailways, larger and more efficient trucks have led to reduced use of rail lines (PC 2014c).
In some areas, the poor state of rail infrastructure increases both journey times and theoverall cost of freight for agricultural producers, and can exacerbate pressure on road
networks. For example:•

freight trains on the Mildura–Maryborough line are limited to a maximum speed of
80 km per hour due to the poor condition of the rail line (MDC 2014)•

rail network issues have been identified as key impediments for moving wheat
efficiently from farm to port, limiting the potential for wheat export growth(NFF 2013a). For example, a considerable portion of grain rail lines in New South
Wales have speed limits of less than 30 km an hour due to poor rail conditions (Nguyen
et al. 2015). Pinch points such as these preclude the use of larger capacity trains totransport goods from regional centres to ports, which in turn can limit exporters’ ability
to use larger, more efficient, ships (Fletcher 2015a)•

modelling by Nguyen et al. (2015) suggested that the closure of rail lines that are
mainly dedicated to wheat in Western Australia would lead to a doubling of wheat
freight volumes moved by road•the volatility in export grain volumes, particularly as producers recover from drought
conditions, affects the demand for rail transport and the ability of rail operators toservice the grain rail network, in turn accelerating the switch to road freight(RFNRC 2007).

The switch from rail to road freight has implications for rural local governments that are
responsible for most public roads (and which, as noted above, already have difficulty
funding road maintenance).
Rail is also impractical for some products. The degree of substitutability between road andrail freight can be limited — by one estimate, about 10–15 per cent of total freight task
(PC 2006a). This varies between products and regions; in some regions, for example,
potentially up to 50 per cent of agricultural road freighted containerised volume in (mostly
meat and fertiliser) could be substituted to rail (PwC 2015). As Voice of Horticulture said:
The potential to increase the amount of product transported by rail from rural and regional
Australia is very sector-specific. Rail works well in some circumstances, but it is impracticalfor other industries or businesses due to the length of time it takes, the cost of getting goods on
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and off trains, and the physical limitations of the nation’s current rail infrastructure.
(sub. 42, p. 16)

Improving price signals for the choice between rail and road
More efficient investment in rail and supporting infrastructure (such as loading facilities
for larger dimension shipping containers and intermodal hubs) could be achieved throughreduced pricing distortions in alternative modes of transport, particularly roads. Whilesome infrastructure projects are likely to have benefits for producers — the planned Inland
Rail is expected to attract 2 million tonnes of agricultural freight from roads 40, for example(Australian Government 2015d) — cost-reflective road pricing would lead to more
efficient infrastructure investments and more efficient distribution of goods moved by roadand rail.
Importantly, this is not an argument for additional subsidies to rail. Rather, theCommission considers there would be benefit in ensuring that there is an efficient pricing
system on roads (and rail) to reduce distortions and to encourage transport resources toflow to their most efficient use. The level and allocation of government investment in bothroad and rail infrastructure should be based on rigorous cost–benefit analysis.

Access to the grain rail network in Western Australia
The Australian and some state governments have established access regimes forinfrastructure services such as railways. These regimes are designed to address the market
failure that can arise if there is an enduring lack of effective competition, due to natural
monopoly, in markets for infrastructure services such as rail. Large, usually sunk, fixed
costs and economies of scale typically associated with natural monopolies can serve as
impediments to prospective competitors entering rail (and other) infrastructure service
markets.
In this inquiry, CBH — the largest grain exporter in Western Australia — expressed
concern that it is no longer able to access parts of the grain rail network.
Brookfield Rail has closed those sections of the [Western Australian Grain Freight Rail
Network] on which it is not making very high levels of profit, without surrendering them to analternate user, on the basis that it can continue to increase revenue and margins from a reduced
section of the rail network without increasing its own productivity. (sub. 36, p. 6)

CBH also pointed to delays of many months — and even years — in negotiating accessthrough the state’s Railways (Access) Code 2000 (the Code).

40 The Inland Rail is expected to give grain exporters more port options, leading to exports being diverted
from the Port of Newcastle to Brisbane and Port Kembla, for example (ARTC 2010).
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The process of obtaining access under the Code has had a significant negative effect on theefficiency of CBH’s operations, and has resulted in uncertainty and increased costs for CBH
and its grain grower members. (sub. 36, p. 6)

Similarly, WAFarmers considered that:… the current access issues currently with negotiations between CBH Group and Brookfield
Rail are an example of regulatory failings. Parts of the WA rail network have also been closed
through changes to the original lease agreement between government and the lease holder …
WAFarmers remain frustrated that the regulatory regimes implemented by the Western
Australian government do not work for monopoly infrastructure. (sub. DR226, p. 24)

The regulation of Western Australia’s grain freight rail network has been reviewed indetail in recent years, by both the Economic Regulation Authority of Western Australia(WAERA 2015) and the Economics and Industry Committee of the Western Australian
Legislative Assembly (WALAEISC 2014). The Western Australian Government also
indicated that it is considering whether to conduct a ‘broad policy review’ of its rail accessregime (sub. 54, p. 28), which would cover the grain rail networks used by CBH, todetermine if the regime is beneficial and cost effective. The Commission considers thatinefficiencies in that state’s rail access regime could be identified and addressed throughsuch a review, provided it is conducted in a timely manner.

9.3

Ports

Access to ports is crucial for agricultural producers as almost all agricultural exports aretransported by sea. Improved access to port facilities can promote competition instevedoring services and shipping, and improve the efficiency with which agricultural
goods can be moved domestically and internationally.
Ports are often characterised by high fixed costs and economies of scale, which provide
port operators with potential market power in some cases. In recent years, most major ports
in Australia have undergone privatisation and port authorities act as landlords forcompeting service providers (Harper et al. 2015).
The deregulation of the ‘single desk’ marketing of bulk wheat exports has also left grain
exporters with ownership of grain port terminals in a dominant position over the supply
chain. Regulatory regimes that can efficiently and effectively constrain the monopoly
power of port owners and port service providers are therefore important for all port users,
including farm businesses.

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Concerns about access to port services
Insufficient port capacity, or limitations on access to ports, pose a significant logistical risk
to certain agricultural industries.
•

Port capacity constraints are an issue for livestock exporters in the west and north ofAustralia, where there is strong competition from the resources sector for port capacity.
Despite being the two largest export ports for live cattle in Australia, capacity at theports of Darwin and Fremantle has been crowded out by the resources sector, and live
exporters report having access to only one berth at each port (ALEC 2014; Gleeson,
Martin and Mifsud 2012). Cattle producers in the Kimberley region face similarcompetition from the resources and tourism sectors at the ports at Broome andWyndham (Gleeson, Martin and Mifsud 2012; Sd+D 2008).

•

Grain exporters face congestion at ports during peak seasons (though at other times ofthe year grain flow is easily managed with existing infrastructure) (Stretch, Carter and
Kingwell 2014).

Port services can account for a substantial share of costs for farm businesses. For example,
port services account for about one third of grain producers’ supply chain costs. And thecost of port services is rising faster than other grain handling charges partly because, unlike
other parts of the supply chain where there is excess capacity, port capacity is limited andgrain exporters face competition for limited port shipping slots from other sectors (Stretch,
Carter and Kingwell 2014).
The NSW Farmers’ Association expressed concern that an absence of competition in grain
port terminal service providers puts farm businesses at a disadvantage.
… investment in port capacity has increased the marginal cost of the supply chain across thewhole export task for a port zone. Under these conditions the increased marginal costs are
passed back to the farm gate creating economic inefficiency … The ability of port terminal
service providers to pass back these inefficient costs to farmers creates an appropriation of rents
from the farm gate, in turn impacting the international competitiveness of Australian
Agriculture. (sub. 72, pp. 35–6)

In this context, the NSW Farmers’ Association (sub. 72) considered that the exemptions
from the Port Terminal Access (Bulk Wheat) Code of Conduct granted to grain port
facilities in New South Wales were premature. Exemptions from parts of the Wheat Port
Code of Conduct have been granted to all grain terminal operators except Viterra (in South
Australia) and to GrainCorp’s operations at Portland, Victoria (ACCC 2016j). The
Australian Competition and Consumer Commission (ACCC) noted that it ‘continues tomonitor exempt ports, including examining market shares and engages with industry
stakeholders more generally’ (sub. DR121, p. 5).
There are procompetitive developments that will, in time, ameliorate the concerns
expressed by grain producers (box 9.10), and the Commission maintains the view that theindustry should ultimately transition to rely on Part IIIA of the Competition and Consumer

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Act 2010 (Cwlth), subject to the outcome of a review of the Wheat Port Code of Conduct
planned for 2017 (PC 2010d).
Box 9.10

Wheat Port Code of Conduct

Port terminals for wheat exports have been subject to access regimes since the ‘single desk’operated by the Australian Wheat Board was deregulated in 2008. An industry-specific access
test, under the Wheat Export Marketing Act 2008 (Cwlth), was put in place to prevent incumbent
bulk handling companies that have port terminals from excluding new exporters. The
Commission’s inquiry into wheat export marketing arrangements recommended that the accesstest requirement end on 30 September 2014 (PC 2010d). The Commission envisaged that
regulated access to grain port terminals would then rely on general competition law (Part IIIA of
the Competition and Consumer Act 2010 (Cwlth)), with continuation of mandatory disclosureand supplemented by a voluntary code of conduct for port terminal services operators.
Concerns that continued regulatory oversight was required to contain monopolistic behaviours
in some grain export supply chains led the Australian Government to introduce a mandatorycode of conduct in September 2014 — the Port Terminal Access (Bulk Wheat) Code of Conduct(the Code). The Code requires port terminal operators to negotiate with wheat exporters foraccess to port terminal services, unless an exemption has been granted by the AustralianCompetition and Consumer Commission or the Minister for Agriculture and Water Resources(who may exempt cooperatives from parts of the Code under certain conditions) (ACCC 2014f).
In November 2014, the Minister for Agriculture granted an exemption to all four of CBH Group’s
ports in Western Australia. According to CBH, the exemption has facilitated agreements withmajor exporters that would not have occurred without the exemption, which in turn benefits its
grower members.
Since the exemption has been in place, CBH has been able to sign up long term agreements with its
grain exporting customers [10 million tonnes with 10 marketers] providing these organisations with alevel of service and flexibility that was not possible under the rigid regulatory arrangements previously
in place. (sub. 36, p. 9)

As CBH is a grower-owned cooperative but is also a major bulk handler in Western Australia,
some stakeholders are concerned that the exemption disadvantages grain growers andenhances CBH’s monopoly over grain ports in Western Australia (SRRATRC 2015b). However,others believe that where growers have direct influence over the provision of port terminal
services — as CBH does — ‘regulation would impose costs that would not exceed the expected
benefits’ (DoA 2014c, p. 33).
There have been a number of procompetitive developments along the grain export supply chain
recently that may reduce concerns over the potential abuse of monopoly power, including new
entrants at Port Kembla in New South Wales (Quattro Ports) and Bunbury in Western Australia(Bunge) (ACCC 2015a, 2015d; PC 2014f). Growing investment in on farm storage capacity,
particularly in eastern Australia, would introduce competition in the upstream market(Rabobank 2016; Stretch, Carter and Kingwell 2014); and from October 2016, CBH is governedby an access undertaking for its upstream grain receival, storage and handling services inWestern Australia (CBH Group 2016). The Inland Rail project is also expected to enhancecompetition on the east coast by increasing grain access to all eastern export grain terminals
between Brisbane and Geelong (DIRD 2015a).
The Wheat Port Code of Conduct will be reviewed by the end of 2017 to assess whether there
is justification for it to continue, taking into account the level of competition in the supply chain.

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Port privatisation is in the public interest under certain conditions
Several inquiry participants (including Stuart Chignell, sub. DR208 and the NFF,
sub. DR216) expressed concern about access to port services in the context of port
privatisation. Others considered that port privatisation should only occur if there are clear
benefits for the agricultural sector (Ag Institute Australia, sub. DR182; WAFarmers,sub. DR226). The Tasmanian Government noted that:… given Tasmania’s reliance on Bass Strait shipping for connections to interstate andinternational markets, continued access to the Port of Melbourne at fair and reasonable prices iscritical to the Tasmanian agricultural sector. (sub. DR287, p. 16)

Concerns about port access and pricing have arisen because, in an attempt to maximise salerevenue, governments have not always put mechanisms in place to constrain ports
operators’ monopoly power.
•

Restrictions on the development of a second port in the Melbourne region wereconsidered by the Victorian Government during the privatisation of the Port ofMelbourne (ACCC 2014b). Such restrictions would have particular implications for the
dairy industry in both Victoria and Tasmania, given the high proportion of dairy
exports through the Port of Melbourne (PC 2014a). While the rights to a second
container port were ultimately not included in the lease, the legislation allows forcompensation if a second port is developed within the 15 years from the lease’scommencement (VDTF 2016).

•

The Chairman of the ACCC, Rod Sims, expressed concern that the privatisation of thePort of Fremantle might confer rights to develop a new port in the region to the newowners, as occurred in relation to Sydney Airport over ten years ago (Sims 2016). An
arrangement of this type would curtail the potential for Fremantle to be serviced by twocompeting ports, to the detriment of port users.

Restrictions on competition during privatisation of port assets may achieve a higher saleprice, but this is not in the community’s interests if it comes at the expense of a lesscompetitive market structure. As the Harper Review noted:
Maximising asset sale prices through restricting competition or allowing unregulated monopoly
pricing post sale amounts to an inefficient, long-term tax on infrastructure users and consumers.
(Harper et al. 2015, p. 196)

Similarly, the ACCC said that:… it is important that governments selling public assets ensure that the appropriate market
structure and/or access and pricing arrangements have been put in place as part of theprivatisation process. Failure to do so will come at the cost of an effective ‘tax’ on future
generations of farmers and the general community. (sub. DR121, p. 5)

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Restrictions on competition should be avoided in the process of selling or consolidating
public port assets. As the Commission noted in its inquiry into public infrastructure(PC 2014c), privatisation of public enterprises has the potential to increase economic
efficiency and be in the public interest where:•user charges make commercial operation feasible•

private ownership can be made compatible with legitimate public policy objectives,
through structural separation, regulation, sale conditions and government payment for
appropriately valued community service obligations•

sale proceeds exceed the value of the assets under continued government ownership.

With these conditions addressed, privatisation of a port is likely to improve commerciallyrelevant decision making and support major export commodities, including agriculturalcommodities.

FINDING 9.3

Privatisation of major ports has the potential to increase economic efficiency, provided
the public interest is protected through structural separation, regulation or saleconditions. Increasing the sale price of ports by conferring monopoly rights on buyers
is not in the public interest.

9.4

Coastal shipping

In 2013-14, coastal shipping (broadly defined as the carriage of cargo between ports inAustralia) was used to move 2 million tonnes of food and live animals through Australianports (BITRE 2015a). Coastal shipping is also important in the movement of farm inputs
such as fertiliser (QTHLGC 2014). The NFF highlighted the importance of shipping to theagricultural sector.
For many farmers, shipping is an essential link in the supply chain. Australian products must beable to move quickly from the farm gate into domestic and overseas markets at a price thatdelivers a return to the farmer. (sub. 61, p. 20)

The Australian Government regulates coastal trading under the Coastal Trading(Revitalising Australian Shipping) Act 2012 (Cwlth) (Coastal Trading Act). For the
100 years prior to the Coastal Trading Act, the Australian Government regulated coastal
shipping through various iterations of the Navigation Act 1912 (Cwlth). On introducing theBill for the new Coastal Trading Act to replace Part VI of the Navigation Act (thereby
creating a new licensing regime for coastal trading), Minister Albanese said that thereforms were to encourage the ‘revitalisation of the Australian shipping industry’(Albanese 2012, p. 4). In practice, this meant protecting the Australian shipping industry
from foreign competition by creating a regulatory framework that ‘maximises the use’ ofAustralian vessels.
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The regulation of coastal trading includes limitations on trade by foreign-flagged vessels
within Australian coastal waters (known as cabotage restrictions). All domestic maritime
movements of cargo on interstate voyages must be authorised by a licence, and foreign
vessels are treated differentially through the licensing system.
The licences are:•general licences — these are available to Australian-flagged vessels (that is, vessels
registered on the Australian General Shipping Register) and provide unrestricted accessto Australian waters for five years. The vessel must be majority owned by an Australiannational, and each seafarer on the vessel must be an Australian citizen, permanent
resident or hold a visa with appropriate work rights•

temporary licences — these are granted to foreign-flagged vessels or vessels registeredin the Australian International Shipping Register, and allow a vessel to be used incoastal trading over a 12-month period. Temporary licence holders must undertake atleast five voyages during the licence period, and must specify the details of eachvoyage when applying for the temporary licence. Information about each application isprovided to holders of general licences, who have the opportunity to provide notice thata general-licensed vessel is available to conduct any of the voyages. This triggers amandatory negotiation process between the applicant and the general licence holder.
The Minister must take the outcomes of the negotiation into account when deciding
whether or not to grant the temporary licence•emergency licences — these can be granted in response to specified national
emergencies that require a significant and coordinated response.

Regulatory changes in 2009 also extended the application of the Fair Work Act 2009
(Cwlth) to workers on foreign-flagged vessels operating in Australian waters.
While the regulation impact statement (RIS) for the Coastal Trading Act found that its
introduction would have a net benefit (DIT 2011), this conclusion was based on theassumption that a productivity compact between the Australian shipping industry andmaritime unions would lead to substantial savings, which would offset the costs associatedwith the changes in shipping licensing. That is, ‘the RIS analysis identifies the compact asa major component of the productivity benefits of the reform’ (SELC 2012, p. 75).
However, as the compact was not in place when the RIS was prepared, the basis for thisconclusion is not clear (PC 2014g). Assumptions made about the compact and the extent towhich it delivered productivity improvements may not have eventuated (DIRD 2014a).
The Commission’s inquiry into Tasmanian shipping and freight (2014g) recommended that
the Australian Government review coastal shipping regulations (including cabotage) as amatter of priority, partly due to concerns about apparent flaws in the findings of the RIS.

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Coastal shipping regulations harm farm business competitivenessThe cabotage restrictions protect Australian-flagged ships by shielding them fromcompetition by foreign vessels. As outlined above, foreign vessels are subject to a range ofrestrictions, and the combined effect of these requirements is that Australian vessels
receive preferential treatment in coastal trading.
Cabotage restrictions are a significant impost for Australian businesses that rely on coastal
shipping, and they deter businesses from using coastal shipping (Harper et al. 2015;
PC 2014g).
While the volume of domestic freight has grown steadily over the past 40 years, coastal
shipping volumes have remained largely static. According to the National Commission of
Audit, this is partly because the regulatory settings have increased shipping costs(NCA 2014). High shipping costs have in turn seen some businesses move operations
offshore (SRRATLC 2015b) or shift to land freight (Shipping Australia 2015; Sheepmeat
Council of Australia and Cattle Council of Australia, sub. 88, att. 1).
The NFF explained how current coastal shipping regulations increase costs anduncertainty.
… a temporary license applicant and its customers have no right to choose who they contract
with to deliver the freight services they require. A third party can take over their contracted
voyage, without any obligation to meet the agreed terms. For example, initial contracting
parties might agree on a price of $20 per tonne. A third party then nominates to undertake thevoyage, ships the contracted goods at a price of $25 per tonne, and leaves the initial parties towork out the difference. (2015a, p. 8)

The Business Council of Australia gave numerous examples of increased shipping costs
following the introduction of the Coastal Trading Act.
Tonnage rates for Australian ships, where there is the right to contest, can be up to double therates offered by foreign ships for effectively the same service. This can add tens of millions ofdollars to the cost base of businesses that use coastal shipping … One company saw freightcharges increase by between $3,000 to $3,500 a day up and down the east coast of Australia …
When challenged by a General Licence holder, one company seeking a temporary licence was
faced with a 100 per cent freight cost increase. (BCA 2014, pp. 9–10)

Similarly, the Minerals Council of Australia said that:… the Coastal Trading Act has increased domestic transport and administrative costs and madeit more difficult to source coastal shipping services when they are needed. (sub. DR244, p. 8)

Current restrictions preclude firms from using spare capacity that is available on foreign
vessels already operating in Australian waters.
Changes to Australian coastal shipping regulations in recent years have impeded foreign
shipping lines from competing with Australian vessels for domestic trade. The higher costs andadministrative requirements have deterred the vast majority of international lines from carrying390

REGULATION OF AUSTRALIAN AGRICULTURE

domestic cargo, despite the obvious efficiencies for vessels already calling at a number ofAustralian ports. (ACCC, sub. DR121, p. 5)

Cabotage restrictions also disproportionately affect Tasmanian businesses which areheavily reliant on coastal shipping to deliver produce to the market (box 9.11).
Box 9.11

Disproportionate impact of coastal shipping regulations on
Tasmanian businesses

Cabotage regulations have a disproportionate impact on Tasmania, as over 99 per cent offreight volume moves in and out of Tasmania by sea (PC 2014g). From 1976, the AustralianGovernment has provided a subsidy to Tasmania under the Tasmanian Freight Equalisation
Scheme, due to the perceived cost disadvantage of the Bass Strait transit. Increased shipping
costs due to cabotage restrictions raise Tasmanian producers’ dependence on the subsidy to
be competitive.
The Tasmanian Farmers and Graziers Association claimed that, as a result of the coastal
shipping regulations, the route across the Bass Strait is the most expensive sea transport routein the world (TFGA 2014), and therefore greater competition in coastal shipping will benefit
Tasmanian farmers (TFGA, sub. DR281). And according to the National Farmers’ Federation,
shipping from Tasmania to Melbourne can cost the same as subsequent freight legs overseas(NFF 2015a). Voice of Horticulture said that it can cost more to ship fruit to the mainland than to
China.
… as a result of the restrictive Australian cabotage regime, the cost to ship fruit from Tasmania to
Brisbane is approximately $7.00 [Australian dollars] per 18 kg box compared with $5.60 [Australian
dollars] per 18 kg box shipped to Shanghai, via Melbourne. (sub. 42, p. 19)

The necessary journey across the Bass Strait makes processing in Tasmania relatively lesscompetitive than on the mainland.
The costs of transporting livestock from locations such as King Island and Finders Island to Tasmania
for process is expensive and in a cost per kilometre considerably greater than on mainland Australia.
The challenges and costs around positioning empty containers in Tasmania and transporting finishedproduct by road and vessel to the mainland for transhipment, is also very expensive in comparison to
mainland costs. (JBS Australia 2013, p. 2)

Recent attempts to improve the competitiveness of coastal shipping
In April 2014 — a month after the release of the Commission’s inquiry into Tasmanianshipping and freight (PC 2014g) — the Australian Government released an options paperon reforms to the Coastal Trading Act (Truss 2014). In June 2015, the AustralianGovernment proposed amendments to coastal shipping laws under the Shipping
Legislation Amendment Bill 2015 (the Shipping Amendment Bill). Proposed changes
included:•

introducing a single permit system allowing unrestricted trade for both Australian andforeign vessels•

removing the contestability provision (foreign and Australian registered vessels would
be subject to the same access and operation conditions)
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•

excluding ships that are engaged predominantly in international trading (that is, foreign
vessels operating in coastal waters for less than 183 days per year) from:– the application of the Fair Work Act (the parity condition)– the requirement to hire two Australian senior crew members.

The Shipping Amendment Bill was referred to the Senate Rural and Regional Affairs andTransport Legislation Committee, which pointed to the estimated benefit from the
proposed amendments of over $667 million over 20 years (SRRATLC 2015b). Thesebenefits would arise through increased competition from foreign vessels.
The existing legislation — the Coastal Trading Act — is clearly inadequate. It has failed torevitalise coastal shipping … There are now fewer Australian flagged vessels, there is lessreason to use them, and there are more and more impediments which prevent shippers making
efficient and rational transport choices … Failing to pass the bill will not change the course ofAustralia’s coastal shipping industry. It’s slow decline is likely to continue … On the other
hand, passing the bill is likely to enable Australian producers to access cheaper, more flexible
and more responsive options for transport. (SRRATLC 2015b, pp. 30–31)

However, Parliament did not pass the Bill due to concerns over the potential loss ofAustralian jobs (Albanese 2016).
Concerns about the potential effect of increased competition in costal shipping on workers’
remuneration and conditions were raised by several inquiry participants, including the Ag
Institute Australia (sub. DR182), Stuart Chignell (sub. DR208) and Peter Flanagan(sub. DR107). They were concerned to preserve Australian wages, which ‘are typicallythree to four times those recommended by the International Labour Organization forinternational seafarers’ (Phil Potterton, sub. DR163, p. 4).
These stakeholders were also concerned about attracting substandard foreign vessels.
However, the Australian Maritime Safety Authority undertakes vessel inspections toinspect areas critical to the safe operation of the ship and the ship’s overall condition,equipment and crew, and can detain noncompliant vessels in Australian waters(AMSA 2016).
In itself, protecting an industry to preserve jobs is not justified. The cabotage restrictions
protect some jobs at the expense of growth in other industries (PC 2014g). Protecting an
industry from competition not only harms consumers (in this case farmers), but also
reduces the incentives of the protected industry to improve its efficiency andcompetitiveness. Over time, the protected industry falls further behind foreign competitors,
requiring ever more protection and increasing the cost to consumers and the community ingeneral.
As Phil Potterton pointed out with regards to the difference between Australian andinternational wages:
Such cost differences would be experienced in virtually all industries throughout the economy
and are not unique to shipping. The difficulty for shipping policy arises from the generally
392

REGULATION OF AUSTRALIAN AGRICULTUREhomogenous character of the shipping service or ‘product’, on the one hand and the‘borderlessness’ of the global shipping industry, on the other … Thus, regardless of the level oftechnical efficiency of the Australian industry, the opportunity almost always exists to facilitatea lower cost service for shippers … (sub. DR163, pp. 4–5)

Put differently, the Australian coastal shipping industry will inevitably face competition
from lower-cost competitors.

Reforming coastal shipping regulations
As outlined in the Commission’s inquiry into Tasmanian shipping and freight, on balance,
coastal shipping regulations tend to:•increase the costs of providing domestic coastal trading services•

deter non-Australian vessels from engaging in Australia’s coastal trade and directinternational services that rely on coastal trade volumes for commercial viability•

reduce the level of competition in Australia’s coastal trading network and reduce the
incentives for efficiency improvements by Australian ships.

The high cost of coastal shipping imposes an additional, significant, burden on farmbusinesses dependent on coastal freight, with particular effect on Tasmanian producers. It
also deters farm businesses and related processing and supplier industries from using sea
freight.
Rather than revitalising the Australian shipping industry, the requirements of the Coastal
Trading Act ‘impose additional regulatory burdens on businesses that use shipping without
any clear benefits for Australian licenced shipping’ (DIRD 2015b, p. 9). In the first two
years of operation of the Coastal Trading Act there was a 63 per cent decline in the
carrying capacity of the major registered Australian vessels, relative to levels seen in
2011-12 (Truss 2015). Farm businesses have had few options but to switch to alternative,
less efficient, ways of moving their goods as a result of the rising coastal shipping costs,
which contributes to a further decline in demand for Australian shipping services.
Reforms to coastal shipping regulations to increase competition will likely lead to
long-term economic benefits by reducing the cost of shipping and incentivising Australian
ships to be more competitive. Reforms that reduce shipping costs would also help ‘reduce
the number of trucks on increasingly congested roads’ (ACCC, sub. DR121, p. 5). Reforms
such as those proposed in the (now lapsed) Shipping Amendment Bill would lower market
entry requirements and induce greater competition in the coastal shipping industry.
Allowing international operators to compete on coastal routes if they are part of acontinuous international voyage (as is the case in New Zealand under its Maritime
Transport Act 1994) would also improve competitiveness.
The shipping policy of the United Kingdom could also be considered. In the United
Kingdom, there are no cabotage restrictions for foreign ships, no crew nationality
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requirements for UK-registered non-strategic vessels (European Commission 2002;
Sampson 2015), and nonresident seafarers’ wages are bound by international labour
standards (GOV.UK 2016; Triesman 2004).
Another option to attract more international vessels and increase competition in coastal
shipping would be to relax the eligibility for an Australian flag. As Phil Pottertonsuggested:… all ships on the coast would again come under the Australian flag. But the content of‘Australian flag’ should be different from the past. Domestic shipping would be open to foreign
ship owners … internationally competitive arrangements would apply and there would bemixed nationality crews. (sub. DR163, p. 7)

Whichever reform path is taken, reforms to allow greater competition from foreign vessels
in coastal waters would allow Australian businesses (including farm businesses) to accessmore cost effective shipping services. This would be welcomed by a range of inquiry
participants (including the Institute of Public Affairs (sub. DR164), Dan Norton (trans.,
p. 750), Tully Cangrowers (sub. DR170) and WAFarmers (sub. DR226)). Increased
competition in coastal shipping would be particularly beneficial for Tasmanian producers,
and could reduce the extent to which those producers rely on the Tasmanian Freight
Equalisation Scheme to be competitive.

RECOMMENDATION 9.5

As a matter of priority, the Australian Government should amend coastal shipping laws
to substantially reduce barriers to entry for foreign vessels, to improve competition incoastal shipping services.

9.5

Biofuel support programs

Biofuels are liquid fuels made from organic material, such as plants and animal material.
Both Queensland and New South Wales currently have (or have passed laws to implement)
biofuel mandates.
Queensland’s Liquid Fuel Supply Act 1984 requires that, from 1 January 2017, a minimumof 3 per cent of non-premium petrol sales be ethanol (ethanol is a renewable, clear andcolourless liquid that mixes with petrol). That is, to achieve the target, at least one in threelitres of non-premium petrol sold at stations stocking E10 must be an E10 product. The
Queensland Department of Energy and Water Supply stated that:
A biofuel mandate is a step towards growing our biofuel and bio-manufacturing industries.
It will provide certainty so the industry can invest, innovate and create jobs as part of a cleaner,greener future for Queensland. A flourishing biofuels industry will also create the foundation
for a new high-value bio-manufacturing industry. (QDEWS 2016)

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In New South Wales, under the Biofuels Act 2007 (NSW) there is an ethanol target of
6 per cent of total fuel sale volumes.
Both states also have biodiesel targets — in New South Wales the target is 2 per cent of alldiesel sold, and in Queensland it is 0.5 per cent of all diesel sold.
Also, until recently the Australian Government operated an Ethanol Production Grants(EPG) program. In place from 2002 to 30 June 2015, the EPG program effectively
removed excise rates for domestic ethanol (imported ethanol remained subject to fullexcise). After the EPG program rebate ceased, the full excise rate applicable to ethanol was
reduced to zero for domestic production for 2015-16, after which the excise rate will
increase incrementally over five years until it reaches 32.8 per cent of the excise rate forgasoline (ATO 2016c; Treasury 2014a). Imported ethanol continues to be subject to thefull excise — currently 39.5 cents per litre (ATO 2016b). In effect, local ethanol
production continues to be protected by arrangements equivalent to a tariff.
A range of participants (including the Australian Forest Products Association, sub. 11;
Australian Sugar Milling Council, sub. DR234; Canegrowers, subs. 22 and DR169; NFF,
sub. DR216; and Queensland Government, sub. DR154) expressed support for biofuel
subsidies and mandates. For example, the Queensland Government said that:
Queensland’s biofuel mandate is designed to provide certainty to the biofuels sector toencourage investment, innovation and growth, and lead to more jobs. (sub. DR154, p. 3)

In addition to supporting current arrangements, the NFF advocated for ‘greater support forsmall-scale biodiesel production and consumption’ (sub. DR216, p. 46).

Biofuel support can increase fuel costs and may not help theenvironment
Assessments of the New South Wales biofuel mandate showed that:•retailers cut the supply of regular unleaded petrol to meet the biofuel sales target•

the mandate reduced consumer choice and increased the price consumers paid for
petrol because they substituted to premium fuels•

the mandate affected the competitive dynamic between retailers by reducing theavailability of regular unleaded petrol at many retail sites (ACCC 2013b, sub. DR121;
IPART 2015).

The extent to which farm businesses are affected by biofuel mandates depends on whether
they are able (and willing) to switch to biofuel blends. Quality control issues for biodiesel
have led to some apprehension over its use in heavy vehicles (Australian Institute ofPetroleum 2015), which means that some farm businesses might avoid (or prefer to avoid)
blended products.

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About 84 per cent of fuel consumption in agriculture is diesel and 14 per cent is petrol(ABS 2004), so the impact of biofuel mandates on farms would likely be felt through thebiodiesel target. That said, the price impact of biodiesel mandates on consumers is
uncertain, as:•

the highest biodiesel target in Australia is 2 per cent (New South Wales), and it has not
yet been achieved (see below)•

at least one major petrol retailer does not label biodiesel blends below 5 per cent (BPAustralia 2016). This means consumer preferences for biodiesel blends, and thus theprice impacts of mandates, cannot be observed.

Despite molasses-based ethanol of the type produced in Queensland being ‘the lowest
greenhouse emission intensity source of ethanol’ (Australian Sugar Milling Council,
sub. DR234, p. 5), the environmental benefits from ethanol support programs in Australia
have been modest. Only about 1 per cent of all road transport fuel volume in Australia isethanol, which means only a small displacement of fossil fuels has been achieved. The costof abatement through the EPG program was relatively high — estimated to be between$274 and $496 per tonne of carbon emissions abated (BREE 2014; PC 2011b).
Also, the extent to which biofuels offer carbon emissions savings depends on how they are
produced. If native vegetation is cleared in order for the land to be used in biofuel
production (or to replace agricultural land diverted to biofuel production), this can lead toseveral times more carbon emissions being released than the fossil fuels they displace(Fargione et al. 2008).
Tariffs for ethanol also reduce the use of ethanol imports, thus reducing the net carbon
abatement benefits which could have been gained by using imports that have lower
greenhouse gas emissions (such as from Brazil which is regarded as one of the world’s
most advanced ethanol producers) (de Gorter, Just and Tan 2009; UN-Energy Knowledge
Network 2011) — even though the emissions reductions benefits of imported ethanol may
be partially offset by the emissions associated with its transport (Australian Sugar Milling
Council, sub. 234).

Biofuel mandates have limited benefits for farmers
A viable domestic biofuel market remains elusive after decades of support
As the Queensland Department of Energy and Water Supply noted, the biofuel mandate
aims to provide an alternative market for primary producers (QDEWS 2015). The
Queensland Government believes that a biofuel mandate would stimulate the biofuel
market in Queensland which has ‘remained relatively static for the last several years’(sub. DR154, p. 3).
However, in spite of various government support programs in Australia since 1980, they
have been ineffective in developing a viable domestic biofuel market (ANAO 2015).
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Biofuel support programs, including the EPG program and biofuel mandates and targets,have had limited effects on stimulating domestic production capacity, which limits themarket for producers to sell feedstock. Currently, there is only one producer in New South
Wales (Manildra Group, which owns the Manildra Ethanol Plant and received over
70 per cent of all EPG program funding) and two producers in Queensland (ANAO 2015;
BREE 2014). In relation to the EPG program, the Australian National Audit Office foundthat:
After 12 years of operation and some $895 million in government support directed towards
improving the long‐term viability of the domestic ethanol industry, in 2014 only three domestic
producers (up from two in 2002) were operating, and an expanded Australian ethanol industry
based on market priced feedstock was considered unlikely to be commercially viable in theabsence of the EPG rebate. (ANAO 2015, p. 17)

Moreover, the New South Wales ethanol target has never been achieved, and the scheduledincrease in the biodiesel target was suspended due to insufficient local production capacity(ACCC 2013b; Hartcher 2011). Mobil (2015) and the Australian Institute of Petroleum(2015) also claimed that there is insufficient local biodiesel production to achieve theQueensland target, and that the significant risk of supply disruption could impose costs on
the fuel supply chain. The market for selling biofuel feedstock is therefore likely to remain
limited and concentrated, and could lead to increased costs being passed onto consumers.
Feed price implications for farmers
Several stakeholders expressed concern that demand from biofuel producers could result in
additional competition for feedstock. Australian Pork Limited (sub. DR282), for example,
raised concerns about the impact of ethanol mandates on pig producers, particularly during
dry periods when feed grains can represent up to 80 per cent of cost of pig production.
Australian Dairy Farmers also said that:… anything which artificially increases the cost of a production input (such as mandated andsubsidised ethanol production) disadvantages the thousands of individual dairy producers
across the country. (sub. DR218, p. 5)

However, there are two main factors that limit the direct influence of domestic biofuel
mandates on crop prices.
•

The feedstock used in Australia is predominantly composed of byproducts — starch(Manildra Ethanol Plant) and molasses (Sarina Distillery) — which have a limited
impact on other markets. One plant (Dalby Bio-Refinery) uses sorghum as its feedstockand represents 18 per cent of industry production capacity (BREE 2014). Feedstock is
the largest cost component in ethanol production, and an expanded domestic ethanolindustry using market-priced crops as feedstock is unlikely to be economically viable in
the absence of the EPG program rebate (whereas producers using waste residues facezero or low costs) (BREE 2014).

•

Australian farmers are price takers in global markets, which means it is unlikely thatdomestic biofuel mandates will directly influence crop prices received by farmers.
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While sorghum producers in Australia have benefited from global grain prices thatwere driven up by overseas ethanol policies (Wylie 2008), in the long run ethanol
support policies (both in Australia and overseas) have the potential to raise the cost of
feed grain prices and impact livestock industries (PC 2008b; Serra andZilberman 2013).

Biofuel industry outcomes should be market driven
Some participants (including Ag Institute Australia (sub. DR182) and the Australian Lot
Feeders’ Association (sub. DR294)) supported the removal of biofuel support policies. The
latter considered that the mandates distort the development of more advanced biofuel
technologies, including second generation ethanol production technologies:… [the Queensland’s mandate would] lead to a misallocation of resources towards a small
number of ethanol producers in the state who have demonstrated over time to be unviablewithout such assistance [and foster] reliance on Government support and further ‘rent seeking’behaviour into the future. (sub. DR294, pp. 15–16)

Cotton Australia also argued that, while ‘bio-fuels have been proven to be technicallyfeasible [it] should be up to the market to determine their up-take’ (sub. DR262, p. 14).
The Commission considers that farmers and the community would benefit from theremoval of ethanol mandates and excise arrangements, as these policies deliver negligible
environmental benefits and come at a high cost.
RECOMMENDATION 9.6

Arrangements to support the biofuel industry — including excise arrangements andethanol mandates — deliver negligible environmental benefits and impose
unnecessary costs on farmers and the community. The Australian, New South Walesand Queensland Governments should remove these arrangements by the endof 2018.

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10 Food regulation

Key points•

Governments in Australia regulate food to support public health and safety and consumer
decisions about buying food products.

•

Food labels are used to convey information to consumers, such as information about
ingredients, nutritional value, production processes and country of origin.

•

Misleading or confusing labelling can result in consumers making choices that do not reflect
their preferences. This could occur, for example, where standards and definitions do notaccord with consumers’ expectations or where consumers do not have an accurate
understanding of the product.
− Country-of-origin labels have confused consumers and limited the ability of Australianproducers to differentiate their products. Recent changes are expected to provide
consumers with country-of-origin claims that are easier to understand, and provide
greater clarity to producers about what is expected. However, it is unclear if a mandatory
system delivers greater net benefits than a voluntary system. Any future reforms to thecountry-of-origin labelling framework should assess the option of a voluntary system.
− A national standard for ‘free-range’ egg labelling was recently announced to help ensurethat free-range eggs are produced according to consumers’ general expectations.
However, consumers’ expectations are difficult to gauge and do not always reflect
scientific evidence of welfare outcomes or best-practice husbandry practices. The
standard may need to be revised after the national standards and guidelines for poultry
welfare are in place in 2017.

•

The case for mandatory labelling of genetically modified (GM) foods is weak. Given thatFood Standards Australia New Zealand assesses GM foods for their health and safety, GMlabelling is a consumer value rather than a food safety issue. Consumers’ preferences topurchase non-GM foods can be met by information provided through voluntary labelling.

•

The Australian Consumer Law, together with advances in technology that enable gluten to
be detected to increasingly minute levels, prevents producers from making a ‘gluten-free’
claim even where the level of gluten poses little risk to consumer health. However,producers can still make other claims for foods that have very low but detectable levels ofgluten (which are not likely to be harmful). A food standard that defines a safe level ofgluten for gluten-intolerant consumers would provide greater certainty for producers andconsumers.

•

Being able to trace eggs is necessary to address outbreaks of foodborne illnesses.
However, it is unlikely that egg stamping is the most efficient and effective policy tool.
Requirements for egg stamping should be removed, unless it can be demonstrated that thisapproach provides the highest net benefits to the community.

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In Australia, there are food regulations at every stage of the production process. Foodregulations seek to support public health and safety, provide clear and accurate information
about food products, and protect the international reputation of Australia’s food. They also
allow Australian food to be distinguished in domestic and international food markets.
Commenting on the benefits of food regulations, the Department of Foreign Affairs andTrade said that:
Australia’s stringent regulations on food safety … increase the level of confidence that foreign
governments and consumers have in the quality and safety of Australian products. These
regulations improve returns and reduce risks for a range of food producers, manufacturers andbrand owners. They assist exports, as evidenced by the success of an increasing number ofAustralian food brands across the immediate region. (sub. 56, pp. 2–3)

However, regulations that impose excessive compliance burdens on food producers,
including farmers, may have unintended consequences such as higher food prices and lessproduct variety.
While many inquiry participants recognised the benefits of food regulations, concerns wereraised about regulations relating to:•labelling requirements•

egg stamping•

food safety audits.

This chapter looks at the rationale for food regulation (section 10.1) and the foodregulation system in Australia (section 10.2), and examines concerns raised about
regulation of food labelling (section 10.3) and regulation of food safety in the production
process (section 10.4).

10.1 Rationale for food regulation
Consumers purchase food based on a variety of attributes such as taste, nutritional value,
convenience, food safety and country of origin. They weigh up the costs and benefits ofvarious food attributes, and decide the price they are willing and able to pay for a given
food product. Producers, by differentiating products based on quality and other attributes,
can often receive a premium price. Consumers’ purchasing decisions in turn send signals toretailers, wholesalers and farmers about what (and how much) to supply.
For their purchasing decisions to accurately reflect their preferences, consumers need clear,succinct and relevant information about food products. However, asymmetric information
between consumers and producers can be a feature of some food markets, and this canmean that markets do not work as well as they might (chapter 12). In these cases, there
may be a case for government involvement through, for example, mandating that certain
information be provided with products, or setting minimum standards.
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That said, recent developments in technology are providing opportunities for consumers to
obtain more detailed information about their food choices and to compare prices between
different sellers.
In some cases, governments prohibit certain foodstuffs to safeguard human health or othercommunity interests. For example, it is illegal to sell raw milk for human consumption in
Victoria (DFSV 2015). The Australian Industrial Hemp Alliance pointed out that
‘Australia is one of the few countries in the world to ban the human consumption of hemp
food products’ (sub. 69, p. 3).

Regulation of food labelling
Food labels can help consumers select the foods that best satisfy their preferences. Labels
provide information about food safety (allergen information, use-by dates), health(nutrition information) and consumer values (such as free-range, organic and country oforigin).
Producers (including primary producers, processors and marketers) have an incentive tolabel their products with attributes that are favoured by consumers, such as ‘fat-free’,‘free-range’ or ‘made in Australia’. They may also choose to participate in third-party
schemes, such as the Heart Foundation Tick, and kosher or halal certification. Producers
who successfully communicate to consumers that their products have desirable qualities
may be able to increase the volume of sales, charge a premium for their products and/or
enhance their reputation.
However, consumers cannot always verify if producers’ claims are accurate. As Rod Sims,
Chairman of the Australian Competition and Consumer Commission (ACCC), said:
Consumers are increasingly placing weight on premium claims and are likely to value the typesof claims that directly affect the integrity of the product, such as where something was made,grown or produced and how it was made, grown or produced. These are claims made by
producers that a consumer cannot test or validate; for example, a claim such as ‘free to roam’.
These claims, if made improperly, have an impact on consumers, and equally important cangive suppliers an unfair competitive advantage. (2013)

To deal with such matters, many countries have consumer protection measures to ensurethat the information provided to consumers is current, accurate and reliable. In Australia,
there is a requirement under the Australian Consumer Law (ACL) that food labels are notfalse or misleading. Governments can also define certain phrases (such as ‘free-range’), setlabelling standards and/or provide consumer information. Governments should choose thepolicy tool that yields the greatest net benefit to the Australian community.

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The food labelling hierarchy
The 2011 Blewett review (Blewett et al. 2011) conceptualised the need for government
action relating to food labelling using a food labelling hierarchy (figure 10.1). The
hierarchy provides a conceptual framework to assess the role of government in regulating
food labelling, and outlines the different purposes of labels and the risks that labels can beused to address. In general, the higher the risk, the stronger the justification for government
intervention (subject to a net benefit test).
•

Food safety is at the top of the labelling hierarchy and is designed to protect consumers
from direct and immediate threats to their health — the review panel considered
mandatory requirements to provide information to be most effective in managing this
risk.

•

Preventative health focuses on longer-term risks, with government action aimed atallowing individuals and populations to make healthier food choices — the review
panel considered both mandatory requirements and co-regulation to be effective for thispurpose.

•Foods produced using new technologies could be labelled where there is a lack ofexperience with the use of the technology — the review panel considered that in thesesituations, time limits on regulations would allow them to be reviewed in light ofexperience.

•

For consumer values issues which present minimal or no risk to human health, thepanel suggested that ‘more flexible, participatory and devolved forms of intervention’such as co-regulation or self-regulation should apply (Blewett et al. 2011, pp. 43–44).
Figure 10.1
Originof action

The food labelling hierarchy

Riskmanagement
approach

Government Higher riskintervention

Dominantmode ofintervention

Food safety

Direct, acute, immediate threats to health

Mandatory

Preventative health

Mandatory
Co-regulation

New technologies

Mandatory
with time limits

Consumer values issues

Co-regulation
Self-regulation

Indirect, long-term impacts on healthTechnologies that require pre-approvalsafety assessments of foods, ingredientsIndustry
initiated

Lower risk

Reflecting consumer perceptions andethical views

Source: Blewett et al. (2011).

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REGULATION OF AUSTRALIAN AGRICULTURE

Oversight
Food
Standards
Code

Consumerprotection
lawsRegulation of the food production process
Consumers rarely observe how their food is produced, resulting in information
asymmetries between producers and consumers about production processes. However, themarket may still achieve an efficient level of food safety (that is, the level of food safetythat consumers want and are willing to pay for) based on reputation. Reputation can beeffective because of repeat customers or word of mouth (increasingly via social media) —it creates a strong incentive for sellers to supply safe food (Rama and Harvey 2009).
However, reputation may be insufficient to ensure efficient levels of food safety if thesource of foodborne illnesses cannot be easily identified or if producers do not havesufficient knowledge about food safety risks. In such cases, government regulation may benecessary to ensure minimum food safety practices (including traceability) during the
production process.

The role of technology
Technology can reduce the costs of information exchange and help overcome information
asymmetries between producers and consumers. For example, Choice (2016a) recently
released a mobile phone application called ‘CluckAR’, which allows consumers to learn
about the hen stocking densities of different brands of eggs by pointing their mobile phone
camera at egg cartons. Some free-range egg producers, such as Manning Valley Free
Range Eggs (2016), have also chosen to broadcast footage of their hens ranging outdoors.
This allows consumers to observe a part of the production process to determine if‘free-range’ claims meet their expectations. Greater adoption of such technology may
reduce the need for government involvement in setting regulatory standards.
However, regulation may still be required to ensure that the information provided via
technology is not misleading or deceptive. Free Range Eggs Farms, which supplies eggs
labelled as ‘free-range’ under the brands Ecoeggs, Port Stephens and Field Fresh, wasrecently fined for misleading and deceptive ‘free-range’ claims on websites, Facebook andTwitter (ACCC 2016c).

10.2 Food regulation in Australia
The food regulation system is a co-operative international arrangement between Australia
and New Zealand. All three levels of government in Australia are involved in foodregulation (figure 10.2).
The food regulation system is established through:•an intergovernmental agreement between the Australian, state and territory
governments (the Food Regulation Agreement). This agreement gives effect to thecommitment by all Australian governments to a national approach to food regulation,
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403

and establishes the Australia and New Zealand Ministerial Forum on Food Regulation(FoFR) (DoH 2014)a treaty between Australia and New Zealand, which establishes a system for thedevelopment of joint food standards. The treaty aims to harmonise food standards,
reduce unnecessary barriers to trade, and reduce compliance costs for industry(DoH 2014; FSANZ 2015a).

•

Figure 10.2

Food regulation in Australia
Intergovernmental Food
Regulation Agreement

Agreements

Policy setting andpolicy development

Australia and New Zealand Ministerial Forum on Food
Regulation, including:-Standards
development

Enforcement
and monitoring

Food Regulation Standing Committee
Implementation Sub-Committee

Food Standards Australia New ZealandState and territory
governments-

Consumerprotection

Food Treaty between theAustralian Government and
New Zealand Government

Primary production
legislation
Food Acts

Local
governments

Australian Competition andConsumer Commission

Department ofAgriculture andWater Resources(imports)

State and territory consumer
protection agencies

Food Standards Australia New Zealand (FSANZ), an independent statutory agency, uses
scientific and technical criteria to establish food standards, which form the Food Standards
Code (box 10.1). Requirements in the Code relate to food safety, food labelling, foodadditives and novel foods, among other things. FSANZ is part of the AustralianGovernment’s health portfolio. When setting standards, FSANZ must have regard to thepolicies and guidelines set by the FoFR.
Anyone can make an application to FSANZ to change the Food Standards Code
(FSANZ 2015b). This involves submitting information to FSANZ regarding the purpose of
the application and its costs and benefits, as well as providing supporting information ordata that demonstrate how the changes would enable the achievement of FSANZ’s
objectives (these requirements are outlined in the Food Standards Australia New ZealandAct 1991 (Cwlth)). Applications are considered using FSANZ’s assessment process
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(figure 10.3). After FSANZ has approved or varied a standard, it notifies the FoFR, which
has the power to amend, reject or seek a review of the standard. If the FoFR does not seeka review of FSANZ’s decision, the standard is gazetted and registered as a legislative
instrument.
Box 10.1

The Food Standards CodeThe Food Standards Code (the Code) contains food standards developed by Food Standards
Australia New Zealand, and applies in Australia and New Zealand unless otherwise stated. The
Code is split into four chapters, covering:•standards that apply to all foods — certain information must be provided on productlabels, such as ingredients, date markings, and country of origin (mandatory
country-of-origin labelling applies in Australia only)•

food product standards — contains requirements relating to specific categories of
products, such as cereals; meat, eggs and fish; fruits and vegetables; and dairy products•

food safety standards (Australia only) — sets out food safety requirements, such as
those for food safety programs, food safety practices, and premises and equipment•

primary production standards (Australia only) — contains primary production andprocessing standards for seafood, poultry, meat, dairy products, eggs (and egg products)
and seed sprouts. Part 4.5 also outlines wine production requirements. The standards in thischapter cover issues such as food safety and traceability.

Source: FSANZ (2015d).

Gazetted standards or variations are adopted automatically, by reference and without
amendment, into state and territory food laws (FSANZ 2014). Regulation of food produced
at the farm level is usually covered by state and territory primary production legislation,
while food Acts usually cover processing and sale requirements. Provisions in the foodActs are generally based on those in the Model Food Act developed by a Senior Officers
Working Group and agreed by ministers as part of the Food Regulation Agreement.
Foods imported into Australia must comply with the Food Standards Code. The
Department of Agriculture and Water Resources (DAWR) enforces the Food Standards
Code through the Imported Food Control Act 1992 (Cwlth), and may request that FSANZ
provide risk assessment advice about imported foods (sub. 1). Imported foods must also
meet Australian quarantine requirements (chapter 8), and the labels must comply withrequirements under the Imported Food Inspection Scheme (DAWR 2015f, 2015k).
Consumer law also applies to food products. The ACL is contained within the Competition
and Consumer Act 2010 (Cwlth), which is administered by the ACCC. It prohibits
producers from engaging in misleading or deceptive conduct and making false or
misleading representations. These provisions apply to claims about the nature of foodproducts on labels, packaging or advertising material. States and territories also have some
responsibility for consumer protection.

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Figure 10.3

FSANZ’s process for assessing applications to change theFood Standards CodeApplication received

Administrative assessment

Application accepted

Applicant notified and early bird
public notification

Minor procedure(3 months)

General procedure(9 months)

Major procedure(12 months)

Assessment

Assessment

Assessment
Public notification (callfor submissions)

Draft regulatory
measures developed

Draft regulatory
measures developed

Draft regulatory
measures developed

Applicant andappropriate gov’t
agencies notified

Applicant notified andpublic notification

Applicant notified andpublic notification

Approval

Approval

Approval

FoFR notified

FoFR notified

FoFR notified

Source: FSANZ (2016a).

10.3 Regulation of food labelling
Food labels can help markets work better by providing information to consumers. The
importance of labels to help consumers make informed choices was acknowledged bysome participants. For example, Choice said that:
Consumers rely on labels to enable them to buy food that is safe to consume (use-by-dates,
allergen information), in line with their beliefs (free-range, organic), healthy to eat (ingredientlist, nutrient information panel) and/or locally produced (country of origin labelling).
(sub. 33, p. 1)

Food labels can also increase producers’ competitiveness by allowing them to differentiate
their products.

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Concerns raised in this inquiry about food labelling included that:•country-of-origin labels are confusing to consumers and limit the ability of Australianproducers to differentiate their products•

eggs labelled as ‘free-range’ do not always meet consumers’ expectations about how
free-range eggs should be produced•

mandatory labelling of genetically modified (GM) foods is inappropriate because GM
foods have been assessed to be as safe as non-GM foods•

the requirement for products labelled ‘gluten-free’ to have no detectable gluten isunrealistic in light of advances in technology, and is a barrier to the adoption of
innovations within the food industry.

Country-of-origin labelling (CoOL)
Information about country of origin is important to Australian consumers. According to a
Choice survey of 743 members conducted in 2012:•84 per cent of respondents said it was ‘crucial or very important’ to them to be able toidentify if their food was grown in Australia•

80 per cent said it was ‘crucial or very important’ to be able to identify if their food was
manufactured in Australia (Choice 2015a).

And, based on a survey for Australian Made Campaign Limited, country of origin is
becoming increasingly important to consumers — 55 per cent of consumers surveyed in2013 reported that ‘buying Australian’ had become more important to them in the last 12
months (AMCL 2013). Consumers state that they buy Australian foods to support
Australian farmers and manufacturing employment, and because they perceive Australianproducts to be of higher quality or safer than imports (AMCL 2012; Choice 2015a;
Deloitte 2015).
Some evidence suggests that the country of origin of foods is most important for fresh,
unprocessed or minimally processed foods (Colmar Brunton 2015). Therefore, while aneffective country-of-origin labelling (CoOL) system could increase the competitiveness of
the Australian food sector more broadly, there are likely to be larger benefits for farmbusinesses that produce fresh or minimally processed foods.
The arrangements for CoOL are changing. A new CoOL system commenced on 1 July
2016, but a two year transition period means that these arrangements will not be mandatory
until 1 July 2018 (FSANZ 2016b). Unless businesses choose to adopt the newarrangements before 1 July 2018, they must continue to comply with the current
requirements (box 10.2).

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Box 10.2

The current country-of-origin labelling framework

Under the Food Standards Code, country-of-origin labelling is mandatory for all packaged foods
and most unpackaged foods. Some food is exempt, such as food sold for immediate
consumption (for example, in a restaurant) and food made, packaged and sold on the same
premises (for example, in a bakery). In addition to ensuring that claims are not false or
misleading, the Australian Consumer Law provides ‘safe harbour’ defences for certain claims.

Mandatory country-of-origin labellingStandard 1.2.11 of the Food Standards Code requires food sold in Australia to be labelled with
its country of origin. The kinds of country-of-origin claims that must be made differ according towhether the food is packaged, and whether it consists of fresh fruit or vegetables.
•

For packaged food other than fresh fruit or vegetables, the food must have a statement that
identifies:– the country where the food was made, produced, or grown; or– the country where the food was manufactured or packaged; or– that the food is made from imported ingredients or local and imported ingredients.

•

For packaged fresh fruit and vegetables and unpackaged food (including meat, fruit andvegetables), the food must have a statement that identifies its country of origin, or indicatesthat it is a mix of local and imported foods or a mix of imported foods.

Safe harbour defences
Businesses can be assured that their claims are not false or misleading if they meet certain
criteria outlined in the safe harbour defences under the Australian Consumer Law. There arethree safe harbour defences in relation to country-of-origin claims.
•

The general country-of-origin safe harbour defence covers claims such as ‘made in’,‘Australian made’ and ‘manufactured in’. Goods carrying such claims must have been
substantially transformed in the country of origin being claimed, and 50 per cent or more of
the production or manufacturing costs must have occurred in that country.

•

The ‘produce of’ safe harbour defence requires that each significant component or ingredientof the good originated in the country being claimed, and that all, or virtually all, of the
production process also took place in that country.

•

The ‘Grown in’ safe harbour defence requires that the country being claimed could also be
represented as the country of origin of the goods, or the country that the goods are theproduce of. Each significant ingredient or component of the goods must also have beengrown in that country.

Source: ACCC (2014c).

Confusion about the meaning of country-of-origin claims
Producers can identify a food’s country of origin in any way that satisfies the FoodStandards Code, and that is not false or misleading under the ACL. However, many
producers use phrases that are covered under country-of-origin safe harbour defences(box 10.2), as this provides increased certainty relative to claims that are not covered by a
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REGULATION OF AUSTRALIAN AGRICULTURE

safe harbour defence.
The National Farmers’ Federation (NFF) raised concerns about the way country-of-origin
claims can be made, suggesting that it undermines Australian farmers who seek tocapitalise on their reputation.
… the current Country of Origin Labelling (CoOL) rules allow imports to masquerade as local
produce, through the ‘Made in Australia’ claim, while making it difficult for locally grownproducts to achieve the perceived premium claim of ‘Product of Australia’. … this undermines
Australian farmers, who are seeking to capitalise on their good reputation for animal welfare,quality and above all food safety. (sub 61, p. 27)

Primary Producers SA also said that:
It is still a major issue that shoppers wanting to support Australian and more local products findit hard to identify the true local product. … we need a system where consumers wishing tosupport local producers have trust and ability to buy local produce without having to interrogate
every label. (sub. 41, p. 5)

In the context of honey and CoOL, Herta Klein said that:
Honey is a commodity and not a product of elaborate manufacture so when there is only
Australia honey in packaging I want to see ‘Product of Australia’ written on the label and not‘made in’. Consumers want to be able to shop with confidence and know where their foodcomes from. (sub. 38, p. 6)

Claims that consumers are confused by, and have difficulty interpreting, country-of-origin
labels are supported by the findings of a number of reviews (Blewett et al. 2011;
FPISG 2012; HoRSCAI 2014; SSCAFPS 2012) and recent consumer research.
•

Choice (2015a) found that only 12 per cent of survey respondents were able to interpretthe phrase ‘made in Australia’ in accordance with its definition under the ACL safe
harbour defence.

•

Colmar Brunton (2015) found that 30 per cent of Australian consumers interpreted thephrase ‘made in Australia’ to mean that all the ingredients were from Australia. A
similar result (32 per cent) was found by Choice (2015a).

As the New Zealand Commerce Commission explained (in relation to New Zealand origin
claims), interpretations of the phrase ‘made in’ varies between different consumers fordifferent products because:
Whether a product is New Zealand made is a question of fact and degree. The relevant
considerations will vary depending on the nature of the product and what consumers may
understand about it. It is not possible to set out a precise formula which will prescribe exactly
which products can be called ‘New Zealand made’. (2015)

Confusion about country-of-origin claims may therefore arise because many consumers
interpret ‘made in’ as referring to the origin of the ingredients, even though this is notnecessarily the case under the current rules.

FOOD REGULATION409

A new CoOL system
In response to concerns about consumer confusion, in March 2016, the AustralianGovernment announced plans for a new CoOL framework (box 10.3). The objective of the
new system is to increase clarity for consumers about the origin of their food, without
imposing excessive costs on industry. Among other things, the new system requires
products labelled ‘made in Australia’ to identify the proportion of Australian ingredients. It
also removes the 50 per cent production cost test from the general country-of-origin safe
harbour defence.
Box 10.3

The new country-of-origin labelling framework

In March 2016, the Australian and state and territory consumer affairs ministers agreed to
implement a new country-of-origin (CoOL) system. Under the new system, CoOL is regulated
only through a mandatory information standard under the Australian Consumer Law. The new
system commenced in July 2016, and includes:•

new country-of-origin labels for priority foods (foods for which country-of-origin information
has been found to be most valuable to consumers, such as fruit and vegetables, meat andmeat products, fish and fish products, and dairy products)•

removal of the 50 per cent production cost test from the general country-of-origin safe
harbour defence under the Australian Consumer Law. Non-food producers will also beaffected by this change as safe harbour defences are available to all producers who makecountry-of-origin claims•

clearer country-of-origin labels on imported priority foods•

voluntary industry provision of country-of-origin information through digital platforms•

an education campaign (funded by government) to communicate the new arrangements to
consumers and businesses.

The cornerstone of the new system is that products labelled ‘made in Australia’ will indicate theminimum proportion of Australian ingredients. Products that are packed in Australia will also
have a statement regarding the origin of the ingredients.

Producers can continue to make ‘Product of Australia’ claims, and in most cases, such claims
would be equivalent to the claim that a product is ‘made in Australia from 100% Australianingredients.
Sources: DIIS (2015a, 2015b, 2015c).

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Consumer group Choice (2016b) welcomed the changes, saying that the new system was
useful for consumers who want to know how much of a product’s ingredients were grownlocally. However, it noted that the system would be less useful to consumers who want toknow the origin of imported ingredients in products labelled ‘Australian made’.
Humane Society International (sub. DR253, p. 12) also said that ‘one downfall of the new
system is that it leaves it up to the manufacturers to voluntarily declare the origin of a
product’s main ingredient’. Under the new system, producers are encouraged to provide
additional information such as the origin of key ingredients, but this will not be arequirement (DIIS 2015c).
Producers generally acknowledged that the new system provides consumers with clearer
information, but they were concerned about the costs of the reforms, including
administrative and labelling costs. Some producers supported the changes being limited to‘priority foods’ (foods for which country-of-origin information was found to be mostvaluable to consumers) to minimise the cost burden, but others argued that it could cause
consumers to be confused about why some products had the new labels and others did not(DIIS 2016). Under a dual system, businesses that produce both priority and non-priority
foods could also face increased costs.
Voice of Horticulture (sub. 42) was supportive of the objective of improving the CoOL
system, and welcomed the requirement to disclose the proportion of Australian ingredients.
However, it did not support the use of the kangaroo logo where there are no Australianingredients (that is, where the product has been manufactured in Australia from wholly
imported ingredients), as it believed consumers would rely on the kangaroo logo as anindication that the product contains Australian ingredients.
Costs and benefits of the new system
Compared to the current system, the new system will enhance consumers’ ability toidentify and purchase Australian products where they have a preference to do so. The
regulatory impact statement (RIS) for the new system identified the benefits to consumers
as:•the ability to purchase products that align with their preferences (and to avoid those that
do not)•knowing a food’s country of origin, even if it does not change behaviour•

time savings from better visual elements of labels (DIIS 2016).

These benefits are difficult to quantify, as they depend on the value of country-of-origin
information to different consumers. However, the Department of Industry, Innovation andScience (2016) calculated that the average time saving required per consumer to offset net

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costs to businesses in the food sector would be 11 seconds per shopping trip. 41 The RIS
stated that this is likely to be exceeded, as consumers currently spend approximately
4 minutes and 48 seconds of a 60-minute shopping trip searching for country-of-origin
information.
If consumers prefer foods with Australian ingredients and are better able to identify thosefoods, businesses that produce those foods will benefit from the new arrangements.
Businesses that make a country-of-origin claim (including non-food businesses) will also
face reduced compliance costs due to the removal of the production cost test from thegeneral country-of-origin safe harbour defence. This was estimated to be almost$550 million (in present value terms) over 20 years (DIIS 2016).
The largest costs imposed by the new system are administrative and labelling costs tobusinesses. Some businesses do not currently keep records of the percentage of Australianingredients in their products (which can change seasonally or for other reasons), and willneed to put in place new systems to keep this information. This may require updating
information technology and communications systems. Administrative costs were estimatedto be $241 million over 20 years (DIIS 2016).
Businesses will also incur costs to change their labels to comply with the newrequirements. These can be divided into an initial cost and ongoing costs, which can occur
if there is seasonal variation in the proportion of Australian ingredients. Labelling costs
will be mitigated by a 24-month transition period that aims to allow businesses to updatelabels within existing processes and labelling cycles. Where there is seasonal variation,businesses will also be allowed to make a statement about the average proportion ofAustralian ingredients as long as more specific information is provided through anothersource such as a website.
Labelling costs over 20 years were estimated to be $228 million for all packaged stock
keeping units 42 and $3 million for all unpackaged stock keeping units (DIIS 2016).
Overall, the Department of Industry, Innovation and Science estimated that the new system
will deliver modest net benefits to the Australian community of $66 million over 20 years(relative to the status quo). This will be achieved primarily through a reduction incompliance costs for producers due to the removal of the 50 per cent production cost test.

41 The RIS assumed that there were 8.8 million shoppers in Australia who went shopping once a week, andwhose leisure time was valued at $29 per hour.
42 Stock keeping units refer to each separate item in a product line. For example, each combination of fruit
juice flavour and package size would be regarded as one stock keeping unit in a range of fruit juice
products.

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Would a voluntary system deliver higher net benefits?
The new CoOL system enhances consumers’ ability to make effective purchasing
decisions relative to the previous system. However, it is unclear whether the new
information standard under the ACL would deliver higher net benefits as a mandatory or
voluntary standard.
A voluntary standard would allow producers to weigh up the costs and benefits of making
a country-of-origin claim, and to do so if they perceive that there is a net benefit. By
contrast, a mandatory standard imposes costs on all producers. This could result in lower
net benefits to the Australian community, because not all consumers’ purchasing decisions
are driven primarily by country of origin (Colmar Brunton 2015).
Many inquiry participants supported a mandatory CoOL system43. For example, Choicesaid that:Food labels provide useful information for consumers and current mandatory information
should be retained … Country of origin labelling is a consistent priority for consumers.
(sub 33, pp. 1–2)

The NFF also said that it:… welcomed the proposed [CoOL] framework, including the mandatory labelling, as it will
provide consumers with this understanding of where their food comes from. (sub 61, p. 27)

The underlying rationale for a mandatory system is that, unless food producers makecountry-of-origin information available, only they have this information. This information
asymmetry can result in consumers not being able to make purchasing decisions in linewith their preferences (DIIS 2016). However, if consumers have a preference for products
from certain countries, businesses selling products from those countries have an incentive
to disclose country-of-origin information, and are likely to do so voluntarily (provided thebenefits exceed the costs). Consumers would then be able to assume that unlabelled
products are likely to be from less-favoured origins. A mandatory system is not necessarily
required to achieve the objective of ‘[providing] consumers with information so they canmake informed purchasing decisions in line with their personal preferences’ (DIIS 2015b,
p. 10).
Under a mandatory scheme, products that would otherwise be unlabelled due tounfavourable origins would be required to state their country of origin. This increases theamount of information available to consumers, but does not necessarily enable more
effective purchasing decisions — consumers who place a high value on country of origin
would already be relying on voluntary claims made by producers.

43 Inquiry participants supporting a mandatory CoOL system included: APL (sub. DR282); Australia Food

Sovereignty Alliance (sub. DR211); Ausveg (sub. DR193); DAWR (sub. DR183); DoH (sub. 261); NFF(sub. DR216); University of Southern Queensland (sub. DR184); VFF (sub. DR189); VoH (sub. DR232).

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Some participants considered that requiring all products to state their country of origin
would provide Australian producers with an advantage in the marketplace. For example,
the Australian Food Sovereignty Alliance said that:
Currently the mandatory country of origin labelling (CoOL) provides some, although limited,
protection for Australian farmers, by ensuring that the consumer can make a conscious decision
to support Australian farmers. (sub. DR211, p. 6)

Similarly, the VFF said that:
The intent of the regulation is to support Australian business and farming through themechanism of informing consumers; informing consumers is not the lone intent of this policy… (sub. DR189, p. 30)

The purpose of CoOL is to enable consumers to buy products from their preferredcountries, regardless of which countries they prefer, not to support Australian businesses.
CoOL regulations should not be used to ‘protect’ or ‘support’ any specific group of
producers, including Australian businesses, at the expense of others.
The fact that there are voluntary CoOL schemes in Australia operating alongside current
mandatory requirements indicates that producers are not prevented from making
country-of-origin claims when there are sufficient incentives to do so (box 10.4).
Box 10.4

Examples of voluntary country-of-origin labelling schemes

Australian Made Campaign
The Australian Made Campaign involves the use of a logo depicting a green triangle with ayellow kangaroo. The use of the logo is administered by Australian Made Campaign Limited, a
not-for-profit company under contract from the Australian Government. The logo is acertification trademark that can only be used if the code of practice is met.

Australian PorkMark
The Australian PorkMark identifies pork products that contain exclusively Australian pork with apink square. The scheme is administered by Australian Pork Limited.

Buy West Eat BestThe Buy West Eat Best program is managed by the Western Australian Department ofAgriculture and Food and allows consumers to identify food that has been grown, farmed,
fished and produced in Western Australia. It is a state-of-origin rather than a country-of-origin
labelling scheme.
Sources: AMCL (2016); APL (2009); WA Department of Agriculture and Food (2016).

In New Zealand, although CoOL is not mandatory, many producers choose to participate
in the Buy NZ Made Campaign. Similarly, in the United Kingdom, although only some
imported products are required to have CoOL, many producers choose to take part in the
UK Red Tractor Scheme. Australian Dairy Farmers (sub. 63) noted that where
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REGULATION OF AUSTRALIAN AGRICULTURE

industry-driven voluntary labelling schemes are in place, mandated arrangements are
difficult to justify.
Where does that leave us?
In principle, the Commission supports a voluntary approach that allows each producer toweigh up the costs and benefits of making a country-of-origin claim. As the Institute of
Public Affairs said:
A voluntary system would allow the value of information to emerge through the market
process, as consumers reveal their willingness to pay and preferences toward origin labelling,
and producers respond to this information accordingly. (sub. DR164, p. 11)

Under a voluntary system, the claims made by producers would still need to be accurate
and presented in a way that is easily understood. To that end, the new information standard
is likely to increase clarity for consumers. Continued enforcement of the ACL will also
ensure that consumers are not misled by country-of-origin claims.
However, in addition to identifying products that satisfy their preferences, some consumers
may want to know the origins of products that they view less favourably, even if thiswould not change their ultimate purchasing decision. Under a voluntary standard, thiswould not be possible, as products of less-favoured origins are likely to be identified by theabsence of a claim rather than an explicit disclosure of country of origin. Consumers may
thus incur costs in searching for the origin of unlabelled products through, for example,
websites or supplier details printed on food labels. The costs of obtaining information inthis way could be larger than the costs of requiring producers to provide the information.
The RIS for the recent CoOL reforms did not assess the costs and benefits of a voluntarystandard. Therefore, it is unclear whether, and to what extent, consumers would search for
information that may not be directly relevant to their purchasing decisions. The proportionof consumers who would search for additional information is also a relevant factor, as amandatory standard could increase prices, and all consumers (rather than only those who
desire more information) would bear the cost of more accessible country-of-origin
information.
As part of any future reforms to the CoOL framework, it is essential that RISs assess thecosts and benefits of voluntary labelling. This will establish whether voluntary labelling
results in higher net benefits to the Australian community compared to mandatorylabelling.

Free-range egg labelling
In recent years, a segment of Australian consumers have increasingly favoured purchasing‘free-range’ eggs over ‘cage’ or ‘barn-laid’ eggs. The Australian Egg Corporation Limited
reported in 2005 that 14.5 per cent of eggs sold in the grocery retail market were free-range(AECL 2005). By 2014, this had increased to 39 per cent (AECL 2014).
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Some consumers are willing to pay a premium for free-range eggs. The average price forfree-range eggs is almost double that of cage eggs (Choice 2015b). However, evidence alsosuggests that some consumers are price-sensitive or are willing to trade off higher hen
welfare for lower prices (Julie Dang & Associates 2012; Quantum Market Research 2015).
Consumers’ preferences for free-range eggs are largely driven by animal welfare concerns,
but are also influenced by other considerations such as taste and health (Choice 2015c;
Julie Dang & Associates 2012). When consumers are asked about the conditions underwhich they expect free-range eggs to be produced, they most often identify the ability ofchickens to roam about freely and to access the outdoors (Choice 2012, 2014; Julie Dang
& Associates 2012).
However, many consumers are unsure if eggs labelled as ‘free-range’ are being produced
according to their expectations.
•

Choice (2014) found that 28 per cent of free-range egg buyers do not have confidence
that the eggs they buy are produced under conditions they expect.

•

Julie Dang & Associates (2012) found that 67 per cent of consumers are not always
convinced that they are getting what they expect when they buy ‘free-range’ or‘organic’ eggs.

The difference between eggs from free-range, barn-laid or cage systems cannot be
observed by consumers, so they must rely on labels for this information. As the Treasury
said, ‘it is relatively easy to mislead consumers and there is a financial incentive for
producers to do so’ (Treasury 2015b, p. 5). Choice also said that consumers were being‘ripped off’ by some producers’ claims that their eggs were free-range (2015b, p. 3).
Consumers bear costs (detriment) where egg production methods that they value, and forwhich they have paid a higher price, have not been used.
Producers also bear costs where they have made investments in free-range production
methods that align with consumers’ preferences, but are unable to differentiate theirproducts or charge a price premium over others that do not meet these same criteria. Some
producers have sought to assure consumers of the credibility of their free-range claims byparticipating in voluntary free-range certification schemes (table 10.1). However, thebenefits to producers and consumers of certification schemes can be limited by thepresence of numerous schemes with different standards.
Animals Australia (sub. 53) claimed that the large number of different schemes
undermines consumer choice and information and creates confusion. Also, the standards
under certification schemes do not always accord with consumers’ expectations. For
example, while some certification schemes have a maximum outdoor stocking density of
10 000 hens per hectare 44, Choice (2014) reported that only 2 per cent of free-range egg
consumers believe this to be an acceptable stocking density.
44 10 000 hens per hectare is equivalent to an average of one hen per square metre.

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Table 10.1

Voluntary certification schemes for free-range eggs
Selected standards under different schemes
Australian
Certified
Organic

Free Range Free Range
HumaneEgg & Poultry Farmers
Australia Ltd. Assoc. Inc. Vic Choice

RSPCA
Coles
(Outdoors)a Free-Range

Maximum outdoor 1 500 or
stocking density
2 500b(birds/ha)
Do hens haveYes
access to pasture?

Unknown

750

1 500

1 500 or2 500b

10 000

Yes

Yes

Yes

Noc

No

Is beak trimmingprohibited?

Yes

No

Yes

Yes

No

No

Is toe trimmingprohibited?

Yes

Yes

Yes

Yes

Yes

No

a Certification by the RSPCA does not necessarily mean that eggs are free-range. The RSPCA certifies
both eggs produced using indoor systems (barn-laid) and outdoor systems (free-range). b A maximum of1500 birds/ha applies to fixed outdoor areas and a maximum of 2500 birds/ha applies to outdoor systems
with rotational range management strategies in place. c Hens do not have to have access to pasture, butthey must still have unrestricted daylight access to the outdoors.
Sources: Australian Organic (2013);
International (2015, nd); RSPCA (2015).

FREPA(2015);

FRFA

Inc.

(2016);

HumaneSociety

What standards do consumers expect for free-range egg production?
While consumers expect free-range eggs to be produced by hens that are not confined incages, there is conflicting evidence about the specific standards and practices that they
have in mind. Julie Dang & Associates (2012) found that 26 per cent of consumers
nominated 8000 to 12 000 hens per hectare as their preferred hen stocking density forfree-range eggs, which differs to the results obtained by Choice (2014) (1500 hens per
hectare). This may be partly due to research methodology — the Choice survey presented
consumers with a text menu of options, while Julie Dang & Associates provided a
computerised diagram where the number of hens on the paddock changed according toconsumers’ selections on a sliding scale (the scale was initially set at the maximum of
more than 20 000 hens per hectare, but consumers were not given the stocking density ateach point along the scale). Julie Dang & Associates (2012) noted that its result is higher
than might be expected from qualitative feedback.
The NSW Farmers’ Association (2015) also reported that a survey it commissioned
showed almost three-quarters of consumers expected ‘free-range’ eggs to come from henswith a stocking density of 10 000 per hectare or more. However, closer examination of theresearch reveals that consumers were asked about what they thought current standards
were, rather than the stocking density they would expect for ‘true’ free-range eggs
(Quantum Market Research 2015).
Another factor that complicates an assessment of consumers’ expectations is that many are
unfamiliar with farming and animal husbandry practices. This is evidenced by the
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proportion of consumers in surveys who respond that they do not know what the standards
should be. For example:•

41 per cent of respondents to a Choice survey said that they did not know what areasonable maximum outdoor stocking density should be for hens that lay free-range
eggs (Choice 2015c). After being given information about stocking densities,
20 per cent were still unsure.

•Julie Dang & Associates (2012) also found that 15 per cent of respondents did notknow if hens should be debeaked — this was after it was explained that beak treatment
is used to control problems of aggressive behaviour.

Consumers’ limited understanding of farming practices can also result in reliance on asmall number of indicators as a proxy for overall animal welfare. For example, the NSW
Young Lawyers Animal Law Committee (sub. DR284) said that consumers are notnecessarily interested in stocking densities per se, but rely on stocking density as anindicator of hen welfare more generally.
In addition, if consumers are unsure about what standards they consider to be appropriate,
they may be easily influenced by information provided by producer or animal welfare
groups, or by the way questions are framed in consumer surveys. For example, consumers
may be led to believe that free-range eggs always embody a higher level of animal welfare,although this is not necessarily the case (chapter 5). As Choice explained, standards forfree-range eggs:… shouldn’t be predominantly based on consumer research, but rather on a broader body of
relevant independent, scientific research in conjunction with consumer research, and with
consultation with all stakeholder groups. (2014)

Current regulations that affect free-range egg labelling
There is currently no nation-wide standard for when eggs can be labelled as free-range,
although in March 2016 the Australian and state and territory consumer affairs ministers
announced a national free-range egg labelling standard (discussed below). The newstandard is expected to be implemented in 2017 (Treasury, pers. comm., 20 June 2016).
Free-range egg labelling is primarily regulated through the ACL, where producers areprohibited from making false and misleading claims. Therefore, producers must consider
whether their ‘free-range’ claims could be deemed false or misleading. This applies
whether or not they participate in a voluntary certification scheme. The ACCC hasprosecuted egg producers on several occasions for making false or misleading ‘free-range’
claims. 45
45 See, for example, ACCC v Pirovic Enterprises Pty Ltd (No 2) [2014] FCA 1028, ACCC v RL Adams Pty

Ltd [2015] FCA 1016, ACCC v Derodi Pty Ltd [2016] FCA 365 and ACCC v Snowdale Holdings Pty Ltd[2016] FCA 541.

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Some states and territories have also introduced egg labelling regulations.
•

In the ACT, different types of eggs must be displayed separately at retail outlets, anddisplays must be labelled with the production method used. The legislation also
provides definitions for ‘cage’, ‘barn’, ‘aviary’ and ‘free-range’ eggs.

•

In South Australia, the Government recently announced a voluntary industry code forfree-range eggs to help consumers purchase free-range eggs with confidence (SAAttorney-General’s Department 2013). Producers that adhere to the code can display acertified trademark logo (SA Attorney-General’s Department 2016).

Animal welfare arrangements can also affect how eggs are labelled — a definition of afree-range production system under animal welfare regulations can be used as a basis foran egg labelling standard. Under the Model Code of Practice for the welfare of poultry,
free-range production systems are defined as having a maximum stocking density of1500 hens per hectare, unless range rotation practices are used. Some have interpreted thisto mean that if these conditions are met, the Model Code does not specify a maximum
free-range stocking density (Treasury 2016b).
The Model Code is voluntary in most states. Queensland, which has adopted the Model
Code into its animal welfare regulations, allows up to 10 000 hens per hectare in free-range
production systems. The Model Code is currently being converted into national standards
and guidelines, and this process will result in the development of mandatory standards andvoluntary guidelines to be implemented by states and territories (chapter 5).
A national free-range egg labelling standard
In March 2016, in response to consumer confusion, consumer affairs ministers from theAustralian and state and territory governments agreed to a national standard for free-range
egg labelling (box 10.5). The new arrangements include an information standard under the
ACL that allows a maximum outdoor stocking density of 10 000 hens per hectare if afree-range claim is made, and requires disclosure of hen stocking density.
Some producers welcomed the new standard — the NFF and Victorian Farmers’
Federation said that a national standard would enable consumers to understand how theirfree-range eggs were produced, and help them make informed choices about their food
(NFF 2016a; VFF 2016a). A spokesman for Egg Farmers Australia said that the newstandard reflected a common sense approach backed by science (Kotsios 2016).
However, some producers with lower stocking densities were critical of the standard.
Freeranger Eggs, whose flock has a stocking density of less than 750 hens per hectare(approximately one hen per 13.3 square metres), said that the new standard would make iteven more complex for consumers to make an informed purchasing decision, and that
‘Ministers for Consumer Affairs were nobbled by the big corporations’ (Freeranger
Eggs 2016). Smaller producers have begun to label their eggs as ‘pastured’ to distinguishthemselves from more intensive producers who use ‘free-range’ labels (Soldani 2016).
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Box 10.5

New arrangements for free-range egg labelling

In March 2016, the Australian and state and territory consumer affairs ministers agreed to newarrangements for free-range egg labelling. The new arrangements comprise two elements: aninformation standard and a safe harbour defence.
The information standard provides a definition for the term ‘free-range’ and allows a maximum
outdoor stocking density of 10 000 hens per hectare. It also requires producers who claim that
their eggs are free-range to prominently disclose the outdoor hen stocking density on the label.
While the exact wording of the definition will be finalised according to legal advice during thedrafting of the legislative instrument, the following has been proposed.
Free range eggs must come from laying hens that had meaningful and regular access to an outdoor
range where the hens were free to roam and forage during daylight hours except on days when on the
open ranges such things as weather conditions endangered the safety or health of the laying hens, orpredators were present, or the laying hens were being medicated. (Treasury 2016b, p. 16)

Compliance with the requirements above provides producers with a safe harbour defence
against allegations that they have engaged in false and misleading conduct.
Source: Treasury (2016b).

Animal welfare organisations and consumer and law groups also expressed disappointment
at the new standard. Humane Society International (sub. DR253) and the NSW Young
Lawyers Animal Law Committee (sub. DR284) said the new standard does not align with
consumers’ expectations. The RSPCA said that the decision ‘[put] the interests of big
business ahead of consumers, with hen welfare coming a distant third’, and that the newstandard ‘failed to provide the animal welfare assurances that consumers were seeking’(RSPCA 2016a). It is calling for more prescriptive standards in the interests of animal
welfare (RSPCA 2016b).
Choice was concerned that consumer affairs ministers were ‘locking in’ misleading egg
labels, and said that:… eggs which come from hens that don’t go outside and have high stocking densities don’t
meet consumer expectations, and don’t deserve a ‘free-range’ label. (2016c)

It urged consumers to boycott free-range eggs that had been produced under conditions
that did not meet the Model Code.
The ACCC (sub. DR121) considered that the recent judgment of the Federal Court in
ACCC v Snowdale Holdings Pty Ltd [2016] FCA 541 provides clear guidance on wheneggs can be labelled as free-range.
The costs and benefits of the new arrangements
The new arrangements will make it easier for consumers to purchase eggs that align with
their expectations. It gives consumers confidence that free-range eggs meet a prescribedminimum standard, and that this is consistent across different producers. The benefit to420

REGULATION OF AUSTRALIAN AGRICULTURE

consumers can be measured in terms of their willingness to pay — Choice (2015c) foundthat most consumers say that they are willing to pay for the assurance that eggs labelled‘free-range’ meet their expectations (figure 10.4).46 While the new definition of‘free-range’ does not appear to meet all consumers’ expectations (as discussed above),consumers benefit from being able to compare the stocking densities of different free-range
eggs.
Figure 10.4

How much more will consumers pay for free-range eggs?a

Not prepared to pay more for free-range eggs
compared to non-free-range eggs

19%

Less than $1 per dozen

19%$1 more per dozen

29%$2 more per dozen

18%$3 more per dozen

8%$4 more per dozen

3%$5 more per dozen

3%

a Survey respondents were asked the question ‘if a mandatory national standard for free-range eggs wasin place which meets consumers' expectations of free-range, how much more would you be willing to pay
for free-range eggs compared to non-free-range eggs?’.
Source: Choice (2015c).

Producers benefit from the clarity provided by the information standard and from the legal
protection afforded by the safe harbour defence. An information standard decreases therisk of the definition of free-range being subject to regular change in response to court
judgments, and allows producers to make investments in production infrastructure withconfidence. It should reduce the time producers spend monitoring developments in caselaw, and decrease the time producers spend on monitoring and maintaining compliance.
Producers also face costs to understand the new arrangements (estimated to take 24 hours)
and to revise labels to meet the new requirements. The RIS conducted by the Treasury
46 While surveys such as that conducted by Choice can provide useful information, these results only
indicate consumers’ stated willingness to pay, which is not necessarily the same as what they would
actually pay. Revealed preference is the true measure of willingness to pay, and as outlined in chapter 5,
consumers’ stated willingness to pay is not always matched by actual behaviour.

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estimated upfront compliance costs to businesses of $4.9 million, which are expected to beoffset by annual compliance savings of $0.7 million. Over ten years, there is estimated to
be an average annual compliance saving of $0.2 million (Treasury 2016b).
Standards should also be based on scientific evidence
Although the reforms are about increasing consumer confidence and certainty regarding
egg labelling rather than to prescribe certain animal welfare standards (Treasury 2015b),
production and labelling standards are inextricably linked. Poultry welfare outcomes areaffected by the production system used and welfare is one of the key reasons why
consumers purchase free-range eggs. As such, the standards for free-range egg labellingshould be based on scientific evidence about hen welfare and egg production. Thisevidence should be balanced against consumer and community expectations about what is
an acceptable level of welfare, as well as the economic costs associated with achieving
these outcomes.
There should also be consistency between animal welfare standards and egg labellingstandards. As such, there may be a need to revise the free-range egg labelling standard
once the Model Code of Practice for poultry has been converted into national standards andguidelines (chapter 5). Animals Australia (sub. DR268) and the Animal Law
Institute (sub. DR213) supported the alignment of labelling and production regulations.

Mandatory labelling of genetically modified foods
Under the Food Standards Code, GM foods, ingredients, additives or processing aids that
contain novel DNA or protein are required to be labelled with the words ‘geneticallymodified’ (FSANZ 2013a). Labelling is also required when the genetic modification
results in altered characteristics, such as increased oleic acid content in soybeans(FSANZ 2013a). Foods which are derived from GM crops but which do not contain novel
DNA or protein and do not have altered characteristics, such as some canola oils, are notrequired to be labelled.
The purpose of mandatory GM labelling in Australia is to enable consumers to makeinformed choices about the food they buy, not to protect consumers against unsafe foods(FSANZ 2013a). This is consistent with the purpose of GM labelling internationally(box 10.6) As discussed in chapter 6, Australia’s robust gene technology regulatory
framework requires that GM organisms and food are assessed for their impact on humanhealth and safety and the environment before they are approved. FSANZ has declared,
based on a rigorous assessment process that considers credible scientific evidence, thatapproved GM foods are as safe and nutritious as similar conventional foods. The
Commission also heard that GM foods can be safer than conventional or organic produce(Professor Mike Jones, sub. DR141).

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Box 10.6

International approaches to GM labelling•

In the European Union, foods must be labelled if they contain genetically modified (GM)ingredients or if they are produced from GM crops, even if no GM material is present.

•

In the United States, laws were passed in July 2016 that will require foods with GM
ingredients to be labelled. Producers will have the option of informing consumers of GM
ingredients through a QR code, which requires a smartphone to read. The US Department ofAgriculture will have two years to establish a national mandatory disclosure standard forbioengineered food.

•Some countries, such as Singapore and Canada do not require GM foods to be labelled.

Sources: Addady (2016); European Commission (2003); GMA (2016); Rifai (2016).

Some biotechnology industry participants submitted that the requirement to label GM
foods is invalid, given that they have been assessed by regulators to be no less safe thanconventional (non-GM) foods. For example, AusBiotech said that it:[B]elieves that FSANZ’s approach to the labelling of GM foods is at odds with its otherwise
best-practice, evidence-based approach to food-safety regulation. (sub 20, p. 10)

A number of participants also argued that mandatory labelling requirements implied that
GM foods were unsafe and reinforced misperceptions.
FSANZ requires labelling of genetically modified organisms in such a way as to confer, in the
consumer’s mind, a ‘danger warning’ on the product. (AFGC, sub. 28, p. 16)
Mandatory labelling for non-health and safety reasons can imply a regulatory concern where
none exists and can reinforce misconceptions in the community. (CropLife, sub. 14, p. 12)
AusBiotech members suggest that market acceptance has been negatively influenced by poorly
supported, mandatory-labelling requirements and a public perception that if GM products
require special labelling and are banned in some states then there must be uncertainty regarding
the safety of these foods. (AusBiotech, sub. 20, p. 5)

It is unclear whether mandatory labelling reinforces misperceptions about GM foods(box 10.7).
Some defended the need for mandatory GM labelling on the basis that it allows consumers
to choose non-GM foods that they believe to be safer or healthier. For example, in its
submission to the Blewett review, Madge Australia said that:
Consumers are expected to choose to eat healthily, and are assumed to have the choice to eat
non-GM rather than GM foods if they desire. However, consumers cannot make thosechoices unless they are given adequate information [sic], and food labelling is an importantpart of that. (2010, p. 17)

The Commission also received a large number of personal views in support of mandatorylabelling of GM foods (box 10.8). Many participants appeared to be under the false
impression that GM foods are unhealthy or unsafe, and supported mandatory labelling on

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the basis that it allowed them to avoid these foods. There appears to be a real disconnect
between the credible scientific evidence and the beliefs of some consumers (chapter 6).
Box 10.7

Does mandatory GM labelling imply foods are unsafe?

•

Lusk and Rozan (2008) found that US consumers who believe that the government has amandatory labelling policy for GM foods are more likely to believe that GM foods are unsafe
compared to those who believe that no such policy is in place. However, it is unclear if thisrelationship is causal (Costanigro and Lusk 2014).

•

Costanigro and Lusk (2014) found that the signalling effects of GM labels (the extent towhich the existence of a label itself influences views about food safety) are likely to be small.
However, this research did not differentiate between the effect of the mere presence of alabel and the effect of a label required by government, which may be larger. At the sametime, it may be difficult for consumers to determine from the label whether it was required bygovernment.

•

Tegene et al. (2003) found that consumers’ demand for GM foods depended on the sourceof the information they received (for example, whether the information was from abiotechnology company or environmental organisation), but they did not test if demand wasaffected by the knowledge that labels were mandated by government.

Box 10.8

Some personal responses and views — GM labelling

I want all GM foods to be labelled because I'm not convinced any GM foods are safe.
I want all GM foods to be labelled because most members of my family have food intolerances orserious compromised health problems. And because consumers have a democratic right to know what
they are eating.
I want all GM foods to be labelled so I can avoid buying GM foods. I don’t support corporations
controlling the food system. Farmers have the right to remain independent, GM free and not be
contaminated with GM.
I want food that contains gmos to be labelled as containing them.
I do not trust the claims that they are safe. I have never seen articles published in refereed sciencejournals that attest to the safety of those products.
I do not want to consume them until scientific safety tests are readily available to the general public.
I want all GM foods to be labelled because the people have the right to know what they are buying andwhat they are putting in their bodies.
… legislate Federally for mandatory labelling. STOP POISONING US. We are already forced to use
Fluoridated, chemical laden water.
I want all GM foods to be labelled because information on food labels allows me to make an informed
purchase. I choose not to eat GM products as I don't believe that we have sufficient evidence toascertain their safety.

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Assessing the need for mandatory GM labelling
GM labelling is a consumer value issue rather than a food safety issue, and, as with otherconsumer values (such as country of origin and ‘free-range’), the aim of ensuringconsumers have information is not a sufficient rationale for mandatory labelling. Where
consumers prefer to purchase GM-free foods (for example, if they believe that genetechnology is unethical, unsustainable or unsafe), producers have an incentive tovoluntarily label their products as ‘GM-free’. Many Australian producers do make suchclaims (GM-Free Australia Alliance 2015), which demonstrates that the market is able torespond to consumers’ preferences where the benefits of doing so outweigh the costs.
In addition, while many consumers state that they want GM labelling on foods(FSANZ 2003), some research has found that GM status is often not a high priority inconsumers’ purchasing decisions (FSANZ 2003, 2008; WA DAF 2011). This indicates thatthe benefits to consumers of mandatory GM labelling are not likely to be large.
Mandatory GM labelling could also reduce consumer choice. Research suggests that when
governments require GM labelling, producers face an incentive to swap GM ingredientsfor non-GM ingredients because of the lack of significant profit incentives and low
expected market share for GM products (Carter and Gruère 2003). If this is the case, thenumber of products available with GM ingredients at the retail level would decrease, which
in turn would mean less product diversity and choice for consumers. Carter and Gruère(2003) suggest that this explains why, in countries with mandatory labelling such as
Australia, New Zealand and Japan, there are few products at the retail level containing GM
ingredients.
Where does that leave us?
While some consumers may prefer not to purchase GM foods based on beliefs about healthand safety, it is difficult to justify a mandatory labelling regime on the basis of providing
information to address these concerns. Approved GM foods have been assessed byregulators to be as safe as conventional foods, and labelling requirements should align withthese regulatory assessments. Governments have a responsibility to set policy andregulations based on credible scientific evidence. Community concerns about the healthand safety of GM foods would be better addressed by using communication strategies toincrease public understanding about the risks and benefits of GM foods and the regulatory
processes that are in place to protect the community (chapter 6).

RECOMMENDATION 10.1

The Australia and New Zealand Ministerial Forum on Food Regulation should amend
its policy guidelines to make labelling of genetically modified foods voluntary, andFood Standards Australia New Zealand should remove the requirement in the FoodStandards Code to label genetically modified foods.

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Gluten-free labelling
Gluten-free labels enable consumers who have coeliac disease, a non-coeliac gluten
sensitivity 47 or wheat allergy to easily identify foods that meet their dietary requirements.
Under the Foods Standards Code, products labelled as ‘gluten-free’ must not contain any:•detectable gluten•

oats or oat products•

cereals containing gluten that have been malted, or products of such cereals.

This differs to the standard under the Codex Alimentarius 48, where gluten-free foods canhave gluten levels of up to 20 parts per million (ppm) 49 (FAO and WHO 2008). The
United States and European Union have adopted the Codex approach (European
Commission 2009; US Food and Drug Administration 2015b).
Australia’s regulations mean that whether or not a product can be labelled ‘gluten-free’
depends in part on the state of gluten-detection technology. In 2000, when the current
standards were put in place, the limit of detection was 30 ppm. By 2010, this had decreased
to 3 ppm (Price 2010). As a result, some foods that were previously labelled gluten-free
can no longer be labelled as such.
There is some evidence to suggest that the current levels at which gluten can be detected
are not harmful to most gluten-intolerant consumers (box 10.9). However, gluten
sensitivity varies among consumers, and scientific evidence on the level of gluten that canbe tolerated by all coeliac consumers is inconclusive (box 10.9). The Australasian Societyof Clinical Immunology and Allergy (sub. DR203) and Allergy and Anaphylaxis Australia(sub. DR134) also pointed out that individuals with wheat allergy (which differs fromgluten intolerance) can be extremely sensitive to gluten, and exposure of these individuals
to minute traces of gluten can result in anaphylaxis.
The current gluten-free standard does not mean that foods bearing gluten-free labels arefree of any traces of gluten (only that current testing methods do not detect any gluten).
Therefore, wheat allergic consumers may need to rely on ingredients lists and allergenlabelling (which is required in all states and territories) rather than gluten-free labels. In
addition, some consumers with wheat allergy may tolerate other grains containing gluten,
such as rye and oats (Healthy Eating Advisory Service 2014). Gluten-free labels may
47 Non-coeliac gluten sensitivity is a condition with symptoms similar to coeliac disease, but there are no
associated antibodies and no damage to the lining of the gut. The role of the immune system in
non-coeliac gluten sensitivity is unclear (Coeliac UK 2016).

48 The Codex Alimentarius (Codex) is a set of harmonised international food standards developed by theWorld Health Organization and the Food and Agriculture Organization of the United Nations. Codex
standards are voluntary, but form the basis of food safety legislation in many countries (WHO andFAO 2016).
49 This is equivalent to 20 milligrams per kilogram.

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REGULATION OF AUSTRALIAN AGRICULTUREtherefore be less useful to wheat allergic consumers compared to gluten-intolerant
consumers.
Box 10.9

Scientific evidence on a tolerable level of gluten for
consumers with coeliac disease

Scientific evidence has been unable to establish a precise level of gluten that can be tolerated
by all consumers with coeliac disease.
•

In 2006, a review of the scientific literature on tolerable amounts of gluten for people withcoeliac disease, conducted on behalf of the UK Food Standards Agency, found insufficientevidence to propose a clinical threshold dose of gluten or a threshold concentration of foodproducts that would be tolerated by all people with coeliac disease (Akobeng andThomas 2006).

•

In 2016, a similar review conducted by Cochrane Australia (on behalf of Coeliac Australia)
concluded that a lack of robust scientific evidence precluded the establishment of a definitive
threshold that is safe for all people with coeliac disease to consume (Cochrane
Australia 2016).

However, gluten sensitivity varies among gluten-intolerant consumers (Akobeng andThomas 2006; Catassi et al. 2007; US Food and Drug Administration 2011). Some studies
suggest that there is a threshold that is acceptable to most consumers.
•

Catassi et al. (2007, p. 165) found that while small amounts of gluten in individual foods canhave a cumulative adverse impact, ‘the threshold of 20 ppm keeps the intake of gluten from“special celiac food” well below the amount of 50 mg/d, which allows a safety margin for thevariable gluten sensitivity and dietary habits of patients’.

•

Collin et al. (2004) found that the threshold for gluten contamination of gluten-free products
can be safely set at 100ppm.

•

In 2011, a study by the US Food and Drug Administration found that:… a less than 1 ppm level of gluten in foods is the level of exposure for individuals with [coeliac
disease (CD)] on a [gluten-free diet] that protects the most sensitive individuals with CD and thus, also
protects the most number of individuals with CD from experiencing any detrimental health effects fromextended to long-term exposure to gluten. (2011, p. 46)

The Catassi et al. and Collin et al. studies were cited during the discussions that led to the
20ppm threshold under the Codex Alimentarius (FAO and WHO 2005).

If the level of gluten that can be detected is not sufficient to harm most gluten-intolerant
consumers, the current standard may be imposing unnecessary costs on the community.
Food producers who want to label their products as gluten-free are likely to face increased
costs in achieving the gluten-free standard, and this could be passed on to consumers.
Consumers who rely on gluten-free labels may also experience a reduction in food choices
if producers choose not to make gluten-free claims due to prohibitive costs.
In addition, the gluten-free standard may act as a barrier to the adoption of beneficial
innovations, such as the ultra-low gluten barley developed by the CSIRO (box 10.10). It
may also inhibit the introduction into the Australian market of products that are sold

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overseas using a ‘gluten free’ label — if processors assess the costs of relabelling products(to align with Australian labelling requirements) to outweigh the benefits.
Box 10.10

The ultra-low gluten barley

In 2015, researchers at the CSIRO successfully developed a hulled barley with reduced levelsof hordeins, the type of gluten found in barley. This ultra-low gluten barley is produced using
conventional (non-GM) breeding techniques, and contains gluten levels of below 5 parts per
million (ppm). It can be used in malt products or brewed beverages such as beer. Use of theultra-low gluten barley would provide some gluten-intolerant consumers with a wider range offood choices.
However, producers in Australia have been reluctant to commercialise this innovation. Since it
is a barley and the gluten can be detected, producers who commercialise this innovation would
not be able to make a gluten-free claim under the current Australian food standards.
The CSIRO is therefore focussing on commercialisation opportunities in the United States andEuropean Union, where products labelled ‘gluten-free’ can contain barley as long as the gluten
content does not exceed 20 ppm.
Sources: CSIRO (2015e); DIIS (pers. comm., 22 April 2016); European Commission (2009); US Food andDrug Administration (2015b); Tanner et al. (2016).

In principle, a standard that aims to enable gluten-intolerant or gluten-allergic consumers
to select foods that meet their dietary requirements should balance food safety risks against
the benefits of more accessible food products and wider choice. This is consistent with
FSANZ’s primary objective to protect public health and safety, and the requirement for
FSANZ to have regard to ‘the need for standards to be based on risk analysis using the best
scientific evidence’ (Food Standards Australia New Zealand Act 1991 (Cwlth),paragraph 18(2)(a)). There is a question about whether the current standard adequatelybalances these tradeoffs.
FSANZ, in setting food standards, must also have regard to the promotion of consistency
between domestic and international food standards and the desirability of an efficient andinternationally competitive food industry.
In 2013, the US Food and Drug Administration set the US threshold for the level of gluten
permitted in ‘gluten-free’ foods at 20ppm, in line with the Codex threshold (box 10.11).
This was based on scientific evidence and an assessment of risks and benefits to the US
community.

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Box 10.11

Determining a ‘gluten-free’ threshold in the United States

In 2013 the United States adopted the Codex threshold of 20 ppm. In doing so, the US Foodand Drug Administration (FDA) evaluated the costs and benefits of adopting a more stringent
standard than what could be tolerated by most consumers with coeliac disease. (The scientificevidence considered by the FDA suggested that this was 20 ppm). The FDA considered thatlowering the threshold beyond 20 ppm would increase the risk of US consumers with coeliac
disease not following a gluten-free diet because of decreased food choices or more expensive
food. It therefore concluded that a threshold of 20 ppm was sufficiently protective of publichealth in the United States, and that ‘the varying needs of individuals with celiac disease may
be best addressed by focused education and outreach’ (US Food and Drug
Administration 2013, p. 47160).

Can the requirement for ‘no detectable gluten’ be changed?
Regardless of whether the current gluten-free standard adequately balances the risks andbenefits to the Australian community, relaxing the standard (to allow detectable levels ofgluten) may be prevented by the ACL (the ACL prohibits producers from making false or
misleading representations as to the composition of goods).
A producer who makes a gluten-free claim on a product with detectable levels of gluten
risks prosecution under consumer law. This is because consumers are likely to understandthe term ‘gluten-free’ to imply an absolute standard. The Department of Industry,Innovation and Science explained that:
The Australian Competition and Consumer Commission’s (ACCC’s) interpretation of ‘free’ isabsolute (ie there can be no detectable level of the relevant substance in the product). This
interpretation is enforced through the ACL which prohibits a business from making statements
in trade or commerce that are false, misleading or deceptive, or which are likely to mislead or
deceive. (sub. DR258, p. 1)

This also applies to similar claims, such as ‘lactose-free’, where the presence of thesubstance being claimed is negligible but detectable.
FSANZ (sub. DR98) submitted that in developing and reviewing food standards, it isrequired by its Act to consider any relevant legislation, including the ACL. In effect, theACL prevents FSANZ from implementing a risk-based approach to setting gluten-freestandards. It also precludes alignment of Australian standards with international gluten-freestandards.
Alternatives to ‘gluten-free’ claims
It is essential that consumer laws are in place to prevent consumers from being misled.
While this may prevent some foods (that have negligible but detectable levels of gluten)from being labelled ‘gluten-free’, producers who want to market their products as safe for
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gluten-intolerant consumers are not limited to making ‘gluten-free’ claims. Producers arefree to inform consumers about the nature of their products in any way, as long as theirconduct is not deceptive and they do not make false or misleading representations.
Producers could establish certified trademarks or alternative claims, such as ‘ultra-low
gluten’, to communicate food safety to gluten-intolerant consumers. These could beaccompanied by information that increases consumers’ understanding of the healthconsequences of the claims being made, which would allow them to ascertain which claims
they can rely on. Less sensitive gluten-intolerant consumers would then have access to awider range of foods beyond those labelled ‘gluten-free’.
In keeping with its primary role of protecting public health and safety, FSANZ should
establish a standard that defines the level of gluten that is safe for gluten-intolerant
consumers. Such a standard would take into account the fact that consumers have varying
levels of gluten-sensitivity, the scientific evidence on food safety risks to these consumers,
and the costs to consumers of a more stringent standard, such as increased prices or
reduced choice. While the standard would not define the specific claims that can be madeto communicate gluten content, it would provide the basis for producers to establish theirown claims, and provide guidance to producers on when claims would not be deemed false
or misleading. It would also provide information to enable consumers to better make foodchoices. Ensuring that there is wide community awareness of the standard would decrease
the likelihood of consumers misinterpreting producers’ claims.

RECOMMENDATION 10.2

Food Standards Australia New Zealand should establish a standard defining the levelof gluten in foods that can be generally tolerated by gluten-intolerant consumers,
taking into account:•the varying levels of gluten sensitivity among gluten-intolerant consumers•

scientific evidence on the risks of gluten to these consumers•

the costs and benefits to the Australian community.

10.4 Regulation of food safety in the production process
As noted earlier, governments regulate to ensure minimum food safety practices during the
production process. The benefits of food safety regulations were acknowledged by anumber of industry bodies. For example, the Australian Chicken Meat Federation said that:Food safety is critical to the chicken industry, and regulation in this area is necessary toprotect consumers and also the reputation of the product and the industry itself … The
ACMF therefore believes that all producers of chicken meat, no matter how big or small,must comply with a common set of standards and compliance arrangements. (sub. 40, p. 7)

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Similarly, the Australian Dairy Farmers said that:
Australia has comprehensive food standards and a system of legislation and regulation acrossthe whole dairy production and processing chain. The system monitors compliance with foodstandards to ensure the integrity of the dairy supply chain … The dairy sector would not like to
see the model we have worked hard at over many years be devalued … (sub. 63, p. 5)

However, concerns were raised about:•the high costs (relative to other options) of the requirement for individual eggs to be
stamped, to enable them to be traced•

the costs and duplication of food safety audits, including those required by regulators,
food retailers and importing countries.

Egg stamping
All states and territories require eggs to be individually stamped with a unique marking
that identifies the producer or processor of the egg. (Some exemptions apply for small egg
producers). With the exception of Queensland which introduced egg stamping in 2005, egg
stamping was progressively introduced in Australian states and territories from 2011
following the introduction of Standard 4.2.5 in the Food Standards Code (the Primary
Production and Processing (PPP) Standard for Eggs and Egg Products). FSANZ developed
the new standard ‘in response to the large number of foodborne illness outbreaks suspectedof being linked to eggs or egg products’ (FSANZ 2015c).
Egg stamping is used as a traceability tool in the event of an outbreak of salmonellosis
caused by contaminated eggs. Traceability enables the source of the contamination to bequickly identified, and allows only eggs that are likely to be unsafe to be recalled orwithheld from sale. This protects public health and reduces financial losses to the egg
industry. It also protects the reputation of producers not involved in the contamination.
While traceability has benefits for consumers and the egg industry, there are also costs
involved in setting up traceability systems. The system adopted should be the one that achieves
the objective with the highest net benefit. That is, egg stamping would only be justified if thebenefits exceeded the costs and it delivered superior traceability compared to other options.
Several inquiry participants were supportive of egg stamping as a traceability tool50. The
NSW Farmers’ Association said that:
Egg stamping has demonstrated clear benefits for consumer health and food safety and any
commonsense assessment of the net benefit to farmers and the community would implicitly
endorse the continuation of this practice. (sub. DR161, p. 25)
50 Participants who supported egg stamping as a traceability tool included: the NFF (sub. DR216); NSW

Farmers’ Association (sub. DR161); SFPQ (sub. DR135); Tasmanian Government (sub. DR287); and theVFF (sub. DR189).

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However, the NSW Egg Farmers’ Association argued that the introduction of egg stamping
was ‘based on faulty and inaccurate information and its cost outweighs the benefits to thecommunity and to the industry’ (sub. 7, p. 1). It also raised concerns about the RIS used tojustify egg stamping.
Others said that egg stamping was an unnecessary regulation. Stuart Chignell, for example,
said that:
The regulation requiring eggs to be stamped is … an unnecessary and burdensome regulation
on farmers in general and family farmers in particular. (sub. DR208, p. 3)

Katherine Snoswell (sub. DR297) expressed a similar view.
Concerns about the costs of egg stamping are not new. FSANZ, in its final assessment
report for the (then) proposed PPP Standard for Eggs and Egg Products, reported that:
Several submitters raised concerns about the specific nature of the traceability requirement inthat it required shell eggs to be stamped. This could impose undue costs, particularly on small
businesses. (2011b, p. 44)

FSANZ (2011b) stated that it addressed these concerns by assessing the impact of egg
stamping on small producers as part of its RIS.
Weighing up the costs and benefits of egg stamping
The costs of egg stamping were outlined in the RIS for the PPP Standard for Eggs and Egg
Products published by FSANZ (2011c). In addition to requirements for egg stamping, thestandard includes requirements around waste disposal, ensuring producers have thenecessary food safety skills and knowledge, bird health and other food safety elements.
The purpose of the standard is to reduce the incidence of foodborne illness from
Salmonella bacteria by minimising the prevalence and concentration of this pathogen in
eggs and egg products (FSANZ 2011b).
FSANZ (2011c) estimated that the initial cost to the industry of egg stamping would bealmost $3 million, with additional ongoing annual costs of about $1.9 million. When
divided between small and large egg producers, FSANZ estimated that $2.8 million of theinitial cost would be borne by large egg producers (those with more than 600 hens) and$106 900 by small egg producers. Of the ongoing annual cost, $800 000 would be borne bylarge producers and $1.1 million by small producers. The costs of egg stamping
represented about 65 per cent of the total costs of the standard. The compliance costs for
egg producers and processors in Queensland and Tasmania were excluded from the RIS asthese businesses were already required to comply with a comparable food safety scheme.
The NSW Egg Farmers’ Association (sub. 7) said that the RIS underestimated the cost ofegg stamping. It estimated that, for large producers, realistic costs were $3.9 million ininitial costs and $1.1 million in ongoing costs. It agreed with the FSANZ estimates forsmall producers.
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Safe Food Production Queensland (sub. DR135) submitted that for 83 per cent of small
egg producers in Queensland surveyed, it costs $100 or less to purchase the necessary
stamping equipment, and $100 or less per year to maintain the equipment. The Tasmanian
Government (sub. DR287) also considered that there was no significant time costassociated with egg stamping, as stamping either occurs during automated packing andgrading processes, or takes 10-20 seconds per dozen where hand-held stamps are used.
In 2009, the Commission estimated the cost of egg stamping in Queensland to be in theorder of 0.4 cents to 2.7 cents per dozen eggs for businesses using a stamping machine, andaround 1 cent per dozen eggs for businesses hand-stamping their eggs (PC 2009).
In some jurisdictions, governments have introduced measures to mitigate the costs of egg
stamping for small producers.
•

In Victoria, there is an exemption from egg stamping for producers with fewer than 50
chickens, and producers of duck and quail eggs (VDEDJTR 2016a).

•

In New South Wales, an exemption applies for egg farmers that produce less than 20
dozen eggs a week and sell them direct from the farm gate, or use those eggs in afundraising activity where the eggs will be cooked (NSW Food Authority 2015a). The
New South Wales Food Authority also provides free hand-held, self-inking stamps tobusinesses that produce less than a thousand eggs a day (NSW Food Authority 2015a,
2015b).

•

Biosecurity Tasmania provides handheld stamps to registered businesses that produce
less than 20 dozen eggs per week (Biosecurity Tasmania 2016).

The benefits of egg stamping are difficult to ascertain. Although the RIS assessed thebenefits of the PPP standard, it did not identify what proportion of these were due to egg
stamping. In addition, no analysis was conducted on the additional benefits that egg
stamping would deliver compared to alternative traceability systems, such as labelling on
egg cartons or requiring restaurants and caterers to keep records of the eggs they receive.
FSANZ expected that the standard as a whole would reduce the burden of egg-relateddisease by 20 to 50 per cent (estimated conservatively), improve the reputation of
producers, reduce the risks that producers face in an outbreak, and deliver savings togovernment through reduced surveillance, recall and investigation of outbreaks.
Egg traceability in the retail sector
Most eggs for retail sale in Australia can be traced using the information on egg cartons.
Under Standard 1.2.1 of the Food Standards Code, food in a package for retail sale musthave a label that states the:•name of the food•

lot identification number (or other information that allows lot identification)•

name and address of the supplier
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•

use-by or best-before date.

Eggs that are not sold in cartons are not covered by the regulation. However, as the
majority of consumers buy eggs from supermarkets and other retail outlets where cartons
are used (FSANZ 2009), eggs sold without cartons make up a small proportion of the retailegg market. And, as discussed below, consumers who buy eggs that are not sold in cartonsare likely to know the source of their eggs.
Egg stamping has the potential to enhance traceability if eggs cannot be traced using
information on cartons. Roberts and Runge (2011) suggest that egg stamping could deliver
benefits where eggs are swapped between cartons at retail outlets or where consumers
reuse egg cartons, particularly at farmers’ markets.
It is unclear how often consumers swap eggs between cartons at retail outlets. The
Commission did not find evidence that egg swapping is a widespread practice, and whilesome consumers do check individual eggs within a carton before purchase (FSANZ 2009),
it is more likely that they would return the carton to the shelf and select another if they are
unsatisfied with the quality of the eggs. The Commission heard that some retailers do
consolidate eggs (of the same brand) from different cartons where there are broken eggs.
Consumers could move eggs to a different carton or container at home, after purchase,because of a broken egg. A consumer survey by FSANZ (2009) found that 35 per cent ofconsumers do this. They could also be consolidating eggs from different cartons. Egg
stamping allows eggs to be identified even if they are removed from their carton. However,other policy options could achieve the same objective at a lower cost. Consumer education,for example, could communicate the importance of egg traceability and encourage
consumers to retain traceability information.
Some consumers do reuse egg cartons. FSANZ (2009) found that 16 per cent ofhouseholds ‘always’ or ‘almost always’ reuse egg cartons, while 15 per cent ‘sometimes’
reuse them. However, egg cartons are more likely to be reused by households that obtain
their eggs from backyard producers, their own chickens or farmer’s markets, compared tohouseholds that buy their eggs from supermarkets (FSANZ 2009). It is not clear that egg
stamping in these instances would confer significant additional traceability benefits, as
end-consumers are likely to know the source of their eggs. And regardless, eggs in reusedcartons may not always be stamped, either because they are not being sold, or because of
the exemption for small egg producers in some states.
In 2005, when the New South Wales Government introduced a food safety scheme for
eggs (which did not include a requirement for egg stamping), the New South Wales Food
Authority acknowledged that labelling requirements were sufficient to enable traceability.
The Australian New Zealand Food Standards Code Standard 1.2.2 presently requires
traceability of food back to the manufacturer or supplier by printing name of food, lot
identification, and name and address of the supplier on the carton. The requirement for lot
identification can be satisfied by Standard 1.2.5 Date Marking of Packaged Food … There is no434

REGULATION OF AUSTRALIAN AGRICULTURE

further requirement for stamping of eggs or use of a unique identifier. (NSW Food
Authority 2005, p. 27)

It also noted that there would be ‘a need for some education and enforcement oftraceability where recycled cartons are used’ (NSW Food Authority 2005, p. 27).
Egg traceability in the catering sector
Requirements under the Food Standards Code also enable traceability for eggs sold torestaurants and caterers. Under Standard 1.2.1, food sold to a caterer in a package musthave a label that has lot identification information and date markings (among other things).
If the food is not sold in a package, such information must be provided to the caterer withthe food. The information required on labels of food for retail sale, including the name andaddress of the supplier, must also be provided to caterers. In instances where catering
packs (trays overwrapped with plastic) are used, these requirements would apply.
In addition, under Standard 3.2.2, food businesses must be able to provide the name andaddress of the supplier of any food they receive, if asked by a regulator. This requires foodbusinesses to maintain records. Businesses engaged in the wholesale supply of foods mustalso have a system to ensure the recall of unsafe food. Standard 3.2.2 enables traceability
one step forward and one step back at every stage in the supply chain (FSANZ 2012).
Does egg stamping deliver superior traceability compared to other arrangements?
While egg stamping identifies the source of individual eggs, it does not necessarily
improve traceability compared to other arrangements such as labelling egg cartons or
requiring businesses to keep records. For example, egg shells are likely to be discarded
immediately after use, before an outbreak occurs or an investigation commences. It istherefore unlikely that ‘the source of the problem … will usually be immediately
identifiable from the product itself’ (Tasmanian Government, sub. DR287, p. 17).
FSANZ said that:
While it is correct that consumers and food businesses will have discarded contaminated eggs
they have used, other stamped eggs are likely to still be in the pack, which will assist in tracing
the source of an outbreak. (2011a)

However, it is unclear why in this case stamping individual eggs would be preferable toproviding identification information on the pack itself. In the case of catering packs, egg
producers could provide their unique identification on the underside of the tray.
Egg stamping is also unlikely to be able to identify the implicated farm where eggs frommultiple sources are comingled at a food business, or where large quantities of eggs frommultiple cartons or trays are used in a food product. As with the use of labels or invoices,
relying on stamped eggs remaining on the premises would only allow the various suppliers

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of the food business to be identified, rather than the supplier of the eggs that caused theoutbreak.
Egg stamping may offer superior traceability compared to relying on invoices if there is along chain of resale, and traceback to the original farm would require gathering invoicesfrom multiple businesses throughout the supply chain. However, a requirement to provide
a farm identifier as part of invoices or product packaging throughout the supply chain
would enable the producing farm to be easily identified.
Where does that leave us?
Egg stamping is unlikely to be the most effective nor efficient method of egg traceability,
especially in light of requirements that are already in place in the retail and catering
sectors. If supplier details are insufficient to trace eggs back to their originating farm
(because the supplier is not necessarily the producer), a requirement to provide producer
details on invoices, labels, or product packaging could replace the egg stamping
requirement in the PPP standard.
In the absence of a regulatory requirement, producers may still choose to stamp their eggs
if they believe it is in their interest to do so. Stamping eggs can protect producers against
recalls if there is an outbreak caused by pathogens originating from another farm.
Producers may also choose to stamp their eggs with a Julian date 51 so that any recalls of
their products can be limited to those with particular Julian dates. This is a commercial
decision that producers can make if they believe that there is a net benefit.

RECOMMENDATION 10.3

Food Standards Australia New Zealand should remove the requirement for egg
stamping under the Primary Production and Processing Standard for Eggs and Egg
Products, unless it can be shown through a transparent and rigorous cost–benefit
analysis that egg stamping is more effective and confers higher net benefits comparedto alternative traceability methods.

Food safety audits
Food safety audits are required by governments for regulatory purposes. They can also be
required by commercial customers, such as supermarkets and quick-service retailers, tosatisfy commercial quality assurance programs. Businesses may undergo multiple audits
by different levels of government, different commercial customers, or both.
51 Julian dates are a three-digit number identifying the day of the year that the egg was produced. For
example, a stamp showing 001 indicates that the egg was produced on 1 January.

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Commercial food safety audits
Participant concerns about the burden imposed by food safety audits primarily related tocommercial audits, including that they were often more burdensome than regulatory audits.
For example, Voice of Horticulture said that:
One major fruit grower from Western Australia experiences 10 different audits each year andneeds to employ a person 3 days a week to ensure all compliance policies are met. Most of thedifferent audits are required by supermarkets. The audits are either related to employment,
safety or product integrity and due to differing requirements from different buyers(supermarkets) cost the business approximately $150 000 per annum. (sub. 42, p. 25)

The AFGC and AMIC also provided an example from the meat industry.
One of the more extreme examples is a multi-species plant in Victoria with multiple market
access listing receiving almost 200 days of audit per year not including the regulators audit and
Department of Agriculture on-site veterinarian’s verification activity. This processor actuallyemploys additional staff just to deal with audits and their follow up. (AFGC, sub. 28, p. 18;
AMIC, sub. 77, p. 9)

Producers can be required to undergo multiple commercial audits if customers requiredifferent standards to be met. Many of the large supermarkets and quick-service retailers,such as Coles and McDonalds, have bespoke company standards, and some customers use
industry standards such as the British Retail Consortium Global Standard for Food Safety(Annison and Fleming 2015). The AFGC (sub. 28) noted that retailers use commercial
audits to differentiate themselves in the marketplace, which explains the lack of mutual
recognition between audits and the need to undergo multiple audits.
While multiple commercial audits can impose high costs on producers, these are not theresult of government regulation. Government action would only be warranted if large
retailers were unfairly using their market power to transfer the risks or costs of doing
business to producers through audits. Competition issues are discussed in chapter 12.
Retailers should have the ability to use commercial audits to ensure safe, high-quality foodwhere consumers demand this, and to protect or enhance their reputation. If the costs andnumber of commercial audits are unacceptable to producers, parties within the foodindustry should negotiate to achieve mutually acceptable outcomes. The food andhorticulture industries are currently working together to reduce the number of commercial
audits that horticultural producers face (box 10.12).

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Box 10.12

The Harmonised Australian Retailer Producer Scheme

In 2012, Horticulture Innovation Australia Limited, at the request of the fresh produce industry,
initiated a project to harmonise the food safety certification requirements of the major grocery
retailers for the growing and packing of whole produce. The aim of the project was to reduce thetime and cost to producers of complying with multiple quality assurance schemes when
supplying multiple retailers.
The project has resulted in five major supermarket retailers — Aldi, Coles, Costco, Metcash(IGA) and Woolworths — working collaboratively to develop the Harmonised Australian Retailer
Producer Scheme (HARPS). Under HARPS, producers of fresh horticultural produce supplying
direct to one or more retailers will be required to be audited against 60 food safety elements,
which have been harmonised from over 200 bespoke company elements, plus one of thefollowing internationally recognised standards:•

the British Retail Consortium Global Standard for Food Safety, Issue 6•

the GlobalG.A.P. Integrated Farm Assurance Scheme, Version 5•

the Safe Quality Food Institute Code, 7th Edition Level 2•

Freshcare Food Safety and Quality Code of Practice (provisional pending benchmarking by
the Global Food Safety Initiative, which is expected to be achieved by late 2017).

Implementation of HARPS will be managed by Kitchener Partners and PMA Australia-New
Zealand Limited, beginning in late 2016. The HARPS project team has estimated the project togenerate savings of $40 million per year.
Sources: Kitchener Partners (pers. comm., 5 May 2016); PMA A-NZ (pers. comm., 5 May 2016).

Regulatory food safety audits
Regulatory food safety audits are conducted by, or on behalf of, regulatory authorities toverify compliance with domestic food safety regulations or to satisfy export requirements.
Businesses are generally audited against a food safety management program which isapproved by the relevant authority, and which may be a condition of a business licence.
Food safety management programs identify potential food safety hazards and document thesystems used to manage them. The Western Australian Government explained that:… [t]he purpose of food safety audits is to ensure that a food business is adhering to its foodsafety program/quality assurance system, and hence, safe food production and processing
requirements. This not only provides assurance to government and the public as to the safety of
the food, but also demonstrates to international markets that there are adequate controls in place
to protect Australia’s clean, green and safe food environment, and maintain a viable andattractive export market for agriculture. (sub. 54, p. 40)

Under the domestic food regulation system, primary producers such as dairy businesses,
producers and processors of eggs and egg products, and businesses that handle, process orstore meat are required to have food safety management programs. Businesses that export
food (except for exporters of plants and plant products) are required to have Approved
Arrangements, which include food safety management controls. Domestic food audits are
438

REGULATION OF AUSTRALIAN AGRICULTURErequired by state and territory authorities, while audits for export purposes are required by
the Australian Government.
Audit duplication can arise if export establishments are required to undergo audits by bothstate and Australian Government regulatory authorities. The AFGC said that:
The State authorities are primarily responsible for food safety. Due to export certification
requirements the Commonwealth has also become involved. There are overlaps between Stateand Federal jurisdictions in this area. (sub. 28, p. 18)

The Western Australian Government also submitted that:
Some food businesses undergo audit or inspection by a state and federal regulator … and cansubsequently be inspected by a local government officer … (sub. 54, p. 38)

However, no specific examples were identified. Governments have sought to reduceoverlap between audits for export and domestic purposes, for example by having
agreements that allow one authority to conduct audits on behalf of the other (DAWR, pers.
comm., 5 April 2016). The South Australian Government (sub. 58) said that amemorandum of understanding between DAWR and Primary Industries and Regions South
Australia has allowed audits for domestic and export purposes in the red meat industry to
be streamlined to a large degree. Similar arrangements exist in the dairy sector (box 10.13).
DAWR (pers. comm., 5 April 2014) also said that work to streamline domestic and export
audits has been undertaken for prescribed goods including eggs, poultry, meat and gameproducts, although some of this work is yet to be completed.
Other measures that governments have adopted to reduce the burden of regulatory foodsafety audits include:•risk-based auditing, where audit frequency depends on the outcomes of previous audits.
For example, all food businesses in New South Wales and South Australia are subject
to risk-based auditing (NSW Food Authority 2016; SA Health 2016)•

the National Food Safety Audit Policy, which promotes national consistency in the
management of food safety audits and auditors (Implementation Sub-Committee of theFood Regulation Standing Committee 2006)•

allowing businesses to employ third-party auditors to conduct audits. For example,
DAWR trains and approves third-party Approved Auditors to carry out regulatory
audits of export establishments (DAWR 2016d). Some state authorities also approvethird-party auditors, who may be authorised to conduct audits for both domestic andexport purposes, such as in the dairy industry (box 10.13).

The ability for governments to reduce the burden of regulatory audits may be limited byimporting country requirements. For example, establishments that prepare or store meat forexport to the United States may only be audited by an auditor employed by DAWR(DAWR 2016d). Although these requirements cannot be directly controlled by theAustralian Government, the Government can use its influence in trade negotiations and
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international trade fora to minimise duplication due to importing countries’ audits(chapter 14).
Overall, the Commission considers that DAWR and state food authorities have made good
progress in reducing the burden of regulatory food safety audits.
Box 10.13

Food safety audits in the dairy sector

Under Standard 4.2.4 of the Food Standards Code, dairy production, transport and processing
businesses must control potential food safety hazards by implementing a documented foodsafety program. A food safety program is also required by state and territory dairy authorities asa condition of a dairy business’ licence. Audits are required to ensure that a dairy business iscomplying with their food safety program, and that the food safety program remains adequate
for the business’ activities.
Dairy establishments that export products are also required to be registered with the AustralianGovernment Department of Agriculture and Water Resources. For a dairy establishment to gain
export registration, it must have an Approved Arrangement (AA), which is a documented foodsafety management system that describes how it manages food safety and traceability. Dairy
export establishments are audited at least annually to ensure that they meet the requirements intheir AAs and in export legislation.
The Australian, state and territory governments have worked together to reduce the burden offood safety audits on dairy businesses. Once a new AA has been approved by the Departmentof Agriculture and Water Resources, state and territory dairy authorities are responsible for
ensuring that businesses continue to comply, and for conducting audits on behalf of theAustralian Government. Dairy businesses can engage third-party approved auditors to conduct
audits for domestic purposes, and Authorised Officers can be engaged to conduct audits forboth domestic and export requirements. The Australian Dairy Farmers explained that:
This enables a single regulatory audit system to be implemented to meet both domestic (state) andexport requirements. This has also reduced overall dairy export certification costs and reduced theneed for multiple audits. (sub. 63, p. 6)

The dairy industry supports these arrangements. Australian Dairy Farmers stated that ‘it isimportant that this model is maintained’ (sub. 63, p. 6). The Australian Dairy Industry Council
Inc. and Dairy Australia went further, saying that ‘this is a good system that needs to be actively
promoted, and could be considered as a model for other industries’ (Australian Dairy Industry
Council and Dairy Australia 2014b, p. 36).
Sources: DAWR (2015c, 2015u, 2016j); DFSV (2016).

The cumulative burden of commercial and regulatory food safety audits
As noted above, concerns about food safety audits primarily related to commercial audits,and responsibility for reducing the burden of commercial audits lies with the private sector.
However, regulatory audits can add to the cumulative burden faced by producers, and, as
the Tasmanian Government (sub. DR278) said, producers often do not distinguish between
the mandatory audits imposed through regulations and the quality assurance systems.

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REGULATION OF AUSTRALIAN AGRICULTURE

Harmonisation or mutual recognition of regulatory and commercial audits has the potential
to decrease the cumulative burden of food safety audits felt by producers.
The Western Australian Government (sub. 54) noted that numerous attempts have been
made over the years by government and industry to harmonise regulatory and commercial
food safety schemes or to effect mutual recognition, and these have been without successdue to the different purposes of the audits. The South Australian Government also
highlighted that many of the requirements of commercial audits are:… based on quality as well as food safety, and the food safety requirements do not always alignwith the Code and they are inconsistent between supermarket chains. (sub. 57, p. 28)

In many instances, the objectives of food safety authorities and producers are aligned, as
unsafe food jeopardises both public health and producers’ profitability. However,producers are also likely to face incentives to provide high quality food, and therefore
commercial audits often have more stringent standards directed at food quality over andabove safety. A harmonised set of standards is unlikely to satisfy both commercial
customers’ demands and the principle of minimum effective regulation.
Rather than creating a harmonised set of standards, authorities could recognise situations
where compliance with a commercial quality assurance program satisfies regulatory
requirements, and waive the requirement to be re-audited, or reduce the frequency of
government audits. The Western Australian Government (sub. 54) said that where private
sector audits were in full compliance with regulatory food safety standards, mutual
recognition by governments should be achievable.
The Department of Industry, Innovation and Science (sub. DR258) also submitted that
there is scope to reduce duplication through increased recognition of commercial audits byregulatory authorities. This is in line with recommendations from previous inquiries topursue work to increase recognition of private sector food safety standards as a means of
reducing the food safety audit burden on businesses (RRC 2013; SSCAFPS 2012).
The Commission supports such an approach in principle. However, ultimate responsibility
for administering the food safety regulatory scheme should continue to rest withgovernments. Food safety authorities would need to retain appropriate powers — such as
the ability to require commercial auditors to report significant breaches to authorities, orthe ability to conduct subsequent audits — to ensure compliance with food safety
standards.

RECOMMENDATION 10.4

The Department of Agriculture and Water Resources and state and territory foodsafety authorities should determine whether regulatory food safety audits could be
reduced by recognising compliance with commercial quality assurance programs.

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Food regulation in the honey sector
Two participants — the Australian Honey Bee Industry Council (AHBIC, sub. 34) and
Herta Klein (sub. 38) — raised concerns about food regulation in the honey sector, inparticular with Standard 2.8.2 of the Food Standards Code (the honey standard) and its
enforcement. The AHBIC pointed to inadequacies regarding the honey standard, notingthat it:… has been lobbying for a new honey standard for Australia for several years now without
success. The answer given by Food Standards Australia and New Zealand (FSANZ) is that thisis a quality issue and not a food safety issue. (sub. 34, p. 4)

Herta Klein also said that:
The honey standard as set out in the Australia New Zealand Food Standards Code … is too
brief and requires updating. The fake honey discovered on sale in Victoria highlights the needfor a standard that defines what honey is beyond simply stating the glucose and fructose levels,and moisture range. (sub. 38, p. 4)

This refers to an incident in 2014 involving Basfoods Australia, where products labelled‘Victoria Honey’ were found to comprise mainly of sugars from plants, including corn andsugar cane. The ACCC issued three infringement notices on the grounds that it believed
Basfoods’ labelling and information on its website contained false or misleading
representations. Basfoods admitted that its conduct contravened the ACL and paid
penalties totalling $30 600 (ACCC 2014a).
AHBIC (sub. 34) submitted that prior to this, it had found products labelled as honey thatwere not honey but most likely corn syrup. It lodged a complaint with the Victorian
Department of Health, which is the authority responsible for enforcing the honey standard
in Victoria. The response that AHBIC received was that:… even though it was most likely in breach of 2.8.2, as it was not a health issue, they would notact. (sub. 34, p. 4)

Herta Klein (sub. 38) also claimed that labelling standards for honey are seldom enforcedin Queensland. In the event of a food safety incident, the lack of labelling could mean that
products cannot be traced, and Australia’s export competitiveness could be jeopardised.
In order to encourage productivity and competitiveness in the food industry, it is importantthat governments enforce food standards where they are in place. There is also a need toreview regulations periodically to ensure that they remain relevant. In the case of honey,
relevant and enforced regulations will complement provisions in consumer law thatprohibit false and misleading conduct. In addition, there is opportunity for the honeyindustry to develop a voluntary certification scheme to increase consumer confidence, andallow producers of high-quality honey to differentiate themselves in the marketplace.

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11 Labour regulation

Key points•

Labour costs, flexible workplace arrangements and access to workers in rural and remoteareas are important for the competitiveness of farm businesses. While many farmbusinesses are family-run (and hire few ongoing workers), some farm businesses (especiallythose in horticultural industries) rely on temporary migrant workers (particularly backpackers)
to meet seasonal labour demands.

•

Farmers mainly hire working holiday makers to fill their seasonal labour needs. To a lesser
extent, farmers also meet their seasonal labour needs through the Seasonal Worker
Programme and sponsored temporary skilled workers (visa subclass 457).

•

Participants raised concerns about recently proposed increases to income tax rates forbackpackers and compulsory superannuation payments for temporary residents. Following areview, the Government revised down its proposed tax change, and proposed increasing the
tax on the superannuation that working holiday makers claim when leaving Australia. With
this change, nearly all working holiday makers’ superannuation would be collected as tax,
but a portion would be collected by superannuation funds as management fees. Alternative
approaches to collecting the tax on working holiday makers’ superannuation should be
examined.

•

Many of the concerns raised about accessing temporary skilled migrants were addressed bya recent Independent review of the 457 programme (the Azarias review). This review
recommended: streamlining the processing of sponsorship, nomination and visa
applications; improving the assessment of labour market shortages; and expanding theConsolidated Sponsored Occupations List to include emerging skilled occupations.

•

Overtime and penalty rates can impose significant costs on farm businesses that employ
workers outside ordinary hours and on weekends. The three-hour minimum shift for
part-time and casual employees under the Pastoral Award and parts of the HorticultureAward were seen as inflexible, adding to farm business costs.
– The Fair Work Commission is currently looking at these issues as part of its review of all
modern awards. The Productivity Commission’s Workplace Relations Framework inquiry
recommended amendments to the modern awards objective that should assist the Fair
Work Commission in its decisions.

•

Agricultural work health and safety (WHS) risks are diverse, particularly as many farmers live
and work on their property. Agricultural workers have amongst the highest rates of fatality
and serious workers’ compensation claims across industries. Concerns included theperceived and actual regulatory burden arising from the number of requirements, and thelevel of responsibility placed on employers and employees.
– Regulators have taken steps to improve information dissemination to businesses, andhave reviewed parts of WHS laws to reduce their regulatory burden. WHS laws are due
to be comprehensively reviewed in 2017.

LABOUR443

Labour costs, flexible workplace arrangements and access to workers (both high and low
skilled) are important for the competitiveness of farm businesses. The National Farmers’
Federation (NFF) said that:
Australian businesses face a distinct disadvantage in competing with international competitors
when it comes to labour input costs … This is why flexible regulation and streamlined andefficient processes in place to manage workplace relations are so important in the Australian
context to ensure that Australian agriculture is globally competitive. (sub. 61, p. 33)

Growcom also noted that its ‘consultation with individual growers has consistently
identified red tape around labour as their number one issue’ (sub. 43, p. 1).
Labour costs vary across agricultural industries (table 11.1). ABARES farm survey data
show that labour directly employed by farmers (excluding contractors, such as those hired
through labour hire companies) accounted for between 3 to 6 per cent of an average
broadacre or dairy farm’s total costs in 2013-14. The share is higher (16 per cent) for
vegetable growing farms, which, like other horticultural farms, are typically more labour
intensive.
Table 11.1

Labour costs vary across agricultural industries
2013-14Hired labour a ($)

Share of total cash costs b (%)

Dairy

37 264

6.4

Vegetable growing c

116 200

16.3

Broadacre farms
Livestock and crops
Sheep

10 923
7 753

3.1
4.2

Beef
Sheep and beef

10 507
9 536

5.3
4.9

Wheat and other crops

27 456

3.6

Farm typea Hired labour refers to wages paid to permanent and casual workers, but excludes contractors such as
shearers and wool classers. b Cash costs exclude capital expenditures (such as depreciation) andhousehold expenditures. c Preliminary data.
Sources: DAWR (2016e, 2016f); Mifsud and Valle (2015).

Labour costs also vary across individual farms. Many farms are family-run and hire few
ongoing workers. In 2015, 71 per cent of farms employed no workers (excluding
contractors) and just one per cent employed 20 or more workers (ABS 2016f).
However, farmers are major employers of seasonal workers. Voice of Horticulture notedthat ‘in peak harvest periods, some growers can have an additional 100 plus employees on
the books at any one time’ (sub. 42, p. 41).

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In a joint submission to an inquiry into the Seasonal Worker Programme, the Departmentof Employment; the Department of Immigration and Border Protection; the Department ofAgriculture; and the Fair Work Ombudsman said that:
The horticulture industry faces dramatic but predictable seasonal peaks in demand for labour.
During harvest the numbers of workers required by horticulture enterprises typically increases
more than ten-fold, from a small base of permanent staff. The peak in labour demand is often
regionally concentrated, as the crops of a number of enterprises across a region will ripen andrequire harvesting at similar times. (2016, p. 9)

The submission also noted that it is challenging for industry to ‘develop permanent local
labour pools, despite attempts to source both local job seekers and other Australian labour’(2016, p. 9).
Some evidence also suggests that hiring local workers may be difficult because they are
unwilling to work on farms or relocate for agricultural jobs (JSCM 2016). Cotton Australia
said that ‘while there are issues of unemployment occurring, that doesn’t necessarilytranslate to being able to access that labour on farm’ (trans., pp. 284–285).
As such, many farmers rely on overseas workers to meet their seasonal labour demands,
which is facilitated by aspects of Australia’s migration system. Farmers also use
contractors to meet their labour demands or to carry out specific activities, such as
shearing.
This chapter looks at: the distinctive features of labour markets and why governmentsintervene (section 11.1); access to overseas workers and taxation and superannuation
payments for temporary overseas workers (section 11.2); workplace relations, including
overtime and penalty rates, and the prescribed minimum length of shifts (section 11.3); andwork health and safety (section 11.4).

11.1 The role of government in labour markets
Labour markets have distinctive features that differentiate them from other competitivemarkets (box 11.1) and governments intervene in several ways, including by providing:•a workplace relations framework. This governs the way that employers and employees
negotiate to set wages and conditions. Australia’s workplace relations framework aims
to address imbalances in bargaining power to ensure that parties can achieve outcomesthat are fair (PC 2015e)•

migration and visa programs. Labour market objectives has become a prominent
motivation for accepting immigrants from many countries (although migration and visa
programs also address a range of other economic and social objectives). Migration,
particularly temporary migration, can help meet labour shortages in a timely fashion(PC 2016a)

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445

work health and safety regulations. These aim to protect the health and safety of people
engaged in work. While in many cases employers and employees recognise theimportance of health and safety at work, they may face insufficient incentives toprevent injury or disease, or have insufficient knowledge of how to manage workplacerisks (PC 2004b).

•

Box 11.1

Characteristics of labour markets

Although no market completely aligns with the model of a perfectly competitive market, labour
markets can be more imperfect than others due to the following features.
•

Information asymmetries: Jobseekers may find it difficult to know the extent of competition
for a job, levels of remuneration and conditions for a comparable employment opportunity,
and the non-wage conditions of a new workplace (such as workplace morale or the
behaviour of managers). Similarly, employers may find it difficult to evaluate a potential
employee’s skills or personal attributes, and other opportunities or offers the employee isconsidering.

•

Search costs: Job searching is costly, as is recruitment. It is also an uncertain process —parties usually make and receive offers in a sequential fashion, and so must consider the
likelihood of receiving a better offer or applicant in the future.

•

Impediments to individuals freely entering and exiting the labour market: Many people do nothave sources of non-labour income or savings to support themselves if they do not work.
Even where safety nets such as unemployment benefits are available, the personal andsocial costs of unemployment mean that many people may not see exiting unsatisfactory
employment as a viable alternative.

•

Barriers that limit the mobility of labour between segments of the labour market: Factors
such as age, family circumstances, education, life events, dual-income households, housing,
employment factors and local infrastructure can be significant determinants of an individual’s
labour mobility. These factors mean that labour may be less mobile than other production
inputs (for example, raw materials or machinery).

•

Employers that wield substantial purchasing power in the labour market (monopsonies):
While ‘one company towns’ (the traditional example of a monopsony) are generally
considered a relic of the past, monopsonies still persist in some sectors. These include
government services such as health, education, policing and defence, or where the skills
required by firms are sufficiently differentiated (‘monopsonistic competition’).

Sources: PC (2014b, 2015e).

11.2 Access to overseas workers
Access to overseas workers, as noted by a number of participants, is particularly important
for the agricultural sector. The NFF, for example, said that:
Migration programs provide an essential source of labour for many Australian farmers. The
seasonal nature of agriculture, and its location in rural and remote areas of Australia, often
makes it difficult to attract and retain Australian workers. (sub. 61, p. 38)

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The West Australian Pork Producers Association noted that piggeries employ overseas
workers because:… the inability to obtain skilled employees for piggeries is identified as a significant risk to theviability of pork producing operations and a threat to the industry’s ability to meet local andinternational demand through expansion of operations. (sub. 24, p. 7)

Access to overseas workers is also important for agribusinesses. The Australian Food andGrocery Council noted that:
Improved access to overseas workers where suitably qualified staff, or an insufficient numberof locals, are not available is critical to the competitiveness of the agribusiness, food andgrocery manufacturing sector in Australia. (sub. 28, p. 9)

Farmers mainly hire working holiday makers (on Working Holiday (subclass 417) andWork and Holiday (subclass 462) visas), to fill their seasonal labour needs (box 11.2). In
2015-16, at least 34 000 working holiday makers (DIBP 2016i) worked in the agricultural,
forestry and fishing industry. 52
In a recent survey of 74 Northern Territory horticultural farms, farmers estimated thatworking holiday makers filled 51 per cent of positions in a year on their farms (McGregor
Tan Research 2016).
To a lesser extent, farmers also meet their seasonal labour needs through the Seasonal
Worker Programme (visa subclass 416). The Government initially allocated 2600 seasonal
worker places in 2014–2015 to the horticultural sector (the main agricultural industry to
use the program) (DoE 2015a). However, in June 2015, the Government announced that it
will remove annual limits on the number of seasonal workers that can participate (Bishop
and Robb 2015). The Government also announced in February 2016 that it will expand the
Seasonal Worker Programme to include cattle, sheep, grain and mixed enterprises (Cashand Joyce 2016).
Farmers sponsor temporary skilled workers (visa subclass 457) from overseas whendomestic skilled or trained staff are unavailable. There were 2100 primary subclass 457
visa holders employed in the agricultural, forestry and fishing industry in June 2015, with
about 700 new subclass 457 visa holders sponsored in 2015-16 (DIBP 2016d).
While representatives of farm businesses noted the importance of accessing overseas
workers to address labour shortages in the agricultural sector, they also drew attention tocompliance costs and features of the temporary migrant programs that, in their view, limit
their access to overseas workers.

52 This estimate is based on the number of 417 visa holders who were granted a second working holiday
visa by working at least 3 months in the agricultural, forestry and fishing industry.

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Box 11.2

Temporary migration programs

The Temporary Work (Skilled) (subclass 457) visa allows skilled workers to come to Australia
and work for an approved business for up to four years. A business can sponsor someone forthis visa if they cannot find an Australian citizen or permanent resident to do the skilled work.
Visa holders must have a satisfactory level of English-language proficiency (with some
exceptions).
They generally must also work in a skilled occupation on the Consolidated Sponsored
Occupations List. An exception is available through the use of a labour agreement, which allows
an employer to negotiate with the Australian Government to recruit workers for occupations thatare not on the Consolidated Sponsored Occupations List. In negotiating these agreements, theemployer must identify the relevant skill shortage and demonstrate why Australian workers
cannot fill these jobs.
The Working Holiday Maker program allows young adults (which currently includes those aged
18 to 30) from eligible partner countries to work in Australia for one year while having an
extended holiday. Work in Australia must not be the main purpose of the visa holder’s visit. The
Working Holiday Maker program includes the Working Holiday (subclass 417) and Work andHoliday (subclass 462) visas. Working holiday makers can generally work with one employer fora maximum of six months; but as of late 2015, those working in particular industries in Northern
Australia, including agriculture, can ask to stay at their job for an additional six months at most.
Migrants on a Working Holiday (subclass 417) visa can apply for a second working holiday visa
for another year if they work for at least three months in agriculture, fishing, mining or
construction in regional Australia.
The Seasonal Worker Programme (Special Program visa subclass 416) provides approved
employers with access to seasonal workers from participating countries (including: Fiji, Kiribati,
Nauru, Papua New Guinea, Samoa, Solomon Islands, East Timor, Tonga, Tuvalu andVanuatu). These workers can stay in Australia generally for up to seven months in any 12month period. Seasonal Workers may return in following seasons, providing employers withaccess to a returning, reliable and productive workforce. Intergovernmental memoranda ofunderstanding were signed by the Australian Government and the governments of theseparticipating countries to enable the citizens who are residents of these countries to participate
in the programme.
Sources: DIBP (2016c, 2016d, 2016f, 2016h, 2016i).

Issues raised around accessing seasonal workers
Tax rates for ‘backpackers’
A major concern for farm businesses was the proposed changes to tax rates for working
holiday makers.
In the 2015-16 Federal Budget, the Australian Government announced plans to change thetax status of most temporary working holiday makers, from resident to non-resident
commencing 1 July 2016 (Treasury 2015a). But the Australian Government delayed
implementing the changes pending an interdepartmental review (O’Dwyer 2016), which
was initiated following concerns raised about the impact of what has become known as the448

REGULATION OF AUSTRALIAN AGRICULTURE‘backpacker tax’ (NFF 2016b) on the competitiveness of industries such as agriculture andtourism (O’Dwyer 2016).
Under the current arrangements, people temporarily in Australia for a working holiday canaccess resident tax treatment typically if they are visiting Australia for more than six
months 53. Resident tax treatment includes: the tax-free threshold; the low income tax
offset; and the lower tax rate of 19 per cent for income between $18 200 and $37 000(ATO 2015b, 2016i; Treasury 2015a). This is in line with tax arrangements in the United
Kingdom, Canada and New Zealand that generally treat working holiday makers as
residents (Canada Revenue Agency 2016; Inland Revenue 2015; UK Government 2016).
Under the proposed change, working holiday makers were to be taxed as non-residents at
32.5 per cent from their first dollar of income. For example, a working holiday maker who
earned $15 000 in a financial year would pay $4875 in income tax.
Some suggested that taxing backpackers at a higher rate would act as a disincentive forbackpackers to work in Australia (as they would choose countries with lower tax rates).54
For example, West Australian Pork Producers Association said that:
Pork producers use itinerant labour from time to time. Currently people on working holiday
visas who are here for more than six months pay no tax until they reach the $18 000 threshold.
A change to be implemented from July 1 [2016] will mean these workers will pay 32.5 cents in
tax for every dollar of income up to $80,000. This is a strong disincentive for backpackers towork in the regions undertaking work that is difficult to satisfy with local labour. A
compromise should be found to address this issue. (sub. 24, p. 7)

The Chair of the NFF Workforce Productivity Committee also said that:
Taxing backpackers at a rate of 32.5 per cent will make work in Australian agriculture a highly
unprofitable proposition … Furthermore, it will lead to reduced agricultural productivity andwill strip regional communities and businesses of much needed tourism spending … Already
we are seeing signs that the proposed tax rate of 32.5 per cent is scaring working holiday
makers away from Australia. In nations like Canada and New Zealand, they are just as likely tobe able to find farm work that attracts substantially lower amounts of taxation … Any further
decline will only exacerbate the current trend of 12 per cent fewer backpacker arrivals toAustralia each year. (NFF 2016b)

One horticultural grower noted ‘that the tax paid by working holiday makers on a standard
38-hour week would increase [under the proposed change] from $109 to $256 and thatwhile this might be acceptable working in a café on the Cairns Esplanade, labourers
53 Currently, a person visiting Australia for more than six months who lives at the same place for most ofthat time, and either has or establishes ties in the local community is an Australian resident for tax
purposes. However, a person visiting Australia for less than six months, or more than six months and istravelling and working in various locations around Australia for most of that time, is a foreign resident for
tax purposes (ATO 2016i).
54 In principle, a potential working holiday maker will choose the country with the highest after-tax wage

adjusted for the cost of living, and also taking into account their preferences to live and work in thevarious countries.

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picking fruit at 400C in Katherine or Mareeba will not bear the change’ (Voice ofHorticulture, sub. 42, p. 40).
WAFarmers said that they ‘would like to see the current system remain in situ; however ifchanges are required, a tax rate of 19 per cent and the removal of the tax free thresholdwould be accepted’ (sub. DR226, p 29).
As part of its stakeholder engagement for the Australian Government’s review, Deloitte
noted that:
There was a split in the responses from industry [on the appropriate level of the tax], with someindicating a preference the current tax free threshold to be maintained, while others preferred alower rate of tax closer to those observed overseas. Of the non-zero rates suggested, 19 per centwas the most common preference … (2016, p. 6)

Following the review, the Australian Government proposed that from 1 January 2017,
working holiday makers would be taxed at 19 per cent from their first dollar of income(Morrison 2016a). At this rate, a working holiday maker earning $15 000 in a financial
year would pay $2850 in income tax.
While a taxation issue rather than a regulatory one (and therefore outside the scope of thisinquiry), the merit of the proposed changes to the tax rates depends on several factors.
These include backpackers’ decisions to come to Australia and work, as well as effects ofthe changes on industry and the wider community.
With the proposed change, the Government also announced other related changes
including:•increasing the tax rate imposed on working holiday makers who claim theirsuperannuation when leaving Australia (the Departing Australia Superannuation
Payment) from 38 per cent to 95 per cent (discussed below) (Morrison 2016a)•

increasing the upper age limit eligibility for a working holiday maker visa from 30 to
35 years (Morrison 2016e)•

allowing an employer with premises in different regions to employ a working holiday
maker for 12 months, with the working holiday maker working up to six months in aregion (Morrison 2016a)•

aiming to reduce exploitation and improve data collection by requiring employers ofworking holiday makers to register with the Australian Taxation Office in order towithhold tax at the 19 per cent rate. Otherwise employers must withhold tax at the32.5 per cent rate and may be subject to penalties (Morrison 2016a).

Parliament has not yet passed legislation to implement these changes. The Senate
Economics Legislation Committee was reviewing these changes at the time this report was
finalised (SSCE 2016).

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High costs — a barrier to accessing the Seasonal Worker Programme?
Some participants highlighted high regulatory costs as a barrier to accessing the Seasonal
Worker Programme and a reason for its limited uptake. The NFF noted the Programme’s
high upfront cost, which includes paying for workers’ airfares (although employers canrecoup any transportation costs above $500 from workers’ wages (DoE 2015b)):
The upfront cost to businesses to participate in the program are approximately $2000 per
worker – while much of this cost may be able to be recovered, it has a large cashflow impact(employing 100 workers requires an outlay of approximately $200 000 before any work is done
– or suitability for the work assessed). This requires a leap of faith from a price taking sector
which is traditionally risk [averse] and cost conscious. (sub. DR216, p. 50)

Cotton Australia also raised concerns about:•high administrative costs for farm businesses participating in the program who must
provide significant levels of paperwork to the Department of Employment as a small
business owner/operator•

under resourcing of the Department of Employment which is not supported in theirassessment of broad public interest and individual farm level labour needs•

lack of support for pastoral care of seasonal workers and their initial participation in the
program due to high upfront costs such as flight costs to Australia•

lack of support to drive uptake of the seasonal worker program; and•the length of time it takes from application to actually getting a worker through the seasonal
worker program. [This] is somewhat lengthy and does not always suit growers needs forworkers on short notice. (sub. DR262, p. 17)

Some research suggests that while the high costs of the Seasonal Workers Programme arean issue, famers’ limited uptake of workers under the Programme is mainly because
farmers can readily meet their labour needs in other ways. In 2014, Doyle and Howes(2015) surveyed horticultural employers who were aware of the Programme 55 but notusing it and found that:•the main reason (61 per cent of employers) for not participating in the Programme was
because there was ‘no need’•

14 per cent said the Programme was ‘too costly’•

11 per cent said the Programme was ‘too risky’ because, for example, they were unsure
whether they could guarantee a minimum period of work for Seasonal Workers.

Doyle and Howes concluded that ‘the lack of an aggregate labour shortage due to theprevalence of illegal workers and backpackers in the horticulture industry remains the key
55 177 employers responded to the survey. Of those who had heard of the Programme (55 per cent ofsurveyed employers), 90 responded to the question asking for the main reason for not participating in the
Seasonal Worker Programme (Doyle and Howes 2015).

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constraint on employer demand for the [Seasonal Worker Programme]’ (2015, p. 1).
Participants in the Joint Standing Committee on Migration’s inquiry into the Seasonal
Worker Programme also supported this view (JSCM 2016).
Employers’ decisions to hire working holiday makers over workers under the Programme
are despite analysis by ABARES which suggested that Seasonal Workers pick more fruit
per hour than working holiday makers (Leith and Davidson 2013). Hiring Seasonal
Workers, who return each season, can also lead to lower training and recruitment costs
when compared with employing working holiday makers. Prima facie, these results
suggest that greater use of the Seasonal Workers Programme by farmers could be
beneficial.
The Commission’s Migrant Intake into Australia inquiry questioned whether the working
holiday maker program is delivering the best outcomes for the community as a whole. On
working holiday makers’ ability to access a visa for a second year, the Commission notedthat:… the initiative is partly aimed at helping employers in regional Australia to meet persistentlabour shortages … However, this is not necessarily consistent with maximising community
wellbeing. Directing working holiday makers into regional areas and selected industries, rather
than allowing market forces (in particular, wages) to determine where they choose to work, canimpose efficiency costs if their labour could be used more productively elsewhere …
Further analysis is warranted to determine whether inducing working holiday makers to take up
regional jobs remains sound policy from an economy-wide perspective. (2016a, p. 388)

And while working holiday makers are not necessarily the most productive type of labourfor farmers, they appear to be used because they are readily available and there are fewer
barriers to hiring them. Reducing barriers to hiring domestic workers (including theunemployed) and Seasonal Workers could benefit both Australian farmers and the broader
community.

Barriers to employing temporary skilled workers
Reforms to reduce compliance costs for sponsors of subclass 457 visa holders
The West Australian Pork Producers Association (sub. 24) and a Queensland cotton farmer(box 11.3) noted the large amount of time they spend dealing with administration related to
employing temporary migrant workers, particularly those on subclass 457 visas. They alsomentioned the difficulties that they face trying to navigate the system.
There have been a number of recent reforms aimed at reducing the compliance costs of
Temporary Work (Skilled) (subclass 457) visas. For example, in October 2014, theGovernment in its Industry Innovation and Competitiveness Agenda proposed streamlining
the subclass 457 program to reduce the time and cost to business of getting subclass 457
workers into Australia (Australian Government 2014b).

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Box 11.3

Employing foreign workers — some experiences relayed

An office manager of a large cotton farming business in southern Queensland recently set out
to complete a nomination form to allow the business to employ a foreign worker whose skills
could not be matched locally.
The manager told the Commission that she was unable to find the correct forms on the
Department of Immigration and Border Protection’s website, so she phoned the department’s
helpline. The manager reported waiting an hour and a half before speaking to someone (butwas told that she had reached the wrong office). The manager was then transferred to thecorrect office. The call was answered after about 30 minutes of waiting on hold.
The manager reported that when she spoke to the correct office, she was given helpful advice
about how to set up an account and access the correct forms. However, the manager found theform to be confusing and had difficulty working out which subclass of visa applied to the worker
that she planned to employ. The manager again phoned the helpline, and said that she was put
on hold for one hour. After being advised about which subclass of visa to apply for, the manager
reported that the form took one and a half hours to fill in.
On submitting the form, the office manager received a confirmation email that asked for a seriesof complementary forms to be submitted in support of the visa application. Again, she noted that
it was unclear which forms were required or where to get them from, so she called the helpline
again and waited about an hour on hold. Once the call was answered, she was directed to the
web page with the required forms.
At the time the Commission spoke to the office manager, the application was incomplete. The
supporting documentation required input from the business’ Chief Financial Officer to make acase for why no Australian worker was more suitable for the role. The reason for nominating theforeign worker was a lack of local candidates for the position.
The Western Australian Pork Producers Association made similar observations.
Whilst the assistance from individual officers within the Department of Immigration and Border
Protection (DIBP) is a high standard, the extent to which they can help is hampered by caution aboutproviding advice as opposed to information. … the system itself is, at times, interpreted in an overly
prescriptive manner … The DIBP website is also difficult to navigate and accessing meaningful
information is not easy. It is noted that DIBP is currently running a survey seeking feedback on making
the site easier to use. (sub. 24, p. 7)
Source: Productivity Commission case study interview (appendix C).

The Independent Review into Integrity in the Subclass 457 Programme (Azarias review)(Azarias et al. 2014) was released in September 2014. In March 2015, the AustralianGovernment announced that it would reform the subclass 457 visa program in accordancewith the majority of the report’s recommendations (DIBP 2015a, 2016a). The Review
recommended streamlining the processing of sponsorship, nomination and visa
applications, based on certain risk factors. In the Commission’s view, there should also be
scope for Department of Immigration and Border Protection (DIBP) to make the systemeasier to navigate and improve support services to reduce the burden on employers wishingto hire foreign workers.

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Calls to expand the Consolidated Sponsored Occupations List
Another key area of concern for inquiry participants was the Consolidated Sponsored
Occupations List (CSOL), which is used to determine eligibility for the subclass 457
program. Cotton Australia, for example, said that ‘the ability to update the CSOL to reflect
new skilled occupations is vital and would remove the biggest single barrier to the 457
faced by the agriculture sector’ (sub. DR262, p. 15). It also noted that the ‘inflexibility of
CSOL will place significant restrictions on agricultural productivity, with anticipatedlabour shortages’ (sub. DR262, p. 16).
The NFF stated that many skilled agricultural occupations are not on the CSOL, and that
this means farm businesses are spending years negotiating labour agreements to accessoverseas workers.
The ability of farm businesses to fill skilled labour shortages with the use of overseas workers
on the 457 visa program is limited by its reliance on the ANZSCO [Australian and New
Zealand Standard Classification of Occupations] coding system, which was never intended todefine current industry skills needs exhaustively. Many skilled agricultural occupations are
simply not on the Consolidated Skilled Occupations List (CSOL) which [is] used to determine
eligibility for [subclass] 457 visas. As a result, agricultural industries have dedicated years
negotiating labour agreements to access workers they desperately need. (sub. 61, p. 38)

The dairy industry (Australian Dairy Farmers, sub. 63) and pork producers (WestAustralian Pork Producers Association, sub. 24; Australian Pork Limited, sub. 37) haveused labour agreements to meet their labour demands. Australian Dairy Farmers (ADF)(sub. 63) reported that the dairy industry and the DIBP negotiated an industry-wide labour
agreement in response to a need to fill senior farmhand roles. A labour agreement wassought because the CSOL does not acknowledge senior farmhands, so it is not possible torecruit people of this skill level on subclass 457 visas. ADF claimed that:
The need for suitably skilled and experienced employees is only going to grow as farms
aggregate and more senior roles become available. Current immigration requirements
hampering these efforts, such as unaligned ANZSCO codes and visa limitations are imposing
significant barriers for the employment of overseas labour. ADF sees a number ofinconsistencies in ANZSCO definitions and current practice, such as definitions used in the
Pastoral Award 2010, and for a number of occupations that have their skill levels classified too
low to enable employers access to the 457 visa scheme. (sub. 63, p. 10)

Skilled occupations on the CSOL are those included in skill levels 1, 2 and 3 of the
ANZSCO list published by the Australian Bureau of Statistics (PC 2015d). The
Azarias review (2014) recognised the imperfect nature of the translation of the ANZSCO
occupation list into the CSOL, and recommended changes to accommodate the inclusion of
emerging skilled occupations on the CSOL (box 11.4). This should make the process for
updating CSOL more responsive.
However, the review recommended that the CSOL remains a list of occupations that are
ANZSCO skill level 3 or above, and that semi-skilled occupations be addressed throughthe labour agreement system.
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Box 11.4

Azarias review’s recommendations — CSOL and identifying
genuine labour shortages

Recommendation 1.1: That, in lieu of the existing Ministerial Advisory Council on Skilled
Migration, a new tripartite ministerial advisory council, which is not necessarily prescribed inlegislation, be established to report to government on skilled migration issues.
Recommendation 1.2: That the new ministerial advisory council be supported by a dedicatedlabour market analysis resource.
Recommendation 3.1: That the Consolidated Sponsored Occupations List (CSOL) be retained
as a list of occupations which are at Skill Level 3 and above, and that the CSOL should be able
to be amended by two means: first, the addition of skilled occupations which can be shown toexist in the community but which may not be on the Australian and New Zealand Standard
Classification of Occupations (ANZSCO) list; and, second, the refinement of the CSOL in cases
where there may be integrity or appropriateness concerns. Any occupations not on the list,
which are usually referred to as semi-skilled, may be addressed as part of the Labour
Agreement regime.
Recommendation 3.2: That the new ministerial advisory council provide advice on those
occupations where some concerns exist and recommend additional requirements or limitations
on occupations and/or regions.
Source: Azarias et al. (2014).

The Australian Government supported, or supported in principle, these recommendations
from the review (DIBP 2015a), and reinstated the Ministerial Advisory Council on Skilled
Migration in mid-2015 (DoF 2016). One of the Council’s tasks is to review theeffectiveness of the CSOL to ensure that the composition of the list better aligns to theneeds of industry. The Council is currently undertaking this task in consultation with
relevant government agencies including: the DIBP; Department of Employment;
Department of Education; and state and territory governments (DIBP, pers. comm.,
14 October 2016). The Council is expected to report to the Australian Government in early
2017.
The Commission’s Migrant Intake into Australia inquiry supported recommendations fromthe Azarias review, on the basis that they should increase flexibility within the CSOL(PC 2016a).
Training requirements under the subclass 457 visa program
Sponsors of subclass 457 visa holders who have operated in Australia for at least
12 months are required to either pay at least 2 per cent of their payroll annually to anindustry training fund, or spend at least 1 per cent of their payroll on training existing
employees (Migration Regulations 1994 — Specification of Training Benchmarks andTraining Requirements (Cwlth)).

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Australian Pork Limited considered the training requirements to be:… onerous and inflexible by industry and inhibit an employers’ ability to effectively train
migrant workers who are yet to qualify for permanent residency status. (sub. 37, p. 3)

Subclass 457 visa holders and training requirements can have conflicting effects on
domestic workers’ skill development. Migrant workers can promote domestic workers’
skill development by helping to train them. For example, Australian Pork Limited saidthat:
We actually think there are significant benefits for the 457 visa worker back to the Australian
workers and that is because the people that are coming in on our 457s are either vets or a step
below that, which are much higher qualified in their home country than what they are here. And
so we think there is a transfer of knowledge and expertise from the 457 visa to the Australian
worker. (trans., p. 364)

But ready access to temporary skilled migrant labour can reduce employers’ incentives tohire and train domestic workers. In addition, the absence of skills shortages reduces
upward pressure on wages for skilled workers, which can reduce domestic workers’
incentive to acquire skills.
Training requirements can be justified when domestic workers’ skill development ishampered by temporary skilled migration. Domestic workers with limited skills are more
likely to struggle to find and keep jobs, which can also have broader impacts on theAustralian community. Employers do not account for these costs to the community when
they decide whether to hire temporary skilled migrants, and training requirements cancorrect for this.
A number of inquiries have concluded that training requirements on employers should
remain. The Azarias review (2014) noted that there was strong stakeholder support inprinciple for training requirements. However, stakeholders to that review, as well as thoseto the Senate Education and Employment References Committee’s (SEERC’s) inquiry into
migrant exploitation (SEERC 2016), highlighted problems with the current requirements.
SEERC said that ‘the evidence to the inquiry makes it clear that the current training
requirements are ineffective and in need of complete overhaul’ (2016, p. 138). Some issues
raised were that an employer of one subclass 457 visa holder must meet the same training
requirement as an employer of many subclass 457 visa holders, and that training funds are
not necessarily allocated to remedying specific skills shortages.
The Azarias review (2014) recommended replacing current training requirements with anannual training fund contribution, which would be scaled according to business size. It
suggested the contribution could be $400 per visa holder per year, with higher
contributions in the first year for larger businesses. The Government supported theserecommendations subject to further consultation (DIBP 2015a).

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SEERC also supported the recommendations, but recommended a higher contribution of$4000 per visa holder, to be in line with the incentive payment that employers receive forengaging an apprentice. SEERC (2016) also recommended that:•sponsors be required to hire an Australian tertiary graduate in their enterprise for eachprofessional subclass 457 visa holder that they take on•sponsors hiring subclass 457 workers for trade professions must demonstrate that
25 per cent of their trade workforce are apprentices when their total workforce consistsof four or more tradespersons.

The Government should carefully examine all options after taking into account the broader
costs to the community. The incentive payment currently given to employers ofapprentices is not necessarily a good benchmark for the requirement, as it is designed toencourage employers to take on apprentices by offsetting some of their training costs,
rather than reflecting the broader costs on the community.
Also, the proposed requirements on employers can significantly increase employers’ hiringcosts. This is likely to deter employers from hiring temporary skilled migrants, and not allof these employers will hire domestic workers instead, particularly those that need skilled
labour immediately and for a short period only.
Labour market testing — a further area of concern
Labour market testing was another area of contention. Employers looking to hire subclass
457 visa holders (and access the Seasonal Worker Programme) must first test the local
labour market to ensure that there is no suitable Australian citizen, permanent resident or
eligible temporary visa holder readily available to fill the position.
A number of participants claimed that labour market testing is unnecessary and therefore
imposes an unnecessary cost on businesses. The NFF (sub. 61), for example, said thatlabour market shortages are nothing new in the agricultural sector, but that the labour
market testing regime does not acknowledge existing shortages, and applies across theboard to all sectors and industries seeking to access overseas workers.
The NFF also noted problems with the requirement to advertise and offer work toAustralian jobseekers before recruiting overseas workers.
Farmers are required to advertise jobs broadly, eliciting numerous responses from foreign
workers and only very few from Australian workers. Each job application must be reviewed
and responded to, requiring allocation of significant time and resources, when the reality is thatmost Australians are not looking for jobs that involve hard, physical work in rural, regional andremote areas. In some cases, our members tell us that Australian workers who have applied andbeen offered a job have refused the offer, advising the application was only made to meet theirjob application quota for the month. (sub. 61, p. 39)

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Some stakeholders (NFF, sub. 61; GrainGrowers, sub. 73) called to remove labour market
testing requirements in regions and/or industries where there is a demonstrated labour
shortage (for example, regions eligible for the Seasonal Worker Programme).
On labour market testing before hiring 457 visa holders, the Azarias review said that:On the evidence presented to us we have concluded that the labour market testing provisions
introduced in 2013 are easily circumvented and do not prevent employers from engaging
overseas workers in place of Australians. In addition, recruitment practices are highly diverse
across occupations and industries: to design a system that encompasses this diversity isimpractical. (2014, p. 45)

While the Azarias review recommended that labour market testing be abolished, thisrecommendation was ‘noted’ (rather than ‘supported’, ‘supported in principle’ or ‘notsupported’) by the Australian Government (DIBP 2015a).
The Commission’s Migrant Intake into Australia inquiry concluded that ‘despite theshortcomings in the current labour market testing arrangements identified in the Azarias
report, the Commission considers that the current labour market testing provisions should
be retained for the moment’ (PC 2016a, p. 399). However, the Commission recommended
that ‘the Australian Government should commission (by 2020) an independent review ofthe effectiveness of changes implemented as a result of the recommendations made by the[Azarias Review]’ (PC 2016a, p. 399).

Broader issues
Superannuation payments for temporary residents
A number of concerns were raised about paying superannuation guarantee contributions,particularly in relation to foreign workers with temporary residency. Under the guarantee,
an employer generally must contribute at least 9.5 per cent of an employee’s before-tax
income to the employee’s superannuation fund when they earn $450 or more in a month,regardless of their residency status (ATO 2015f).
Reducing compliance costs from administering superannuation

Voice of Horticulture (sub. 42) and Cotton Australia (sub. 23) noted the disproportionately
high compliance costs associated with making small superannuation contributions, mainly
for workers (both domestic and temporary residents) who are employed for a short period,
such as during harvesting.
An option that was previously recommended by the Regulation Taskforce (2006) and theCommission’s Annual Review of Regulatory Burdens on Business: Primary Sector(PC 2007) is to increase the minimum income threshold ($450 per month) after which
employers must start paying superannuation.
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The current threshold has not changed since it was introduced in 1992 (PC 2007) and is set
at the tax-free income threshold at the time of $5400 per financial year (ATO 2015a). Overthe same period, the minimum wage has doubled. 56 This means an employer in 1992 wasrequired to pay superannuation to a minimum wage worker after they worked 53 hours in amonth. Today, an employer must pay superannuation after an employee has worked 25
hours per month (or less than 7 hours a week).
Increasing the threshold would reduce employers’ labour costs, but also reduce theretirement savings of employees earning below the threshold (unless offset by acorresponding increase to workers’ base pay equal to the fall in superannuation). The
Government noted that the fall in some employees’ retirement savings when it rejected theRegulation Taskforce’s recommendation to increase the threshold to $800 per month (or$9600 per year) would be in line with the growth in average wages since 1992 (AustralianGovernment 2006; Regulation Taskforce 2006).
The Commission’s previous regulatory review of the primary sector agreed with a higher
threshold, but did not specify a level. It suggested that it be increased through anappropriate process and that Treasury periodically review it (PC 2007). At the time, theCommission judged the benefit to businesses from lower compliance costs would likely
offset any negative impact on workers’ retirement savings, and would take into accountregulatory creep caused by wage inflation.
There are also other solutions for reducing business compliance costs without broader
economic effects. The Australian Taxation Office’s Small Business Superannuation
Clearing House, for example, allows small businesses to combine their superannuation
guarantee contributions into one electronic payment to the clearing house, which thendistributes the payment to employees’ superannuation accounts (ATO 2016g).
More generally, the tax rates on superannuation contributions are higher than income tax
rates for those on low-incomes, with the current tax free income threshold of $18 200(ATO 2015b). An employee earning $15 000 before tax (excluding superannuation) in ayear would avoid taxes of about $210 on their superannuation contribution if, for example,
they receive their superannuation with their take-home wages, rather than into asuperannuation fund.
Superannuation for temporary residents does not align with objectives

Voice of Horticulture (sub. 42) also questioned the need for superannuation payments forworking holiday makers who, like overseas workers temporarily in Australia, can claim it
when they depart Australia (the Departing Australia Superannuation Payment (DASP))
56 The minimum wage in 1992 is based on the full-time wage in the Metal Workers Award which was$325.40 (Bray 2013). The national minimum wage at November 2016 was $672.70 (FWO 2016c). A
full-time work week consists of 38 ordinary hours.

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(ATO 2015e). Commenting on superannuation contributions for temporary overseas
workers in their submission to the Commission’s Migrant Intake into Australia inquiry, theNFF said that:… this policy measure is worth reconsidering at the right time, given the underlying purposesof superannuation to provide an adequate level of retirement income, relieve pressure on the
Age Pension and increase national savings. Each of these objectives can be achieved without
the need to extend the benefit to temporary, overseas workers. (2015b, p. 14)

Paying superannuation to temporary residents does not appear to be in line with theobjectives of superannuation. A Charter Group established by the Australian Government
in 2013 assessed the core high-level objectives of the superannuation system are to:•provide an adequate level of retirement income•

relieve pressure on the Age Pension; and•increase national savings, creating a pool of patient capital to be invested as decided byfiduciary trustees. (Cooper et al. 2013, p. 29)

These objectives relate to Australians’ superannuation, taxation and pension. Consistent
with this, temporary residents are able to claim their accumulated superannuation
contributions when they leave Australia. This suggests that requiring temporary foreign
workers to have superannuation accounts, and Australian employers to make contributions
and to administer these arrangements, is an unnecessary regulatory burden on both
employers and temporary residents.
Superannuation collected from temporary residents is a source of revenue for government,
as temporary workers’ superannuation contributions are taxed at 15 per cent and then again
at 38 per cent when they claim their DASP (ATO 2015d, 2016a). From 1 July 2017, nearly
all of working holiday makers’ superannuation could be collected by the AustralianGovernment, with the Government proposing to increase the tax rate on working holiday
makers’ DASP claims to 95 per cent. The Government expects the higher DASP tax rate toincrease tax revenue by $35 million each financial year (Morrison 2016c).
But a sizable share of working holiday makers’ superannuation appears to be collected bysuperannuation funds, which charge fees for managing superannuation. Data on thenumber of working holiday makers with superannuation accounts are limited. However, if,for example, half of the 137 000 working holiday makers in Australia (DIBP 2016g) heldan account for a year, then superannuation funds would collect about $5 million just fromadministration fees. 57 And superannuation funds often charge other fees.
Funds’ fees are generally offset by funds’ investment returns, but this is of little benefit to
the Australian Government. Unlike workers with limited investment expertise, theGovernment could earn an equivalent return from managing working holiday makers’
superannuation.
57 Estimates based on an average annual administration fee of $70.

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One option is for the Australian Government to collect working holiday makers’
superannuation directly from employers. For example, employers could pay working
holiday makers’ superannuation directly to the Australian Taxation Office, which could
then hold it until working holiday makers lodge a claim (as they already do for unclaimed
superannuation).
However, such a change would require amending legislation. It would also need to be donein a way that does not bias employers’ decisions about who to employ by making working
holiday makers relatively more or less expensive to employ than domestic workers.
Alternatives to paying superannuation to temporary residents

The above option could be more broadly applied to temporary residents’ superannuation if
the Australian Government decides that paying them superannuation is inconsistent withthe objectives of the superannuation system.
Other options could involve changing the taxation arrangements for temporary residents.
For example, the Government could impose an income tax rate on foreign workers that
captures all of their superannuation, while ensuring the costs of employing temporary
residents and domestic workers remain the same for employers. Another option is to allow
temporary residents to be paid their superannuation guarantee with their take-home wage.
However, these options need to be carefully examined as they raise broader questions
about the taxation and superannuation systems, and can affect the demand and supply of
temporary migrant labour in Australia. These broader issues are beyond the scope of thisinquiry and have not been examined in detail.
Checking migrants’ visas
The DIBP requires employers to take reasonable steps to ensure that their workers arelegally able to work in Australia (DIBP 2016b). This requirement helps avoid instanceswhere migrants work without a valid visa or an entitlement to work, which could
undermine Australia’s migration policies and labour market conditions. Checking
migrants’ visas can also help reduce instances of exploitation by employers. Migrants may
be susceptible to exploitation because of characteristics such as limited English language
skills and knowledge of workplace entitlements. In 2015-16, 76 per cent of litigation filedby the Fair Work Ombudsman and more than one third of its enforcement activities
involved visa holders (FWO 2016b, p. 2). In addition, the Fair Work Ombudsman’sinquiry into the wages and conditions of 417 visa holders found that:•

almost a third did not receive payment for some or all of the work they did …

•

14 per cent had to pay to secure regional work …

•

more than a third claimed they were paid less than minimum wage. (2016b, p. 4)

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Migrants that work in breach of their visa are particularly susceptible to exploitation as
they can face large penalties such as deportation, and may therefore be less willing toreport exploitation (PC 2015e).
The Voice of Horticulture said that:… the imposition of visa checking responsibilities is another concern for growers. Farmers are
required to check visa entitlements within 48 hours of an employee commencing work to avoid
penalties … during harvest time when up to 300 new casual labour is on site the administrative
burden can be immense. (sub. 42, p. 41).

The DIBP previously specified that employers who did not have immediate access to theinternet or fax had 48 hours to check a job applicant’s work entitlements (DIAC 2009). But
the DIBP (2016b) currently does not specify a grace period for when a farmer must checkan employee’s work entitlement, but expects ‘employers to take reasonable steps, atreasonable times, to confirm that a non-citizen is allowed to work’ and prefers employers
to check a worker’s visa details using the Department’s Visa Entitlement Verification
Online service (VEVO). The DIBP recommends that employers conduct checks before amigrant commences work.
Limited information is available to assess whether checking migrants’ work entitlements isburdensome on businesses, but VEVO provides a fast response (which was acknowledged
by Voice of Horticulture (sub. 42)), so the compliance burden per worker appears to below (DIBP 2016e).
There can be other barriers to accessing VEVO such as inadequate internet access(chapter 6); and other aspects of the checking process may be time-consuming, such ascollecting workers’ visa details. These barriers can delay an employer from checking thework entitlements of all their temporary migrant employees before they commence work.
However, employers can avoid penalties as long as they can show that, given thecircumstances, they have taken reasonable steps to confirm that a migrant can work
legally.
The Commission notes that there are benefits from employer visa checks in limiting theprevalence of illegal work, which can help reduce instances of migrant exploitation. The
DIBP should continue to examine ways to improve the ease and speed of access to visa
checks by employers, and ensure that businesses clearly understand their responsibilities.
Labour hire companies
Farmers often use labour hire companies to source labour, particularly during harvest time.
However, there have been instances of these companies underpaying and more generally
exploiting migrant workers. The Victorian inquiry into the Labour Hire Industry andInsecure Work noted that:
The evidence provided to the Inquiry shows that there is a problem with the presence of ‘rogue’
labour hire operators in Victoria. While it is difficult to be precise about the extent of this462

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problem, rogue operators are particularly evident in the horticultural industry (including thepicking and packing of fresh fruit and vegetables), and the meat and cleaning industries. In
many instances, the activities of rogue operators have led to exploitation of vulnerable workers
including underpayment of award wages, non-payment of superannuation, provision of
sub-standard accommodation and non-observance of statutory health and safety requirements.
(VDEDJTR 2016b, p. 25)

Case study participants to this inquiry also expressed some concerns about the practices oflabour hire companies. Labour hire companies can be difficult to pursue as they may avoid
paying unpaid wages by declaring insolvency and then rebirthing their operations
elsewhere (known as ‘phoenixing’) (appendix C). Some labour hire companies also
directly source workers from their country of origin, which weakens regulators’ educationand enforcement activities (SEERC 2016).
The Queensland and South Australian Parliaments and the Victorian Government recently
reviewed the labour hire industry, and labour hire was also examined by SEERC’s inquiry
into migrant exploitation (Parliament of South Australia Economic and FinanceCommittee 2015; Queensland Finance and Administration Committee 2016; SEERC 2016;
VDEDJTR 2016b).
One of the recommendations put forward by these reviews (except for Queensland) was toestablish a national licensing regime for labour hire companies, and to require businesses
to use a licensed labour hire company to procure labour. In the absence of a national
regime, the South Australian and Victorian reviews recommended implementing
state-based systems.
The Queensland and Victorian reviews also recommended doing more to limit labour hirecompanies’ practice of avoiding their employer obligations through ‘sham contracting’,
where they hire workers with Australian Business Numbers. The Victorian inquiry
advocated for the Productivity Commission’s Workplace Relations Framework inquiry’s
recommendation that it should be unlawful for an employer to misrepresent an
employment relationship as an independent contracting arrangement where the employer
could be reasonably expected to know otherwise (recommendation 25.1 (PC 2015e)).
Voice of Horticulture (sub. 42, p. 43) warned that ‘imposing red tape obligations on
growers is not the answer’ to improving oversight of labour hire firms. The Commissionagrees that any regulations on labour hire companies should not place an unnecessary
burden on businesses (or on labour hire companies). However, the costs of regulation need
to be balanced against the need to deal with exploitation.
The Commission has not assessed the merits of a licensing regime. However, in its
Business Set-up, Transfer and Closure inquiry, the Commission recommended tracking
company directors through a Director Identity Number and requiring additional details
about them. These recommendations should help regulators pursue exploitative employers
who may try to avoid paying unpaid wages by liquidating their company (recommendation
15.6) (PC 2015b).
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Cotton Australia (sub. DR262) and the NFF (sub. DR216) agreed that this recommendation
is worth considering. In addition, adopting other recommendations from the Business
Set-up, Transfer and Closure inquiry will facilitate hiring workers which could reduce
farmers’ reliance on labour hire companies.

11.3 Workplace relations
Australia’s workplace relations framework comprises a complex array of labour laws,
regulations and institutions, and specifies the minimum wages and conditions thatbusinesses must provide their employees.
Wages and conditions in the pastoral and agricultural sectors have evolved from the 19th
century. The foundations of the minimum wage are based on the 1907 Harvester Case thatwas initiated by a manufacturer of harvesters (box 11.5).
Box 11.5

Some notable industrial decisions in agriculture

Harvester Case establishes the minimum wage
In a case brought forward by Hugh Victor McKay to the Arbitration Court in 1907, JusticeHiggins (President of the Arbitration Court) decided a ‘fair and reasonable’ wage to be
7 shillings a day, which he deemed would allow an unskilled labourer to support a wife andthree children.58 Mckay owned Sunshine Harvester Works which built stripper harvesters. The
Harvester Case became the basis for the national minimum wage in Australia (FWC 2014).

Wide comb dispute in the Pastoral Industry Award
In 1984, sheep shearers and farmers disputed the use of shearing combs wider than 2.5 inches(which had been the standard) (O’Malley 2009; Sullivan 2013). Shearers argued that thechange would attract cheaper labour from New Zealand, who already used the wider combs,
and were paid less in New Zealand largely because of Australia’s stronger currency at the time.
Farmers, however, claimed that the wider combs would improve productivity. Shearers went on
strike for six weeks, but the Australian Conciliation and Arbitration Commission ruled to allow
the use of wide combs.

Most farm businesses (except some in Western Australia) are covered by the Fair WorkAct 2009 (Cwlth) (PC 2015e). The Fair Work Act has a diverse set of objectives, including
to deliver outcomes that are fair, flexible, co-operative, productive, relevant, enforceable,
non-discriminatory, accessible, simple and clear.
In 2015, the Commission held an inquiry into the workplace relations framework(PC 2015e), which assessed all aspects of the framework and addressed many of theconcerns raised in this inquiry about provisions in the Fair Work Act. For example, the58 Ex parte HV McKay (Harvester Case) (1907) 2 CAR 1 [8 November 1907]

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NFF (sub. 61, pp. 33–36) identified a number of ‘red tape’ concerns in the Fair Work Act
that the Commission made recommendations on. The NFF said that:•the requirement to review all awards every four years was ‘excessive’ — theCommission’s workplace relations inquiry recommended removing this requirement(recommendation 8.1)•

the notice of representational rights was an ‘unnecessarily strict approach with severe
consequences for employers — the Commission recommended allowing the Fair Work
Commission wider discretion to overlook minor procedural or technical errors whenapproving an agreement, and extending the scope of this discretion to include minor
errors or defects relating to the issuing or content of a notice of employee
representational rights (recommendation 20.1)•

the drafting of the protections provision was ‘opaque’ and ‘its effect not clear for mostusers’ — the Commission recommended that amendments be made to section 341 of
the Fair Work Act to more clearly define the meaning and application of workplacerights (recommendation 18.2).

Other concerns raised by participants to this inquiry related to overtime and penalty rates,
and the prescribed minimum length of shifts.

Overtime and penalty rates
Like many other modern awards, the Pastoral Award 2010 and Horticulture Award 2010
pay overtime and penalty rates for work outside any ordinary hours on weekdays. The rates
are generally one and a half times the regular hourly wage for work after hours or on
Saturday, and double the regular wage for Sunday work (although these rates can varydepending on the particular occupation covered under the award).
A number of participants (for example, Tasmanian Farmers and Graziers Association,
sub. 16, and Voice of Horticulture, sub. 42) claimed that overtime and penalty rates
significantly increased the costs of production to farms that hire workers. They noted that
rates based on a Monday to Friday working week do not reflect the seasonal nature of
agricultural work. Also, many agricultural activities occur early in the morning or at night,
and continue to be carried out on weekends — all of which are subject to penalty rates.
AgForce, for example, said that:
The appropriateness of set mandatory penalty rates, given the timing requirements of many
farms where many activities cannot be done between the more urban-relevant 9am to 5pm
period eg, night spraying when wind and temperature are appropriate to make best use of
applied chemical and 24-hour crop planting practices during the time-limited, more effective
window. Such non-standard conditions can be offset by providing employees with otherrurally-relevant options to maintain equitable employment conditions. (sub. 17, p. 10)

Both Tropical Pines (sub. 39) and the Tasmanian Farmers and Graziers Association(sub. 16) acknowledged that the Pastoral and Horticulture Awards contain provisions that
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accommodate some of the nuances of agricultural work. For instance, both awards consider
ordinary hours of work to be between 6am and 6pm from Monday to Friday for some
occupations. The Horticulture Award also does not pay casual workers penalty rates forweekend work.
NFF acknowledged that the Pastoral Award ‘has more flexible provisions than many
awards around hours of work’, but noted that:… you have different arrangements for different parts of the pastoral industry [under the
Pastoral Award], and we don’t know that that’s the best outcome … (trans., p. 405)

The Fair Work Commission sets penalty rates in modern awards and, in doing so, should
consider the effects of penalty rates on the wider community (including those who are notin work). This was recommended by the Commission’s Workplace Relations inquiry
through revising the modern awards objective in the Fair Work Act (recommendation 8.3)
(PC 2015e).
The Commission’s Workplace Relations Framework inquiry also advocated for greater useof quantitative and qualitative data analysis when setting penalty rates. An example of thistype of analysis underpins the inquiry’s recommendation to reduce Sunday penalty rates
for permanent employees in the hospitality, entertainment, retail, restaurant, and café
industries (recommendation 15.1). Such analysis could be used as a template for assessing
the penalty rates in the Pastoral and Horticulture Awards.

Minimum shift length in the Pastoral Award and Horticulture Award
A number of participants (for example Tasmanian Farmers and Graziers Association,
sub. 16, and ADF, sub. 63) raised concerns about provisions in the Pastoral Award 2010that stipulate that part-time and casual employees must be engaged for at least three hours
every shift. The Horticulture Award 2010 also specifies that employers pay workers aminimum of three hours of wages for working on Sundays.
ADF claimed that this stipulation ‘does not meet the modern requirements of a dairy farm’(sub. 63, p. 11), and that the time it takes to milk depends on the season, the size of theherd and the technology used on-farm. This can mean that some farms take less than threehours to milk their entire herd.
The requirement to pay a staff member for 3 hours’ work, rather than the hours actually
worked, creates unnecessary costs to farmers, and also acts as a barrier to employment for
employees who seek flexible working arrangements. (sub 63, p. 11)

ADF’s submission to the Commission Workplace Relations Framework inquiry also statedthat the three hour minimum engagement ‘removes any incentive for staff to milk in atime-efficient manner, thus lowering productivity’ (2015, p. 1).
The Fair Work Commission is currently reviewing all modern awards and provides anopportunity for concerns to be raised about flexibility constraints affecting the466

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competitiveness of farm businesses (FWC 2015). The Fair Work Commission has sought
feedback on the minimum shift length for a casual employee (which other awards also
include), and is exploring whether parties should be able to agree to a shorter minimum
length if it suits their circumstances (FWC 2016).
The Commission’s Workplace Relations Framework inquiry’s recommendations to revise
the modern award objective, and amend the Fair Work Act to ensure modern awards canbe varied if necessary to achieve or improve outcomes according to the revised modern
awards objective, would help the Fair Work Commission better assess farm businesses’
concerns about awards (PC 2015e).

11.4 Work health and safety
The objective of work health and safety (WHS) regulations is to help prevent workplace
injuries and diseases by encouraging employers, employees and regulators to work
together to provide safe and healthy workplaces. WHS is regulated by the states andterritories, but most jurisdictions (except Victoria and Western Australia) 59 and theCommonwealth have implemented model regulations, with changes in some instances(SWA 2016a).
Agricultural work involves a range of hazards, including handling animals and usingchemicals, agricultural vehicles and machinery. Safe Work Australia (SWA) described
agriculture as ‘unique’ from a WHS perspective and noted that:
While other industries share some of the hazards of farming such as plant, chemicals, noise,dust, sun exposure or working with animals, the combination of hazards found in agriculture,
make it one of the most dangerous industries in which to work. (sub. 10, p. 1)

Many farmers are self-employed and live and work on their property, which blurs the line
between workplace and household hazards. SWA said that:
Self-employed farmers face the demands and stress of running a business as well as
undertaking the hard physical labour involved in farm work … In addition to being places ofwork, farms are unique in that they are also homes, often with children. (2013, p. iii)

Farmers also often work on their own (which means they may not have anyone to assist
them if they are injured on the job) and can work at a distance from any help (SWA 2013).
Some evidence suggests that farmers are relatively tolerant of a high level of risk andperceive a low threat from injury (ASCC 2006).

59 Western Australia is currently consulting on the draft legislation that incorporates the model (Western

Australian Department of Commerce 2016). Victoria is reviewing some of its legislation, but theVictorian Government has stated that it will not adopt the model regulations in their current form (Work
Safe Victoria 2016a, 2016b).

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A dangerous industry to work inAgricultural workers have one of the highest rates of fatalities and serious workers’
compensation claims across industries. Between the period 2003 and 2015, the fatality rate
for agricultural workers was 14.6 fatalities per 100 000 workers (figure 11.1). This fatality
rate is more than six times higher than the rate for all industries (2.3) (SWA 2016e). The
agricultural industry accounted for 17 per cent (555) of worker fatalities, despite only
representing 3 per cent of the Australian workforce (ABS 2016h).
Figure 11.1

Fatality rates across industriesa
2003-2015

Agriculture
All industries
Agriculture, forestry and fishingTransport, postal and warehousing
MiningConstruction
Electricity, gas, water and waste services
Arts and recreation services
Administrative and support services
Manufacturing
Wholesale trade
Rental, hiring and real estate services
Public administration and safety
Other Services
Information media and telecommunications
Retail trade
Professional, scientific and technical services
Accommodation and food services
Education and training
Health care and social assistance
Financial and insurance services
0

5
10
15
Fatalities per 100 000 workers

20

a Data on sub industries (as shown for agriculture) are not available for all industry groupings.
Sources: SWA (2016e, sub 10).

Fatality rates vary considerably across farm types. For example, no fatalities were recordedin poultry farming from 2010 to 2014. However, fatality rates in livestock farming andagricultural support services were about 20 per 100 000 workers in the same period,
accounting for nearly three-quarters of farm deaths (SWA 2016d).

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Vehicles are the main cause of fatalities on farms. Between 2010 and 2014, incidents
involving vehicles accounted for 76 per cent of all fatalities on farms, with most of these
involving tractors, quad bikes or aircraft (SWA 2016d). Of the incidences not involving avehicle, the common causes of fatalities involved being hit or bitten by an animal; fallingfrom a horse and other falls; and electrocution (SWA 2013, 2016d).
Serious workers compensation claims are also disproportionately high in the agricultural
sector. Over the five-year period between 2009-10 and 2013-14, the rate for agricultural
workers was 11 serious claims per million hours worked. This rate was 59 per cent higher
than the rate for all industries (6.9 serious claims per million hours worked) (SWA 2016d).
SWA (2015) estimated that the cost to the Australian economy of work-related injuries andfatalities in the Agriculture, Forestry and Fishing industry to be $2.35 billion in 2012-13.
Most of the costs were borne by workers through reduced earning capacity following theirinjury.
Agriculture is one of seven priority industries identified under the Australian Work Healthand Safety Strategy 2012–2022. The priority industries are the focus of activities byregulators, employer and employee groups to identify the common causes of injury andfatality and to find and implement solutions (SWA, sub. 10).

A role for government
While employers and employees have incentives to maintain WHS in the workplace(including on farms), they do not always have adequate information about workplace risks
and consequences. As a result, employers and employees will not always adequately
protect themselves. Also, risks and people’s ability to avoid them are not uniform. For
example, driving a tractor is more risky when it is raining or if the driver is inexperienced.
Accounting for these differences may not be straightforward.
WHS incidents also often have broader effects on the community — such as the distressexperienced by an injured worker’s family. Individual employers and employees areunlikely to adequately consider these effects when carrying out their actions.
These market failures point to a role for government to ensure that the optimal level of
WHS is achieved. Regulations place a duty of care primarily on those who have control
over the workplace (mainly the employer), although employees and others also have a duty
to follow instructions and act responsibly. The duty on employers creates a strong
incentive for them to maintain good WHS standards, which extends to the broader
workplace as employers control most of the work environment and can implement
appropriate WHS standards and management practices that ensure employees takeresponsibility.
While workers’ compensation insurance (which is mandatory for most employers inAustralia and covers the cost of compensating employees for workplace injuries and
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diseases) can create moral hazard as employers do not bear the cost of workplace injuries,
employers pay a premium that typically increases when businesses claim more (soprovides an incentive for employers to maintain WHS standards).

Development of model WHS regulations
In 2004, the Commission looked at possible models to establish a national WHS
framework. While noting that there were ‘no compelling arguments against a single
national [WHS] regime’ (2004b, p. XXIII), the Commission considered that this should bea medium term reform objective as ‘it would be unlikely that a single national [WHS]
regime to replace those operated by the States and Territories, whatever its merits, could beachieved in any realistic timeframe’ (2004b, p. 75).
In the short-term, the Commission proposed strengthening the national institutional
structure at the time, with a key recommendation being agreement across governments toadopt, without modification, the regulations developed by the National Occupational
Health and Safety Commission (PC 2004b).
In 2008, the Workplace Relations Ministers across jurisdictions agreed to use model
regulations to harmonise WHS (SWA 2016a); and the Council of Australian Governments
signed the Intergovernmental Agreement for Regulatory and Operational Reform in
Occupational Health and Safety, which sets out principles and processes to harmonise
regulations and enforcement activities across jurisdictions (COAG 2008).
SWA developed model regulations from 2009 to 2012. All jurisdictions except Victoria
and Western Australia have adopted the model WHS laws. Queensland, South Australia
and the ACT have made a number of substantive amendments to their WHS laws, but coreprovisions remain the same in all jurisdictions that have adopted the model WHS laws.
Western Australia is developing legislation that would adopt key provisions of the model
WHS laws (SWA, sub. 10).
The model WHS regulations consist of laws and Codes of Practice. The laws include the
WHS Act, which governs the WHS framework in a jurisdiction and contains general duties
of care; and the WHS Regulations, which set out how to meet obligations in specific areas
where there are significant risks to health and safety, such as hazardous chemicals(SWA, sub. 10).
Non-mandatory Codes of Practice provide further practical guidance to employers on how
to manage risks, and the minimum level of safety that employers must provide in theworkplace. Employers are not required to adhere to the Codes and can manage risks inother ways as long as they are at least as safe.
There are no specific regulations under the model WHS laws that are targeted at
agriculture, and therefore farm businesses are subject to the same WHS requirements asother workplaces (SWA, sub. 10).
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Regulatory issues
While farm businesses and their representatives supported the policy objectives underlying
WHS regulations, inquiry participants raised concerns about the:•regulatory burden of WHS requirements•

duty of care falling disproportionately on employers•

high penalties for non-compliance•prescriptiveness of the WHS regulations.

Regulatory burden of WHS requirements
Participants raised several concerns about the burden of WHS regulation. However, SWA(sub. DR264), responding to concerns raised by participants, argued that employers’
burden may be more perceived rather than actual.
Some participants said that the system is difficult to navigate and that it is not easy to stay
up to date with WHS requirements. GrainGrowers, for example, said:
Navigating the regulations around Workplace Health and Safety (WH&S) is a difficult
endeavour for many Australian grain farming businesses. To ensure proper compliance, farmers
must be familiar with the Work Health and Safety Act 2011 and all associated material,
including 23 Codes of Practice, 46 pieces of Guidance Material and 29 fact/information sheets.
The sheer quantity of information can be overwhelming for small farming businesses, andfarmers often struggle to maintain up-to-date knowledge of all WH&S requirements.
(sub. 73, p. 21)

SWA, however, stated that ‘in general, less than 100 pages of the model WHS Regulations
will apply to most businesses, as a significant portion of the model WHS Regulations only
applies to a specific industry or type of work’ (sub. DR264, p. 4).
Responsibility of WHS falling disproportionately on employers

The Commission’s case study participants raised concerns about the duty of care for WHS
falling disproportionately on employers. They said that they experienced difficulties whentrying to meet WHS regulations, and that the imbalanced duty of care dissuaded them fromhiring employees (box 11.6). Beef, sheepmeat and goat producers also highlighted thedisproportionate duty of care as an issue (Sheepmeat Council of Australia and Cattle
Council of Australia, sub. 88, att. 1).
Cotton Australia, however, said that their industry is ‘comfortable with the level of
responsibility allocated to employers and employees following harmonisation of WHS
laws’ (trans., p. 283). SWA (sub. DR264) suggested that case study participants appeared
to perceive that the model regulations require employers to eliminate work health andsafety risks, which is not the case.
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Box 11.6

Farmers’ perspective – duty of care is imbalanced

A manager of a cotton farm in southern Queensland said that the work health and safety (WHS)
regulations disproportionately placed a duty of care on farm businesses (rather than theemployees). He said employers and employees need to share the risks, and that farm owners
cannot control all the circumstances that employees find themselves in. He said employees areoften best placed to manage their own risks and noted that ‘currently the business has to takeresponsibility for everybody’s momentary lapses of judgement’.
The co-owner of a large vegetable processing business also told the Commission that WHS
should be a shared responsibility between employers and employees. He said that he respects
his workers as responsible adults, and recognises that they are often best placed to manage
WHS risks.
However, he told the Commission that the enforcement of WHS regulations in Australia has
evolved to place far too much responsibility on employers, and not enough on employees andvisitors to the facility. As a result, he and the other co-owners of the business had concerns thata major WHS incident could unexpectedly cost them $100 000 or more, and threaten thefinancial viability of the business. He said that ‘it doesn’t matter what we do, it’s never enough’.
The co-owner also told the Commission that the primary productivity cost of implementing WHS
regulations in this way is the disincentive that it creates to hire workers. He said that it ‘pushes’
the business to use machinery to complete tasks that could otherwise be done more efficiently
by workers.
Source: Productivity Commission case study interviews (appendix C).

SWA said that WHS is a ‘shared responsibility’ between employers and workers. The
WHS Act places a duty on employers and persons with management or control of aworkplace to do what is ‘reasonably practicable’ to eliminate or minimise the risk of a
WHS incident occurring. SWA noted that:… in determining what is reasonably practicable, after taking into account all other factors, aduty holder can weigh the cost associated with available ways of eliminating or minimising therisk, including whether the cost is grossly disproportionate to the risk. (sub. DR264, p. 6)

Workers (and also farm visitors) have a duty to take care of their health and safety(wherever reasonable), to ensure their actions do not affect the health and safety of others,
and to comply with instructions from those in management or control.
Despite this, an employee’s conduct under the model Act is generally, but not always,
attributed to those in management or control of the workplace. But this rule depends onwhether workers are meeting their responsibilities under the Act. For example, a recent
case in NSW found that an employee’s actions were not attributed to his employer because
the employee acted contrary to his training and employer’s safety procedures. 60

60 Safe Work NSW v Wollongong Glass P/L [2016] NSWDC 58.

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More generally, while the regulations aim to share WHS duties of care between employers
and workers, the impact on employers (and workers) also relates to the enforcement of
WHS regulations by regulators and courts.
Disproportionate penalties?

The NFF argued that unclear regulations and disproportionate penalties dissuaded farmers
from hiring workers.
Many farm businesses are not clear on their obligations under the WHS Act but fear thefinancial implications of a safety incident and subsequent prosecution. Rather than risk it, theychoose not to employ any labour at all. This is a clear barrier to growth and productivity in the
agriculture sector. (sub. 61, p. 37)

The NFF provided examples of penalties in the WHS Act that it considered weredisproportionate. For instance:… the penalty for engaging in discriminatory conduct for a prohibited reason is a maximum of$100 000 for an individual and $500 000 for a body corporate. The penalty for a comparable
offence under the Fair Work Act 2009 (Cwlth) is $10 200. (sub. 61, p. 37)

The NFF called for a comprehensive review of the level of penalties and how the Criminal
Code is applied to breaches of WHS laws.
SWA (sub. DR264) highlighted that the penalties in the WHS regulations are maximums,
and that maximum penalties are almost never fully levied. Also, the Explanatory
Memorandum to the model WHS Bill stated that ‘the maximum penalties reflect the levelof seriousness of the offences and have been set at levels high enough to cover the mostegregious examples of offence’ (sub. DR264, p. 4). Laws are also enforced throughinfringement notices, and penalties in these notices are likely to be significantly less thanthe maximum penalties that could be imposed by a court.
Will better information help?

A perceived (or real) burden can dissuade employers from implementing measures toadequately protect against WHS risks. Better information to employers about their
obligations can reduce the perceived burden of regulation.
Regulators have taken some steps to improve their information dissemination. For
example, SafeWork NSW publishes several instruction videos for employers on how tomeet their duties (SafeWork NSW 2016).
Industry can also play a role. As Cotton Australia said:
The cotton industry has developed templates which were formulated using information
developed by the Agriculture Health and Safety Unit, which makes it easier for growers tomake a start and have the foundations of having something to work with. We recognise that
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there are challenges in the WHS space but we believe growers have put systems in place todeliver a safe workplace. (trans., p. 283)

The right level of prescription of WHS regulations
A number of participants called for WHS regulations to be less prescriptive. The NFF, forexample, argued that many of the WHS regulations are ‘unworkable or too hard to comply
with’ (sub. 61, p. 37). AgForce (sub. 17) and Voice of Horticulture (sub. 42) noted thatfarm businesses spend significant amounts of time complying with WHS regulations.
Equestrian Australia said the draft code of practice being developed in NSW on managing
workplace risks related to horses was ‘complex (nearly 30 pages), legalistic and very
difficult to understand’ (sub. DR299, p. 1). It also argued that the code ‘cannot be achievedin practice’ and ‘will therefore not advance safety in horse handling [in] any significant
way’ (DR299, p. 1).
Cotton Australia also said that ‘reducing the level of prescription in many cases will haveno negative effect on health and safety of workers but will make complying with the WHS
Act easier’ (sub. 23, pp. 18–19). Using the example of licences for forklift drivers, Cotton
Australia said that while they might be justified in high risk environments (such as
warehouses), employers should not need to ensure forklift drivers on a farm obtain licences
when operators of other machines like a front-end loader do not need one.
On licensing, SWA said that:
Decisions on which items of plant or type of work require a licence are based on evidence ofthe frequency and severity of injuries involving the plant or work and the potential forcatastrophic injury to occur. For example, in 2014 SafeWork NSW reported that, in New South
Wales alone, 1360 workers had been injured in the two years to July 2014 and eight had been
killed in the previous three years as a result of forklift incidents. (sub. DR264, pp. 3–4)

More generally, SWA said on the level of prescription of WHS regulations that:
Finding the right balance between risk management and prescription can be difficult … Somebusinesses prefer to be provided clear instruction on exactly what they need to do to keep theirworkers safe and comply with WHS laws. Others have the resources to develop sophisticatedsystems for managing risks and prefer to have the flexibility to determine the best methods ofkeeping their workers safe. (sub. DR264, p. 3)

Finding the right balance appears to be a longstanding issue. For example, someparticipants in the Industry Commission’s Work, Health and Safety inquiry (1995) notedthat the Codes of Conduct at the time were, in contrast, too general to provide practicalassistance. In general, not all employers are likely to be satisfied even if the right balance isachieved.

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Jurisdictional differences
Others questioned whether the model laws had made WHS simpler. The Tasmanian
Farmers and Graziers Association, for example, said:
The new system sought to make WHS simpler and more streamlined however for many
employers it has added more grey to the plethora of regulation that control them daily.
(sub. 16, p. 5)

And others expressed concerns about different rules in different jurisdictions despite model
laws being implemented (Consolidated Pastoral Company, sub. 71).
In the Commission’s previous Review of Regulatory Burdens on Business: Primary Sector,
many more submissions than in this inquiry raised the issue of different rules acrossjurisdictions, which suggests that the model regulations have addressed (at least to someextent) concerns in this area.
Work health and safety issues relating to migrant workers
SWA (sub. DR264) noted that some migrant workers may have a higher WHS risk thanAustralian-born workers due to factors such as poor English language skills and a poor
understanding of rights at work.
WHS risks related to migrant workers were discussed by Safe Work Australia members in
December 2015. Since then, Safe Work Australia has developed a work program to reduce
those risks by:•developing targeted information for workers about WHS, and task-based guidance on themost high-risk tasks•

improving the integration of government information sources•

working with national community organisations which supports migrants to disseminate
WHS information widely•

supporting employers to understand their role and to improve communication with migrant
workers in their business, including by developing workplace resources for employers.
(sub. DR264, p. 2)

Additional labelling requirements on manufacturers of agvet chemicals
From 1 January 2017, WHS regulations will require manufacturers of agricultural andveterinary chemicals to comply with the Globally Harmonized System of Classificationand Labelling of Chemicals (SWA 2016b).
Several inquiry participants argued that these requirements overlapped with those of theAustralian Pesticides and Veterinary Medicines Authority. This issue is examined inchapter 7.
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WHS regulations are scheduled to be reviewed
In 2014, the Council of Australian Governments (COAG) initiated a review thatconsidered whether the model WHS laws were simple, appropriate for the risks that they
address, and facilitated businesses to adopt flexible approaches to manage risks(SWA 2014). The review recommended changes to:•make health and safety representative training more effective•

bring right of entry provisions in line with the Fair Work Act•

make model Codes of Practice clearer and easier to use.

In addition, COAG tasked WHS Ministers with reviewing the WHS Regulations to
identify and address any areas that are overly prescriptive, unnecessary, duplicative andcreate enforcement difficulties (SWA, pers. comm., 31 May 2016). SWA is currently
conducting this review.
The model WHS laws are scheduled to be comprehensively reviewed at the beginning of
2017. Upon agreeing that model laws be developed, the former COAG Workplace
Relations Ministerial Council agreed in principle to a review within five years of the model
regulations commencing (WRMC 2009). Most jurisdictions enacted the model laws in2012 (SWA, sub. DR264). However, at the time of writing, WHS Ministers wereconsidering deferring the review of the model WHS laws until 2018 on the basis that:•

there are no fundamental issues with the laws as they stand•the model WHS laws have not been in place for the full five years in some jurisdictions, so
it is likely that there will be insufficient data and evidence available to fully examine theimplementation of the model WHS laws, and•amendments made to the model WHS laws in March 2016 have not yet been implemented
within jurisdictions and their impact has not been realised. (SWA, sub. DR264, p. 8)

The review should build on the findings from earlier reviews, assess the compliance burden
on businesses and address any misperceptions by employers. It should also explore ways toimprove information dissemination to employers, particularly so that employers do not feelcompelled to pay for advice on compliance with WHS laws — the Commission heard thatmany employers engage consultants to ensure they are complying with the laws. In addition,
the review should evaluate jurisdictions’ progress towards harmonising WHS regulations.

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12 Competition regulation

Key points•

Competition is a key driver of innovation and productivity in agriculture.

•

Widespread regulation of agricultural markets via statutory marketing up until the 1990s
imposed costs on consumers, domestic user industries and the regulated industries. The
arrangements constrained both competition and productivity.

•

Just one statutory marketing arrangement remains — the New South Wales Rice Marketing
Board (RMB). The RMB maintains single-desk exporting by issuing an exclusive export
licence to SunRice. One of the objectives of the RMB is to secure the best possible price forAustralian rice in export markets. However, the costs of single-desk marketing are notrequired for the Australian rice industry to achieve price premiums in international markets.

•

Deregulation of potato marketing in Western Australia (which took place in September 2016)
should improve the responsiveness of the industry to changing consumer preferences andreduce the price of potatoes to consumers.

•

There is no market failure (or other reasonable objective) to justify the re-regulation of the
Queensland sugar industry. Legislation to re-regulate the Queensland sugar industry isconstraining structural adjustment and investment.

•

Queensland Sugar Limited’s (QSL) charity status provides it with tax concessions that
benefit a small number of commercial milling and farming businesses (and affects thecompetitive neutrality of the market). It also reduces the transparency of QSL’s financial
performance and has the potential to further impede structural adjustment in the sugar
industry.

•

Collective bargaining is only likely to be attractive to small groups of farm businesses withsimilar production characteristics. This is because larger and more efficient farm businesses
have strong economic incentives to negotiate more competitive terms. Consequently,
government efforts aimed at increasing the use of collective bargaining under theCompetition and Consumer Act 2010 (CCA) are unlikely to significantly increase adoption.

•

The perception that the introduction of an ‘effects’ test to section 46 of the CCA is likely toshield farm businesses from intense competition in retail food markets is ill-founded. In any
event, shielding farm businesses from competition would not be in the interests ofconsumers.

•

The current focus on misuse of market power by wholesale merchants and supermarkets
overlooks the critical co-dependence of businesses along agricultural value chains. It alsorisks overlooking potential new commercial arrangements for farm businesses to participate
in globalised chains.

•

Industry codes of conduct can provide flexible regulatory frameworks to influence behaviourin agricultural markets and improve transparency and clarity of transactions.

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Competition is not an end in itself, but plays a crucial role in promoting economic
efficiency and enhanced community welfare. Competition provides a strong incentive forfirms to innovate, reduce costs and meet the preferences of consumers. It also helps society
to generate the highest value from its scarce resources and, in doing so, generates higher
real incomes and living standards.
Competition is a dynamic process. Commercial success in competitive markets requires theability to reallocate resources to new products and processes to meet changing market
conditions. To remain competitive, Australian farmers need to innovate and improve
productivity at a faster rate than their competitors in domestic and international markets.
The competitive process drives efficiency improvements by encouraging existing
businesses to innovate, new and more efficient businesses to enter markets, and lessefficient businesses to decline and exit. In agriculture, larger farm businesses tend to be
more efficient than smaller farm businesses, and competitive markets have driven thegradual consolidation of farms (Gray, Oss-Emer and Sheng 2014). Larger farms enableeconomies of scale in production and facilitate capital investment that allows more
efficient use of labour (Hooper et al. 2002; Nossal and Gooday 2009).
The objective of competition policy is to improve community welfare by increasing
economic efficiency. However, markets may not always result in efficient outcomes. Thiscan be because of a lack of effective competition and inadequate information (examples ofmarket failures), or because of government intervention in markets through regulations andpolicy arrangements.
The unconstrained operation of competitive markets (and the structural adjustment that
results) has for more than a century raised concerns about the balance of power inarrangements between small farm businesses and larger wholesale merchants andsupermarkets. Remoteness, isolation and lack of marketing expertise have historically beenargued as factors that place farmers at a significant disadvantage in negotiating sales withlarger and better informed input suppliers and purchasers of agricultural produce(Sapiro 1923). The potential concentration of market power into the hands of a relatively
small number of well-organised traders continues to be seen as disadvantaging diverse,
dispersed and less-organised farmers in terms of price and the conditions written into
supply agreements.
The National Farmers’ Federation (NFF), for example, argued that the agricultural sector
has specific and unique characteristics that mean that ineffective competition legislation
can have a more detrimental bearing on farm businesses than on other businesses:
The farming sector is fragmented, made up largely of small to medium sized businesses inremote areas with limited access to market information and opportunities for collective
organisation. Fluctuations in input costs, the impact of climatic variations, limitations ininfrastructure and the perishable nature of produce leave some farmers in an economicallyvulnerable position operating under extremely tight margins. This inequality of market and or
bargaining power means that farmers are largely price-takers in the market and susceptible to attimes questionable business practices. Farmers may be forced to accept standard form contracts
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on a ‘take it or leave it’ basis or to operate under arrangements without the benefit ofcontractual security. (sub. 61, p. 28)

Concerns about market power have led to continued calls for regulation to protect small
farm businesses from larger businesses. Governments have used two main forms ofregulation to address these concerns — statutory marketing arrangements (appendix B) andcompetition law.
This chapter looks at statutory marketing arrangements (section 12.1) and competition law(section 12.2), including industry codes of conduct (section 12.3).

12.1 Statutory marketing
Statutory marketing arrangements are a package of inter-related regulations that compel
farmers to sell to a single marketing agent (Watson and Parish 1982). In Australia, the term‘single-desk marketing’ was widely used to describe the monopoly selling powers held bystatutory marketing authorities (Gropp, Hallam and Manion 2000). In some cases, thepowers extended to both domestic and export sales of commodities, in others, themonopoly extended to export sales only.
For most of the 20th century, statutory marketing shielded many of Australia’s agriculturalindustries from competition (appendix B). In 1982, at the height of statutory marketing,Australia had 11 marketing boards operating under Commonwealth legislation and morethan 50 operating under state legislation (Vinning 1980; Watson and Parish 1982).
Over the years, numerous arguments for statutory marketing arrangements have been put
forward, including:•unstable world markets — volatile food prices (partly attributed to high levels ofprotection in world markets and fixed exchange rate policies) were perceived asworking against industry development and rural welfare objectives•

market power — for some agricultural products, the concentration of market power
among a relatively small number of wholesale merchants and/or supermarkets wasthought to disadvantage farmers on price and terms of supply agreements•

information failures — remoteness and lack of marketing expertise (especially in the
pre-digital age) were perceived as placing farmers at a significant disadvantage innegotiating supply agreements•

distorted input markets — high farm input costs arising from trade and other forms ofprotection on input-supplying industries were used to justify ‘countervailing’ protection
to compensate agricultural industries.

While producers perceived there were benefits for them from restricting competition, it
became increasingly clear during the late 1980s and early 1990s that restricting
competition in the interest of one industry imposed significant costs on taxpayers,
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consumers and downstream industries. Statutory marketing was becoming less effective at
raising domestic prices as improvements in transport and communication increased
competition in domestic and global markets. Improvements in communications technology
also reduced the information disadvantages of remoteness. It was also recognised
internationally that attempts to insulate agricultural markets via trade protection increased
price volatility on world markets (Anderson 2014). In the end, statutory marketing failed in
its own objectives and exposed protected industries to higher risk. 61
A series of reviews and inquiries from the 1990s onwards found that statutory marketingarrangements were impairing agricultural industry performance in several ways:•

limited recognition of product quality or other valued product characteristics in pooled
producer returns tended to reward lower-valued products at the expense of higher-value
products, discouraging more efficient and innovative producers•

compulsory pooling of returns meant that price risk was averaged across growers, anddid not accommodate the risk preferences of producers•

pooling of transport and distribution costs encouraged inefficient distribution andproduction, resulting in higher costs•

lack of competition and choice of service provider promoted over-servicing andcost-padding by the statutory marketing authorities•

payment of an average price for products distorted production levels (Gropp, Hallam
and Manion 2000).

In 1995, recognising the benefits of removing unnecessary restrictions to competition,
Australian governments committed to a series of agreements to increase competition under
National Competition Policy. The Competition Policy Agreement required that any
legislation which restricted competition be reviewed by the end of 2000. The review wassought to ensure that legislation did not restrict competition unless it could be shown thatthe benefits to the community outweighed the costs, and that the objectives of thelegislation could only be achieved by restricting competition. The legislative review
provided renewed impetus to the reform of statutory marketing arrangements (appendix B).
Only one marketing board with statutory powers will remain in operation beyond 2016 —the Rice Marketing Board (RMB) in New South Wales. Statutory marketing arrangementsfor potatoes in Western Australia were repealed in September 2016, and will cease tooperate by the end of 2016. However, in December 2015, the Queensland Parliament
re-regulated the sugar industry by passing legislation that enables sugarcane growers to
direct how millers market sugar internationally.

61 This was illustrated by the failure of the wool reserve price scheme, a scheme which was thought to assist
wool growers but ultimately harmed them (appendix B).

480

REGULATION OF AUSTRALIAN AGRICULTURERice marketing in New South WalesThe RMB was the first commodity marketing board in New South Wales. It was initiallyestablished under the Marketing of Primary Products Act 1927 (NSW). The domestic
marketing of rice in New South Wales was deregulated in 2006, but the RMB maintains
single-desk exporting by issuing an exclusive export licence to SunRice.
Under the Rice Marketing Act 1983, all rice produced in New South Wales is vested in the
Board (that is, the Board is its legal owner). The objectives of the RMB are to:•encourage the development of a competitive domestic market for rice•

ensure the best possible returns from rice sold outside Australia based on the quality
differentials or attributes of the Australian grown rice•

liaise with and represent the interests of all New South Wales rice growers in relation to
the Board’s functions and objects (RMB 2016).

The RMB has previously pointed to price premiums 62 as evidence that statutory marketingarrangements are working and should be maintained (RMB 2015).
Australia is a small, price-taking exporter that is unable to exert monopoly power in rice
export markets. Australia contributes less than 1.5 per cent of total world exports of rice
(ABARES 2015a) and 3.5 per cent of japonica exports (FAO 2016a). Any price premiums
generated in rice export markets are likely to reflect quality and branding advantages rather
than market power.

Evidence of price premiums?
Dating back to the mid-1990s, there have been a number of reviews of the single-desk
export selling arrangements for the New South Wales rice industry:•

according to the NSW Government (2012) a National Competition Policy review in
1995-96 concluded that the single-desk export selling arrangements of the New South
Wales rice industry generated market premiums for the rice industry and a net benefit
to the community; a further review in 2004-05 came to a similar conclusion•

a 2009-10 review did not conclusively argue that the single-desk export marketingarrangements were delivering price premiums to growers and broader community
benefits. The review called for stronger accountability arrangements and for initiatives
and performance information to form a key consideration in any decision to continue
the arrangements beyond 2013 (NSW Government 2012).

62 The term ‘price premium’ is used to describe the difference between the prices that growers receive as aresult of the activities of the RMB, relative to the price that would be received under alternative (nonstatutory) marketing arrangements.

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Nonetheless, the 2012 review by the New South Wales Government recommended thecontinuation of single-desk marketing for rice:… there is evidence to support a finding that the single desk enabled by vesting is delivering
price premiums in export markets relative to SunRice competitors selling into those markets.
(NSW Government 2012, p. 14)

The review recommended that vesting be renewed until 30 June 2017, with further
extension subject to a review to determine whether export price premiums, relative to thosereceived by other international competitors on export markets, continue to be achieved.
The New South Wales Department of Primary Industries is currently reviewing whether
single-desk exporting of rice should be extended beyond 30 June 2017 (NSW DPI 2016c).
The evidence presented to the 2012 review on price premiums was contested. Economic
analysis undertaken by Deloitte Access Economics found no evidence of price premiums
in export markets (Deloitte Access Economics 2012). In contrast, analysis by SunRiceclaimed price premiums ranged from 5 to 20 per cent in diverse export markets (Deloitte
Access Economics 2012).
SunRice (Ricegrowers Limited, sub. DR197) and the Ricegrowers’ Association ofAustralia (sub. DR162) pointed to analysis undertaken by Grant Thornton to suggest thatthe value of price premiums to rice growers was $82.4 million for the year ended 30 April
2015 (RMB 2015).
No independently verified evidence has been made public by the RMB or SunRice to showthat statutory marketing results in price premiums, or whether these price premiums arepaid back to Australian rice growers. Price data for Australian rice exports by country ofdestination are not published by the Australian Bureau of Statistics, which makes it
difficult to assess claims of product differentiation across diverse markets.
Grant Thornton calculated premiums for Australian rice as the difference between the
average in-country price for Australian rice relative to local competing brands of rice inAustralia’s five major export regions (RMB 2015). However, these domestic prices incountries that Australia exports to show the price premium accruing to foreign
supermarkets. Unless the premium is also reflected in border prices this type of analysis
does not provide evidence that a premium is being passed back to Australian rice growers.
To assess the price premiums for Australian rice exports, the Commission updated thework of Deloitte Access Economics (2012) (appendix D) and also looked at price data
based on individual country data.
SunRice is the only exporter of rice from Australia, and the Australian Bureau of Statistics
maintains commercial confidentiality by not publishing export data for each destination
country. To update the Deloitte Access Economics analysis, the Commission compared theunit value of Australian exports (aggregated across all destination countries) to the price ofCalifornian rice exports (where there is no statutory rice marketing) for the periods
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1989-90 to 2012-13 and 2003-04 to 2012-13. Based on this analysis, the Commission did
not find evidence of a price premium for Australian rice exports (appendix D).
A criticism of this type of analysis is that it relies on average unit export values from
Australia, rather than individual country data (NSW Government 2012). However, if pricepremiums are not apparent in aggregate data, it means that premiums generated in one
export market are dissipated in others.
Notwithstanding the lack of evidence in aggregate data, the Commission recalculated pricepremiums using data for rice imported from Australia into 123 countries between 1986 and2013 (appendix D) (FAO 2016a). The analysis was repeated for 25 countries in the Middle
East and North Africa and for New Zealand.
Premiums were found to be limited to the New Zealand market where Australia has asignificant advantage in terms of transport costs, but there were also significant pricedetriments 63 in other markets. Overall, premiums in some markets are offset by detriments
in other markets. This analysis is sensitive to the adjustments made to account for freightcosts and package value-adding, which may partly explain the more favourable results ofprevious analyses compared to those of the Commission. The Commission used sensitivity
analysis to ensure that these findings were robust and concludes that the claims of pricepremiums are overstated.
Arguments for retaining statutory marketing
Price premiums are not in themselves evidence that single-desk marketing is desirable ornecessary. Rather, improved performance through higher returns or lower costs should be
an outcome of commercial innovation. Price premiums can also be achieved by producing
a product with quality and service characteristics that consumers are prepared to pay more
for relative to commodity-grade alternatives.
The Ricegrowers’ Association of Australia (Ricegrowers) claimed that Australian grown
rice delivers a premium to global competitors for two reasons:
Australian grown rice has very favourable perceptions amongst consumers in several key
markets. This is due to the favourable perceptions of Australia as a good country for growing
food as well as the quality of Australian rice, driven by our varietal development, processing
infrastructure and total supply chain quality assurance.
Branding of New South Wales rice by SunRice has added considerable value to the exports.
SunRice’s brands have very strong recognition in key markets and can achieve a premium overcompetitor product. This has allowed SunRice to maintain some premium in markets over thelast few years despite competing with traded rice from competitor countries. (2012, p. 8)

63 The term detriment is used to describe a price premium that is negative (lower prices than would
otherwise have been achieved).

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Previous Commission inquiries have questioned whether regulated single-desk marketingis necessary to generate this type of price premium, and argued that competition was more
likely to drive innovation and higher premiums (Gropp, Hallam and Manion 2000;
IC 1991).
In some situations, collective bargaining can prevent quality and service premiums frombeing competed away by multiple small suppliers. However, the experience in other grainindustries is that deregulation leads to innovation and reduces inefficiencies associatedwith single-desk marketing, which improves industry performance (PC 2010d).
Another argument in support of maintaining single-desk marketing was the need tomaintain a critical mass of rice production to support milling and marketing activities inthe southern Riverina of New South Wales. SunRice, for example, argued that:… because of the relatively small tonnages involved, only with vesting and the consequentcertainty that it would be handing all the southern NSW rice crop could it, or any competitor,
maintain the requisite storage and milling facilities in the southern Riverina. (NSW
Government 2012, p. 13)

However, the industry’s strategy for maintaining the viability of mills during periods of
low on-farm rice production (such as droughts) is to import unprocessed rice, and thisstrategy does not rely on statutory marketing of exports.
Ricegrowers (sub. DR162) also told the Commission that rice vesting was essential to theviability of the rice industry, and that competition between rice and other crops for inputs
such as irrigation water provided sufficient incentives to minimise costs and drive
innovation.
Rice is a relatively low value use of water (figure 4.3, chapter 4), and between 2006-07 and2013–14, rice farms that were net sellers of water made a higher annual rate of return thanthose that bought water to grow rice (Ashton, Oliver and Norrie 2016). This means thatrice vesting is likely to lead to an inefficient allocation of water if it favours rice at theexpense of more valuable crops.
Ricegrowers also put forward the argument that deregulation would be harmful for lessprofitable growers:
While a small minority of growers may establish successful niche export markets, the benefitsof these opportunities are unlikely to extend to the majority of growers who collectively do nothave the ability to establish and maintain export markets that would be more profitable thanthose established and maintained by SunRice. (sub. DR162, p. 4)

Similarly, SunRice noted that deregulation could have ‘far reaching consequences for theAustralian rice industry and regional communities’ (Ricegrowers Limited,sub. DR197, p. 5).
Deregulation does not translate into individual farm businesses needing to find and service
their own export markets. Rather, the activities of SunRice (or new entrants to rice
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marketing) could continue unencumbered by the constraints and costs of statutory
marketing. That said, structural adjustment is likely to result in resources being reallocatedfrom smaller and less efficient farms to larger, more efficient and innovative farmbusinesses.
It is also important to note that rice is not critical to the viability of most rice-growing
farms. Most farms that grow rice do so opportunistically when irrigation water is available.
An ABARES survey in 2016 found that rice growing farms are diversified and adaptive,
and consistently generated less than 25 per cent of their income from rice during the
drought of 2006-07 to 2010-11 (Ashton, Oliver and Norrie 2016).
The direct costs incurred by single-desk marketing of rice are relatively small, but
unnecessary nonetheless. The expenses of the RMB were $564 000 in 2014-15, with aplanned budget of $626 000 for 2015-16 (RMB 2015). While Ricegrowers has argued thatthe 2014-15 cost of RMB came to 68 cents per tonne which was a ‘small price to pay toreceive a price premium of $116.65 per tonne’ (sub. DR162, p. 3), this is an expense that
does not need to be incurred.
The bottom line
Statutory marketing of Australian rice exports is unnecessary. In a deregulated market,
competing marketing companies would have an incentive to retain grower loyalty by
maximising price premiums and minimising costs, without incurring the costs of statutory
marketing. This incentive to innovate in marketing and reduce costs is likely to result inhigher profits for farms that grow rice.
Statutory marketing has become an inefficient means of requiring the diversified farms that
produce rice to sell to a single processor and exporter. The single-desk export sellingarrangements for rice in New South Wales are an anachronism and should be repealed.

RECOMMENDATION 12.1

The New South Wales Government should repeal the Rice Marketing Act 1983.

Potato marketing in Western Australia
It was illegal to sell fresh ‘table’ potatoes grown in Western Australia for humanconsumption without a licence from the Potato Marketing Corporation until September
2016. The Potato Marketing Corporation undertook a number of functions under theMarketing of Potatoes Act 1946 (WA), including:•determining the quantity and the colour of potatoes produced

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•

issuing licences (a domestic market entitlement) to grow potatoes•

setting the price that growers will receive•

licensing wash packers (wholesalers that receive, wash and pack potatoes)•

acting as the monopoly seller of potatoes to the wholesale market (ERAWA 2014).

The Potato Marketing Corporation was funded by a levy on growers.
The Marketing of Potatoes Act was created to ensure that consumers in Western Australia
had a reliable supply of potatoes following the disruption to agricultural markets caused byWorld War II. The Potato Marketing Corporation was the last statutory marketing
authority left in Australia to control domestic production by registering growers andlicensing areas of land where potatoes can be planted.
While the Potato Marketing Corporation had for some time reported that it no longer used
its powers to search for and seize unlicensed potatoes, legal action was used as recently as
December 2015 to restrict the quantity of potatoes that farmers can grow (Wahlquist 2015).
The Economic Regulation Authority of Western Australia (ERAWA) (2014) found thatlong term increases in consumer prices caused by restricting competition had become
capitalised into the value of entitlements that sold for between $350 and $600 per tonne.
The Western Australian Government announced in May 2016 that it intended to deregulate
the potato industry (Nalder and Redman 2016), and the Marketing of Potatoes Amendment
and Repeal Act 2016 (WA) commenced on 12 September 2016. It provides for the Potato
Marketing Corporation to be abolished from 31 December 2016. The Western AustralianGovernment told the Commission that:[the Department of Agriculture and Food Western Australia] is progressing the deregulation of
the potato industry and the Department of Finance is providing some advice on transitional
assistance, particularly in respect of a set of principles that can be broadly applied acrossgovernment to guide decision making on transitional assistance. (sub. DR285, p. 2)

It is reported that the majority of Western Australian potato growers support deregulation(Thompson 2015).
The public policy objectives of maintaining the statutory marketing of potatoes in Western
Australia for so long are difficult to identify. The Potato Marketing Corporation’s annual
report states that it exists to fulfil the functions of the Marketing of Potatoes Act(PMC 2015). The broad purpose of the Corporation was to ensure the supply of thequantities, kinds and qualities preferred by consumers following the disruptions toagricultural markets caused by World War II.
Clearly, the market conditions under which potato marketing in Western Australia wereoriginally regulated are no longer in place. In recent years, the Potato Marketing
Corporation interpreted its role as restricting the supply of potatoes to match a level ofdemand consistent with maintaining a constant price of potatoes, and therefore income forpotato growers (PMC 2015). It is not uncommon for regulators who have seen their486

REGULATION OF AUSTRALIAN AGRICULTURE

original purpose come to an end to use revised and creeping mandate as a reason tocontinue operating.
In response to a review by the ERAWA, the Potato Marketing Corporation also argued thatits activities counteract the market power of major supermarkets (ERAWA 2014).
Combatting the market power of supermarkets is not one of the functions given to the
Potato Marketing Corporation under the Act. The ERAWA found that major supermarkets
purchased 42 per cent of potatoes marketed by the Corporation, and that there wassubstantial competition amongst buyers of potatoes.
After extensive consultation and review, the ERAWA concluded that:… the existing regulations on the potato market are holding back the industry and are notserving the Western Australian public well. As such, the ERA recommends that the Marketingof Potatoes Act 1946 and Marketing of Potatoes Regulations 1987 be repealed. (ERAWA 2014,p. 317)The statutory marketing arrangements for potatoes in Western Australia were also
ineffective — they did not supply the quantities, kinds and qualities preferred byconsumers. The ERAWA (2014) found that Western Australian consumers had a limited
choice of potato varieties compared to consumers in eastern Australia. In the rest ofAustralia, where potato markets have long been unregulated, consumer preferences haveshifted since the 1990s from white to yellow varieties. Statutory marketing arrangements
appear to have impeded the response of Western Australian potato production to this majorchange in consumer preferences.
The marketing arrangements also appear to have had an impact on the productivity ofpotato production in Western Australia. South Australia, for example, has a similar numberof potato growers but produces more than five times the volume of potatoes. The
regulation of ‘table’ potato marketing in Western Australia has hampered the developmentof a seed potato export industry in that state (ERAWA 2014).
The ERAWA found that statutory marketing of potatoes provided monopoly rents for
78 farm businesses at the expense of 2.6 million consumers in Western Australia:… restrictions on potato marketing have raised the incomes of potato growers in Western
Australia. However, this has been at the expense of Western Australian consumers, who have
paid higher prices than would otherwise have been the case, have had limited choice of potato
varieties and have endured poor product quality. The restrictions have also limited productivity
growth in the industry. (ERAWA 2014, p. 316)

The ERAWA estimated that if the industry was deregulated, consumers would benefit by
about $43 million per year from lower prices (this equates to about$16.50 per person per year) (ERAWA 2014).
The statutory marketing of potatoes in Western Australia has for some time not served theinterests of consumers and has reduced the ability of the industry to respond to changes in

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consumer preferences. The Marketing of Potatoes Act has served the interests of a small
number of potato growers at the expense of a much greater number of consumers.
Deregulation of the potato industry in Western Australia is well overdue. An unrestrictedmarket will provide a much more effective and efficient way to meet the changing
preferences of potato consumers in Western Australia than the previous statutory
marketing arrangements.

FINDING 12.1

Statutory marketing of potatoes in Western Australia reduced consumer choice andincreased the price of potatoes in Western Australia. Deregulation of the industry willallow potato production in that state to better respond to changing consumer
preferences and reduce the cost of potatoes for consumers.

Re-regulation of the Queensland sugar industry
History of sugar marketing
In 1902, Australia’s sugar industry became the first industry in Australia to receive tariff
protection as a precursor to the later development of a full system of statutory marketing.
Prior to federation, the sugar industry had employed Melanesian labourers at wages lower
than those received by labourers of European descent (Lloyd 1982). Tariff protection
raised domestic prices above export prices, and was designed to compensate the industry
for the higher costs of employing European labour.
In 1912, a Commonwealth Royal Commission into the sugar industry concluded that thedominant sugar refiner at the time (Colonial Sugar Refining Company) did not face any
effective competition. There was discontent by millers over the prices for raw sugar, andby growers over cane prices fixed by millers (Craigie 2014).
The Royal Commission led to the development of a ‘cane price formula’(SRRATRC 2015a). The cane price formula calculated how the returns of the raw sugar
would be allocated between growers and millers. At that time it was estimated thatgrower’s total investment in the production of sugar cane, and ultimately raw sugar, was
two-thirds of the total industry’s investment, while millers’ investment was estimated to be
one-third. A modified version of this formula continues to be used today.

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The sugar industry in Queensland was highly regulated up until the early 2000s.
Government regulation controlled virtually every aspect of the industry — from theallocation of cane production areas between farms to the acquisition, marketing and sale ofraw sugar (QPC 2015). As Craigie said:
Over a 100 year timeframe, the sugar industry in Queensland has been highly regulated by both
Commonwealth and State governments. Government regulation originated in 1915 withcompulsory acquisition of sugar and controls on raw sugar and sugar cane pricing implemented
to regulate returns to growers and millers and encourage further settlement along the coast of
Queensland. (2014, p. 1)

Between 1982 and 2006 there were more than 30 inquiries into the sugar industry(Australian Sugar Milling Council, sub. 68). The inquiries revealed significant globalchanges in the operating environment facing the sugar industry and brought into question
the efficiency and effectiveness of statutory marketing (Craigie 2014). There wasincreasing concern that regulation had constrained investment and innovation, and that low
adoption of new technologies had held back productivity and competitiveness (QPC 2015).
Commenting on reviews of the Queensland sugar industry in the early 2000s, a Senate
inquiry into current and future arrangements for marketing of Australian sugar said:
The consistent message coming from the reviews was that the regulatory system ‘created a setof formal and informal rules — called the principle of adverse effects — which have the effectof blocking productivity gains’. It was also found that the system created antagonism between
growers and mill operators and fostered a resistance to change, which together hindered
productivity and diminished innovation (SRRATRC 2015, p. 10).

The need to improve the productivity and competitiveness of the industry became evenmore critical in the 2000s as Brazil increased its production of sugarcane and exports ofsugar (ABARES 2015a).
In 2006, the sugar industry was nominally deregulated with the repeal of sections of theSugar Industry Act 1999 (Qld). Vesting of raw sugar to Queensland Sugar Limited (QSL)
was removed and control of raw sugar was consequently returned to millers.
However, prior to deregulation in 2005, growers and millers signed a memorandum of
understanding (MOU) with the Queensland Government which included retaining
single-desk marketing via QSL (Queensland Government et al. 2005). This agreement
effectively locked in contractual arrangements for the 10-year term of existing Raw Sugar
Supply Agreements (RSSAs) (to 2016). Under the RSSAs the seven Queensland millowners supplied all raw sugar production, intended for bulk export, to QSL.
In 2014, three of Queensland’s larger mills (Wilmar, MSF Sugar Limited and Tully Sugar
Limited) announced that they would cease contracting QSL to market raw sugar exports
from 1 July 2017, and would instead market export raw sugar through their own
arrangements (QPC 2015). Canegrowers and grower organisations sought government
intervention because they were concerned that a move away from marketing via QSL
would alter the way risks and rewards were shared across the industry.

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Growers were concerned that the decision by some millers to market raw sugar would strip
them (the growers) of their rights to continue using QSL, and that millers removing theirright to choose QSL to market sugar was a form of market failure (Canegrowers Burdekin
sub. DR271). Growers advocated for the right to choose which marketer marketed thetwo-thirds ‘economic interest’ in raw sugar that they claimed under the cane price formula.
In December 2015, the Queensland Parliament passed the Sugar Industry (Real Choice inMarketing) Amendment Act 2015 (Qld) (the Real Choice Act) to protect the interests ofQueensland’s canegrowers. 64 The Real Choice Act re-regulates the international marketingof Queensland sugar.
The Queensland Productivity Commission (QPC) prepared a decision regulatory impact
statement (RIS) on the Bill (the Bill had already been tabled in the Queensland Parliament)(QPC 2015). The RIS was informed by the consultations and findings of a report by the
Agriculture and Environmental Committee of the Queensland Parliament and a Senate
inquiry into current and future arrangements for the marketing of Australian sugar(QAEC 2015; SRRATRC 2015a). The Senate inquiry coincided with the development of asugar marketing code of conduct by an informal taskforce of senators and members from
Queensland and New South Wales with an interest in the sugar industry (Joyce 2014a).
Confusing and contested objectives
The stated objectives of the Real Choice Act are to ensure that sugarcane growers cannominate who markets a significant proportion of the sugar milled from the cane that theygrow, and to provide mechanisms for dispute resolution.
The objectives of reregulating the Queensland sugar industry are both confused andcontested. According to the Canegrowers the Act protects competition by allowing choice:
The Act establishes a macroeconomic framework that protects growers’ and millers’ rights todeal with their respective economic interest sugar, enabling them to independently choose who
provides the marketing services that best suit their needs. In doing so it provides forcompetition in the provision of those marketing services. (sub. DR169, p. 3)

However, the millers perspective is different. Wilmar, for example, said that:
We suspected from the outset that this legislation was never about addressing concerns aboutmarket failure. Rather, it was always about advancing generation-old claims for grower
ownership of the raw sugar that mill owners manufacture from cane that they purchase fromgrowers, and about reintroducing a form of quasi-statutory bargaining in cane supply
negotiations that was in fact abandoned in 2004. (trans., p. 499)

The QPC argued that the stated objectives of the Real Choice Act (then Bill) read more
like policy responses rather than policy objectives. Through extensive consultation, the64 This legislation was a private members Bill and not supported by the Government of Queensland.

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QPC sought to clarify the underlying goals of reregulating sugar marketing, and concluded
that they were:•to ensure a pricing framework where there is an appropriate balance of risk and reward
between growers and millers•

to ensure that there are appropriate protections for growers and millers to prevent against
the abuse of market power•

to ensure a regulatory framework that supports investment and innovation in the sugar
industry and supports the long-term economic sustainability of the sugar industry.
(QPC 2015, p. 36)

The idea that the Real Choice Act re-regulates sugar marketing is also contested — manyorganisations representing sugarcane growers said that the Act should not be described as‘re-regulating’ the marketing of sugar (SISL, sub. DR117; Canegrowers Isis, sub. DR230).
Canegrowers, for example, said:
The Sugar Industry (Real Choice in Marketing) Amendment Act 2015 does not provide for
either the actual or potential introduction of new statutory marketing arrangements inAustralia’s sugar industry in Queensland … nor do they re-regulate the international marketingof Australian sugar. (sub. DR169, p. 2)… this isn’t a case of reregulating sugar marketing at all. It is simply correcting the imbalancesthat have always been there but came to the fore when certain parties who had signed off on amemorandum of understanding and a heads of agreement about the transition to voluntary
marketing arrangements, back in 2004 and 2005, actually reneged on those understandings andundertakings. (Canegrowers Herbert River, trans. p. 620)

The argument that the legislation does not ‘re-regulate’ seems partly based on the idea thatthe term re-regulation can only be applied to a full return to single-desk statutory
marketing (SISL, sub. DR117; Canegrowers Isis, sub. DR230).
The Real Choice Act is legislation that restricts the marketing choices of sugar millers, andhence the term ‘regulation’ is appropriate. Because the legislation follows earlier
amendments to the Sugar Industry Act 1999 (Qld) designed to abolish most previous
legislative controls on marketing, the term ‘re’-regulation is also appropriate.
The Queensland Government said it was ‘concerned that the amendments signal a return toa highly regulated industry structure, which cuts against the basis of thirty years of micro
economic reforms in Australia’ (sub. DR154, p. 2).
Lack of transparency in miller marketing?
Submissions to this inquiry (including by Canegrowers, sub. 22), as well as to the QPC(2015) and a Senate inquiry (SRRATRC 2015a), said that sugarcane growers expect theReal Choice Act to maintain transparent pricing mechanisms that lead to an equitable
distribution of market premiums between themselves and millers.

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Transparent pricing is seen as a means of preventing transfer pricing if vertically integrated
international agribusinesses dominate future marketing arrangements (QPC 2015). Grower
confidence in the pricing practices of industry-owned QSL has meant that the goals ofmaintaining transparent and equitable pricing are often conflated with the goal of
maintaining existing single-desk marketing via QSL (for example, Canegrowers Burdekin,trans., p 683).
While there may be a case for government intervention where there is evidence of
insufficient information or information asymmetry, the QPC concluded that the
information that millers were proposing to provide sugarcane growers under the newmarketing arrangements from 2017 onwards:… appears to be comprehensive and would appear to provide the information that growers
would need to form a view on whether the premiums that should be being paid to growers, is infact being paid. It would also allow comparison of the premium and cost performance fromyear to year. (QPC 2015, p. 53)

Also, sugar is a commodity traded on world markets with readily reported and standardised
price and quality characteristics. This makes transfer pricing easy to monitor and detect by
the Australian Taxation Office.
Re-regulation of sugar marketing is not needed to meet the growers’ objective ofpreventing transfer pricing.
Imbalance of bargaining power?
Consistent with the historical arguments for statutory marketing (discussed earlier for otherindustries and in appendix B), a key concern of sugarcane growers is the potential for mills
to exercise monopsony power when negotiating future agreements. Canegrowers, forexample, said:
In each of the sugarcane producing regions, the local cane growing community must deal
commercially with a highly concentrated raw sugar miller. In most regions, a single company
owns all mills in the district; there is no feasible alternative market for cane; and there are few
if any worthwhile alternatives to sugarcane production within the farming system. With one
exception, the mill owner is either a large multinational or linked to a large multinational inwhich Australian sugar accounts for a small part of their total business activities. There is aclear imbalance in economic strength favouring the milling company. (sub. 22, p. 8)

Sentiments similar to the view that ‘growers are captive to the mill they supply’(Canegrowers, sub. DR169, p. 4) were repeated in submissions and at hearings fromorganisations representing sugarcane growers — including Pioneer Cane Growers
Organisation (sub. DR144) and Canegrowers Burdekin (sub. DR271). Canegrowers
Herbert River, for example, said:
The issue is that all the grower has is his cane in the field. The balance of power rests with theprocessor, so it’s going to be a Mexican standoff. Who’s going to look each other in the eye

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REGULATION OF AUSTRALIAN AGRICULTURE

and who’s going to back down first? The grower, who has a perishable product in the field feels
like he is under absolute duress. (trans, p. 630)

Others have made even stronger claims — on 12 October 2016, Mr George
Christensen MP reportedly wrote to the ACCC requesting an investigation into alleged‘unconscionable’ and ‘extremely anti-competitive’ conduct by sugar millers (Boyd 2016).
This investigation could address some of the misconceptions surrounding sugar marketing
put to this inquiry (box 12.1).
Box 12.1

Myths about sugar marketing and the need for regulation

During the inquiry, the Commission heard a number of claims about sugar and the need forregulation that appear to be misplaced.
•

Regulation is required because sugarcane is transformed by crushing into crystallised sugar.
– All agricultural products are transformed in some way before consumption, even if thistransformation is minimal (milling grain for animal feed) or limited to transporting it toconsumers (fresh fruit).

•

Regulation is required because the commercial sugar content falls rapidly after cutting.
– The value of most fresh commodities such as fresh milk, vegetables and fish falls rapidly
after harvesting, and supply chains optimising their value do not require regulation to
select a marketer.

•

Regulation is required because the value of sugarcane is not derived from the cane itself,
but from the value of final products.
– The value of all agricultural commodities is determined by the value of final products, andthe share of this value to growers and processors and other participants along the supply
chain is usually resolved by market processes.

•

Cane growers retain economic rights to two thirds of the sugar crushed from cane.
– Legal title to agricultural produce normally passes from grower to processor at the pointof delivery. The cane price formula does not convey legal title for sugar to growers
beyond its delivery to mills.

•

The cane pricing formula is the only acceptable basis for commercial arrangements between
growers and millers.
– The cane pricing formula is one possible method for sharing the economic returns fromsugar between millers and growers. Industry participants should be free to develop theirown innovative methods.

•

Economies of scale mean that milling is a natural monopoly, often resulting in only one
economically viable mill per region.
– Economies of scale are an inherent attribute of Australian and global food processing andretailing, and deregulation has assisted the evolution of more efficient value chains that
benefit consumers.
(Continued next page)

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Box 12.1•(Continued)

Sugarcane growers are disadvantaged because there is usually only one economically
viable mill in each region.
– Sugar mills are unable to exercise market power because Australia is a small,price-taking exporter of raw sugar, and sugar mills are dependent on farmers in theircatchment to supply sugarcane. Sugar growers and millers are mutually dependent.

•

The Memorandum of Understanding (MOU) signed by the Queensland Government,
Canegrowers and the Australian Sugar Milling Council in 2005 retains past sugar marketingarrangements indefinitely into the future.
– The MOU was a transitional arrangement that recognised that ‘the future cannot simply
be an extension of the past’ and committed all parties in the industry to the‘transformational change required to achieve sustainability’ (Queensland Government etal. 2005, p. 1).

•

Sugar mills marketing sugar internationally will use transfer pricing to accrue profits in othercountries, to the disadvantage of Australian sugarcane growers.
– Sugar is a commodity traded on world markets with readily reported and standardised
price and quality characteristics. This means that transfer pricing is easily detected andmonitored by agencies such as the Australian Taxation Office.

•An industry-owned, not-for-profit company is the corporate structure that best serves theinterests of sugarcane growers for market sugar internationally.
– Corporate structures that are subject to takeover in capital markets provide incentives for
managers to innovate to improve markets and reduce costs.

•

Recourse to political processes to resolve disputes is in the interests of the sugar industry.
– Recourse to political processes to resolve industry disputes undermines trust between
growers and millers, and prevents the development of industry leadership or the evolutionof conflict resolution processes with genuinely independent arbitrators.

Sugar cane needs to be processed within 16 hours after harvest (due to falling sugar
content) and the location of mills (due to transport costs) means the mills available togrowers are limited. As QPC said:
Due to the 16 hour crushing window, harvested cane must be delivered to mills soon after
harvest and growers generally use the services of a miller located close to their farms. In manycases, growers have no alternative mill to supply their cane crop. Millers also require harvested
cane to be delivered quickly to their mill as it is not economically feasible to source cane fromdistant locations. (p. 14)

Mill consolidation and limitations on the distance that sugarcane can be transported before
crushing suggest that there are economies of scale in sugar milling that could mean that asingle mill in each region is the economically most efficient industry structure (QPC 2015).
However, this does not mean that mills exclusively servicing a region can exercise market
power.

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Mills can only exercise monopsony (exclusive buying) power if there are alternative
suppliers of sugarcane, or monopoly (exclusive selling) power if they can influence prices
in world sugar markets. Because neither of these conditions exist in sugar markets, it is in
the commercial interests of millers to maintain a viable sugarcane growing industry thatmaximises mill efficiency and productivity.
In recent years, Australia has exported only six per cent of total world raw sugar exports
into a globally competitive market dominated by Brazil (44 per cent) (ABARES 2015a).
This means that international buyers of Australian sugar have many alternative sources ofsupply and there is no scope for Australia to use monopoly market power to influence
price.
The QPC concluded that while some millers may have a degree of market power, thepotential to exercise this power in price negotiations is counteracted by the co-dependencyof millers and sugarcane growers in local supply areas. This co-dependency gives sugar
growers an opportunity to organise and bargain collectively with millers for mutual benefit(QPC 2015).
Collective bargaining is used widely in the sugar industry to negotiate the terms of cane
supply and related agreements (Canegrowers, sub. 22). Collective bargaining in the sugar
industry is a recognised exception to the Competition and Consumer Act 2010 (CCA)(Cwlth) under section 51(1).
Are property rights appropriately assigned?
As noted earlier, a further concern of growers when the industry was deregulated was thelevel of influence and control they had in how raw sugar was marketed which raisedquestions around the extent to which growers have ownership of the raw sugar producedby mills.
Typically, legal title of agricultural produce passes from grower to processor at the point ofdelivery, and control over how the produce is managed is usually attached to ownership.
However, Canegrowers argued that it is different for sugar.
The sugar industry is fairly unique. Cane has no real market, commercial value on its own,
except for the products that can be produced from processing it. We are in a partnership, and it
should be a genuine partnership, with a processor. The partnership is two-thirds to the growers.
You’d think that it was 100 to nothing, the way that some processors talk.
… We seek no more than what it fair and reasonable for the marketing of the growers’ share,
the grower economic interest, sugar, from the cane that they produce … the grower carries
100 per cent of the economic risk associated with the storage, logistics, marketing, sale andshipping of their grower economic interest, sugar. 100 per cent risk … we want to be able tocontrol the process by which the value of our cane in the field is determined for its value. Thatis only fair and reasonable. I don’t think we’re asking too much. It’s been fair and reasonable
for many, many years. (trans., pp. 624–7)

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However, all agricultural products are transformed in some way before consumption, even
if this transformation is minimal (milling grain for animal feed) or limited to transporting it
to consumers (fresh fruit). And the value of most fresh commodities such as fresh milk,
vegetables and fish falls rapidly after harvesting, and supply chains optimising their value
have evolved without regulation to vest property rights in growers or to select a marketer.
The QPC concluded that there was no evidence that the cane price formula or the conceptof grower economic interest (GEI) provides any form of legal title in the growers. Rather,that the arrangements simply recognise that the price the growers obtain for cane isdependent on the price obtained for the sale of manufactured raw sugar. The QPC said:
We cannot conclude there is a market failure in the Queensland sugar industry because millers
are not offering growers choice to determine the marketing arrangements for something they do
not own. Nor do we consider that this is inhibiting competition in the market, because the‘market’ is the market for the export of raw sugar, which is contestable. (p. ix)

Also, that millers should have the right to choose who markets the sugar that they purchasefrom growers:… the growers are effectively asking to be given property type rights in a product which they
do not own. A refusal by the owner of a product to give away property type rights in that
product, does not constitute a misuse of market power as it is not of itself inherently
unreasonable. (QPC 2015, p. 51)

The Commission agrees with the QPC’s assessment that millers have exclusive property
rights over the sugar that they crush. Millers have no obligation to provide growers with achoice of marketer. This is not a market failure that needs to be regulated.
Claims of property rights by growers over the products produced by millers are notconfined to sugar. Wilmar told the Commission that:On 5 May 2016, a collective representing growers supplying Wilmar mills lodged a claim for
66% of profits obtained by Wilmar from bagasse products, molasses and any new non-raw
sugar products. It seems that the collective is arguing that grower economic interest creates
entitlement to a 2/3rds share of profits from the sale of all products derived from cane during orin association with the manufacturing of raw sugar. (sub. DR139, p. 12)

In September 2016, Canegrowers applied to the ACCC for a collective bargaining
exemption that included ‘capturing the value of the by-products and related products fromthe sugarcane’ (ACCC 2016e). The application seeks to expand existing exemptions
allowing collective bargaining to ‘include the right to have marketing agreements imposedon all mill owners’ (Boyd 2016).
Cangrowers do not seem to recognise the normal transmission of value from the benefits
and co-benefits associated with agricultural commodities through supply chains via prices
negotiations. Canegrowers Burdekin said:
We point out that the investment in innovation in areas such as co-generation and biofuel has
been to the sole financial benefit of the milling companies. To our knowledge growers have
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REGULATION OF AUSTRALIAN AGRICULTUREreceived no benefit from these innovations and our lack of bargaining power has stopped us
from obtaining a flow through of this benefit to growers. (sub. DR271, p. 5)

The arbitrary appropriation of miller’s property rights through the Real Choice Act islikely to discourage investment in milling, resulting in inefficiencies in mill capacity which
will in turn lead to reduced productivity of sugar cane growing. Wilmar argued that:
The Act has created uncertainty for investors in the Queensland sugar industry. The impact has
been profound and immediate. Within a week of the Act becoming law, media reported anannouncement by a foreign-owned milling company that it had put future capital investment‘on hold’. It is Wilmar’s view that while the Act remains in force, more such decisions will beforced by investor uncertainty and new risks introduced under the Act and this will be to thefinancial disadvantage of growers, millers and the economy. Wilmar has also put a hold on
future investment because of the Act. (sub. DR139, p. 11).

The QPC concluded that the legislation increases risk for millers, and this was likely to‘make Queensland a less desirable investment destination, compared with otherjurisdictions’ (QPC 2015, p. 75). This risk will be compounded by regional variability andchanges over time in the cane price formula.
Dispute resolution and self-reliance
Another objective of the Real Choice Act is to provide mechanisms for dispute resolution.
The Act provides an avenue for grower collectives to ‘use binding pre-contract arbitration
proceedings to have a 2/3rds share of non-sugar profits included in new cane supply
agreements’ (Wilmar, sub. DR139, p. 4).
The QPC (2015) found that while a degree of distrust between growers and millers has
made price negotiations difficult, this lack of trust is not in itself an indication of themisuse of market power, and does not justify additional regulation. The Chair of the
Queensland Parliament Agriculture and Environment Committee also said:
I acknowledge the view of many within the industry that the impasse over marketingarrangements could only be resolved through government intervention. … The committee
encourages growers and mill owners to continue to negotiate in good faith and to fully utilise
the federal-government-led mediation process to resolve the current impasse. It is thecommittee’s opinion that, where possible, commercial negotiated outcomes can produce better
outcomes for all those involved in the Queensland sugar industry. (QAEC 2015, p. v)

Arbitration is costly and can impede investment and innovation. As Hildebrand said:
It is not desirable that arbitration becomes a customary way to avoid the responsibility thatshould accompany local leadership in genuine negotiation at the mill area level, for the good ofparticipants in that mill area. (2002, p. 14)

Hildebrand saw ‘time spent in aggressive conflict between co-dependent parties as sheer
waste’, and suggested ‘facilitation as a practice worth substituting [for conflict]’(2002, p. 14).
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Implicit in the objective of providing dispute resolution is the idea that there are
imbalances in market power that need to be regulated. There are protections through the
CCA that prevent the misuse of market power (section 12.2), and the concentrated natureof the industry provides sugarcane growers with an opportunity to take advantage of thecollective bargaining provisions in the CCA.
Mediation provided under codes of conduct is used in other industries (section 12.3) as a
low cost mechanism for resolving disputes. However, a code of conduct is only likely to beeffective if it is developed and administered in a manner considered to be independent andimpartial by all parties. A draft code of conduct was developed during 2015 by anon-parliamentary taskforce of National Party senators and members from Queensland and
New South Wales with an interest in the sugar industry (Entsch 2015; Joyce 2014a).
Milling companies expressed dissatisfaction with the degree to which they were consulted
during its development (Sparkes 2015), and are reported as rejecting the draft, saying that:… the work of the taskforce, and the threat of government intervention, had proved adisincentive for millers and growers to reach a commercial agreement for future marketingarrangements. (Zonca 2015)

There is no reason why government should intervene to expropriate assets from one privateorganisation (millers) to give to another (growers). Both growers and millers are mutuallydependent and have shared responsibility for reaching an amicable agreement. As in othersectors, differences should be resolved by negotiation (or if necessary by the judicial
system). Recourse to political processes to resolve industry disputes can undermine trust
between growers and millers, and prevent the development of industry leadership and/or
conflict resolution processes.

FINDING 12.2

There is no market failure or other reasonable objective to justify the re-regulation of
the Queensland sugar industry.

Re-regulation increases vulnerability
Re-regulating the sugar industry also risks entrenching a backward looking perspective that
reduces the ability of the industry to anticipate and adapt to future change and external
shocks. Modelling by the Economic Research Service of the United States Department ofAgriculture (ERS) highlighted that world sugar markets will continue to experience shocks
from unexpected policy changes in Brazil, India, China and Pakistan into the long term
future (Haley 2015). Demand is also expected to grow for alternative sweeteners such as
corn syrup that compete with sugar in world markets (OECD 2015b).
Some organisations representing growers equate market failure with the disruption tomarketing arrangements established in 1915, and see the object of re-regulation as
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REGULATION OF AUSTRALIAN AGRICULTURE

continuing these past marketing arrangements. For example, Canegrowers Burdekin told
the Commission that:
We are surprised and disappointed that anybody could conclude that there has not been a caseof Market Failure. Australia has had a market process in place that has benefited millers andgrowers for over 100 years. We understand this marketing process is the envy of othercountries throughout the world. Wilmar International, fresh to Australia, came to growers andsaid they want to completely smash this process. Growers clearly SHOUT OUT NO and our
region and others vote unanimously to condemn Wilmar’s proposal. (sub. DR271, p. 3)

Organisations representing millers dispute that they have any intention of moving awayfrom past revenue sharing mechanisms. The Australian Sugar Milling Council stated that‘mills have not proposed to change the existing revenue sharing cane payment
formulas …’ (trans., p. 560).
Looking beyond the claims and counter claims, a worrying aspect of the debate is that it
assumes that marketing arrangements developed in 1915 (when Australian and New
Zealand diggers landed on the Gallipoli peninsula) should continue to be adhered to in2016 (Canegrowers, sub. DR169; Canegrowers Burdekin, sub. DR271; Canegrowers
Innisfail, sub. DR119). What seems to be missing is a vision for the future of the sugar
industry that projects likely changes in technology and patterns of future demand, andways for growers, millers and marketers to work cooperatively to adapt to thesechallenges.
The cane price formula developed in 1915 is ingenious in that it has the potential toprovide incentives for both sugarcane growers and millers to improve productivity (Dixon
and Johnson 1988). However, growers and millers should be free to mutually agree tocontinue using this formula if it is in the interests of both parties. Its use should not be
mandated by regulation. Existing and new industry participants should be able to develop
new and innovative marketing arrangements.
Grower organisations claim that the approximate one-third (miller) and two-third (grower)‘economic interest’ in sugar is derived from past capital investments in the industry(Canegrowers Burdekin, trans., p. 679). More appropriate mechanisms would apportion
revenue based on current and future commercial contributions to productivity andprofitability.
Historic investments are ‘sunk costs’ in that they cannot be recovered, and are therefore apoor measure of current or future productivity and profitability, and theirbackward-looking nature provides no incentive to innovate. Retaining a backward looking
perspective and out-of-date practices risks reducing the ability of the sugar industry toadapt to rapid or unexpected future changes in world sugar markets.
Grower representatives may also be underestimating the ability of milling companies toexit and relocate mills in other countries, which would leave the cane farms as stranded
assets. During hearings the Commission asked several grower representatives to address

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this possibility, and was told that it was not considered possible, so no contingency
arrangements were being prepared (Pioneer Canegrowers trans., p. 669).
As noted earlier, sugar millers are concerned about the impact the Real Choice Act will
have on the industry. Wilmar, for example, said:… while the Act remains in force, the Australian industry will not grow and will not improveits competitiveness in the global raw sugar market. This will be to the financial disadvantage of
growers, millers, communities and the economy. (sub. DR139, p. 3)

The QPC also concluded that the legislation:•by interfering with the property rights of millers creates a significant form of sovereignrisk for millers and is likely to ‘reduce the profitability of future sugar mill investment
and dampen longer term innovation and productivity compared to no additional
regulation’ (2015, p. 84)•

could reduce overall returns to the sugar industry and add extra costs (for example,
marketers need to compete for the business of cane producers with costs to attract andretain customers and additional transaction costs; also pre-contract arbitration can resultin additional costs that may not be outweighed by benefits).

The vulnerability of the sugar industry is highlighted by the degree to which the industry
has been reliant on structural adjustment funding programs. This includes: $100 million
structural adjustment and support assistance in 1986–1989; $40 million in 1993–1997;$16 million in 1998; up to $86 million in 2000; and up to $444 million in 2004
(Craigie 2014).
The Commission estimates that the sugar industry has received almost $2 billion (in2013-14 terms) in tariff, marketing and budgetary assistance from the AustralianGovernment since 1990-91. This equates to a public subsidy of over $400 000 per farm foreach of the 4000 farms that remained in the industry in 2014-15.
Growers assuming that millers will not exit the Australian market, and that structuraladjustment funding will continue into the future (particularly given changing demographics
and voting affinities), is a high risk strategy. Without self-reliance or contingency plans,
growers are effectively playing a high stakes game where they have bet ‘all in’.
Regulation is constraining the productivity of sugarcane growing
Past inquiries noted a long history of the Australian sugar industry not taking advantage ofscale economies (IC 1996). In the past, this was partly due to regulations limiting the areaof sugarcane that new farms could establish (IC 1992). However, the evidence suggeststhat not much has changed since the nominal deregulation of Queensland sugar in 2006. In
fact, the evidence suggests that productivity and profitability growth of the sugar industry
has stalled, and that this has coincided with slow rates of structural adjustment (box 12.2).

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The average size of sugarcane farms in Australia increased from around 80 hectares in
1997-98 to 110 hectares in 2014-15 (ABS 2016b). In 2014-15 there were just over
440 sugarcane farms in New South Wales with an average size of 53 hectares, and nearly
3600 farms in Queensland with an average size of 116 hectares. This compares to an
average sugarcane farm size in the United States of 415 hectares in 2002 and 495 hectares
in 2007 (USDA 2009). This larger scale of sugarcane production is possible in Australia —in 2014-15, 23 farms in the northern gulf region of far north Queensland crushed anaverage area of 435 hectares each, producing an average of 82 tonnes of cane per hectare(ABS 2016b).
Box 12.2

Structural adjustment in the sugar and dairy industries

The sugar and dairy industries have similar structural characteristics. Both are regionallyconcentrated, highly intensive agricultural land uses and both have had a long history of market
regulation. The dairy industry was deregulated in 2000, and the industry worked closely with
Australian governments on a program of structural adjustment. In contrast, the sugar industry
was deregulated in 2006, but the majority of Queensland mills continue to market their raw sugar
exports through the single-desk marketing arrangements.
In the dairy industry, milk yields per cow have increased by 25 per cent since 1997-98, while
yields of sugar have fallen by 10 to 15 per cent over the same period.
Productivity growth in the Australian dairy industry has been highest in regions that haveundergone the most structural adjustment (Ashton et al. 2014, p. i). The total number of dairy
farms fell by 46 per cent between 1997-98 and 2010-11 compared to 32 per cent for sugarcane
farms. The decline in the number of dairy farm was accompanied by much greater consolidationof farm sizes, with the number of farms with an area of less than 99 hectares falling by 58 percent compared with 38 per cent in the sugar industry.

(Continued next page)

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Box 12.2(continued)

Sources: ABARES (2015a); ABS (2016b).

As far back as the early 1990s, the Industry Commission (1992) cited research indicating
cost savings of around 30 per cent from expanding farm area from 100 to 300 hectares.
More recently Valle and Martin (2015) found that most Australian sugarcane farms with anarea of less than 125 hectares generated a negative rate of return on capital while sugarcane
farms with more than 250 hectares generated a rate of return comparable to farms in thegrains industry with similar total capital investment. Nearly half of Australia’s sugarcane
growers plan to exit the industry or diversify over the period 2015–2020. Valle and Martin(2015) reported that:•

40 per cent of sugarcane growers intend to maintain the current size of their farm•around 12 per cent expect to expand their sugarcane area — this was higher for larger
farmers (28 per cent) and for farmers in the more productive regions of north
Queensland (13 to 16 per cent)•around 22 per cent of farmers planned to either retire or sell their farm•

11 per cent of farmers planned to reduce their sugarcane area.

Another study found that the age profile of sugarcane farmers has a disproportionately
larger percentage of its workforce in the older age brackets (> 60 years) than the overall
Queensland workforce (Thompson et al. 2010). Also that:
The low numbers of young people participating in the sugar cane industry compared with thetotal Queensland workforce indicates that there are existing factors that already make the502

REGULATION OF AUSTRALIAN AGRICULTURE

industry less attractive than other areas for younger participants, or that present barriers to their
participation. (Thompson et al. 2010, p. 33)

Peak bodies representing sugarcane growers dispute that farm size is related to
productivity, arguing that larger farm sizes in the United States are sustained by subsidies.
CANEGROWERS suggests that the difference in sugarcane farm size between Australia andthe United States can be explained in large part by the differences in support structures received
by the two industries. (Canegrowers, sub. DR169, p. 6)

However, higher levels of protection in agricultural industries are usually associated withthe maintenance of smaller and less efficient farm sizes. For example, in 2015 the average
dairy herd in the United States was 183 cows (McBride 2016) in an industry receiving theequivalent of 15 per cent of its farm-gate milk price in public subsidies (OECD 2016b). In
contrast, the average Australian dairy herd was 233 cows in 2014-15 (ABS 2016b), in anindustry receiving no direct public subsidies (OECD 2016b).
Significant levels of government support are also likely to partly explain the persistence ofsmall inefficient farm sizes in the Australian sugar industry. Thompson et al. (2010)
showed that the Sugar Industry Reform Program 2004 to 2008 provided Queensland
sugarcane farms with average payments of $3361 per farm for income support, and an
additional $27 820 per farm to undertake reforms including business planning,
restructuring and exiting the industry. For payments amounting to $334 million, 3 mills
were closed and 624 growers (approximately 12 per cent) exited the industry for aminimum of five years. It appears that the result is a relatively poor return on thegovernment’s investment in terms of productivity gains relative to similar programs inother comparable industries (box 12.2).
Real choice in marketing?
While the Act passed by the Queensland Parliament is titled ‘Real Choice in Marketing’,
its actual effect is to restrict the marketing options of sugar millers and appropriate theirright to market the sugar that they produce (QPC 2015). Commenting on the passing of theBill, the Queensland Government Department of Agriculture and Fisheries said:
It was not supported by the Queensland Government due to likely negative impacts, whichwere identified in a regulatory impact assessment undertaken by the Queensland Productivity
Commission … the amendments to the Sugar Industry Act 1999 which commenced on
17 December 2015 authorise potential anticompetitive behaviour (in the form of enabling
growers to force sugar mills to enter contracts with a sugar marketer of the grower’s choice).
(sub. 58, p. 7)

There is already some evidence that re-regulation of the sugar industry is constraining
sugar marketing (Webster and Zonca 2016). Re-regulation forced milling company Wilmar
into a complex redrafting process that delayed the drafting of contracts with growers forthe 2017 season (Webster 2016). This meant that in mid-2016 neither Wilmar nor growers

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were able to use forward selling to take advantage of the highest world sugar prices since
2012.
Grower organisations attribute contracting delays to Wilmar (Webster 2016). Canegrowers
Burdekin, for example, said:
Wilmar make regular comments in regard to the resources and costs they are incurring to draft
contracts for 2017. Little thought has been given to the resources and costs incurred by growers
and their representatives since 2013 when Wilmar initiated this nightmare. … growers havebeen unable to take advantage of very attractive forward prices for 2017 as they are unable toforward price due to Wilmar’s actions. (sub. DR271, p. 3)

Current proposals by sugar millers to seek higher premiums for growers throughalternative marketing options are consistent with the goals of deregulation and competition
policy (QPC 2015). There are limits to market premiums in competitive global commodity
markets. The QPC found that ‘between 95-99 per cent of the price of the sugar isdetermined by the international market’ (2015, p. 58).
However, reform in agriculture shows that innovation in marketing has the potential toattract small additional premiums by providing products and marketing services tailored to
new and emerging markets in which each marketer has a competitive advantage(PC 2010d). Improved integration of milling and marketing operations may create
opportunities to increase efficiency and reduce costs.
By appropriating the rights of millers to market sugar, the Real Choice Act isanticompetitive in a number of ways that could contravene the CCA. The QPC found that:•growers forcing millers to sell sugar to a third party looks like a form of ‘third-line
forcing’ prohibited under subsections 47(6) and 47(7)•collusion among growers to nominate the same alternative marketer (such as QSL)
looks like a form of exclusionary contract provision prohibited under section 45•

agreement between competing sugarcane growers to limit the supply of goods orservices to a third party could be a criminal offence under section 44ZZRF•

contracts, arrangements or understandings between sugarcane growers which have thepurpose or effect of substantially lessening competition are prohibited under section 45(QPC 2015, pp. 72–73).

The Real Choice Marketing Act has not been investigated by the ACCC because it is an
exception to the CCA under section 51(1). Section 51(1b) of the CCA allows exceptions
for:anything done in a State, if the thing is specified in, or specifically authorised by:(i) an Act passed by the Parliament of that State; or(ii) regulations made under such an Act.

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That said, under clause 2(2) of the Competition Code Agreement, the Commonwealth
Treasurer can only table amendments to the CCA granting exemptions under section 51 if
supported by evidence that there is a clear public benefit and that there are no other ways
the policy objective can be achieved.
The QPC found that ‘a public benefit assessment of the net benefits of authorising the
proposed anti-competitive conduct was not undertaken prior to introduction of the Bill’(2015, p. 73). Under these circumstances, the Commission understands that the Treasurer
can refer the state legislation to the National Competition Council to assess whether it is in
the public interest. This review would be conducted by the secretariat for the National
Competition Council, which is the ACCC.
The Queensland Government told the Commission that:
Given the significant and wide-ranging impacts of the amendments for the Queensland sugar
industry and the economy more broadly, the Queensland Government raised its concerns with
the Australian Government both before and after the passing of the legislation. In particular,
given conduct authorised under the Act potentially breaches various sections of theCompetition and Consumer Act 2010 (CCA), the Queensland Government requested that theAustralian Government refer the matter to the National Competition Council for investigation.
(sub. DR154, p. 3)

To date the legislation has not been referred to the National Competition Council. This is
another missed opportunity to test whether the legislation is in the interest of the broader
Australian community.
The Real Choice Act should be repealed
The Sugar Industry (Real Choice in Marketing) Amendment Act should be repealed on thebasis that:•

there is no market failure or other reasonable objective to justify re-regulation•

the benefits of the Act do not outweigh the costs.

Repealing the Act could enable consolidation and productivity gains which would enhance
the international competitiveness of the sugar industry.

RECOMMENDATION 12.2

The Queensland Government should repeal the amendments made by the Sugar
Industry (Real Choice in Marketing) Amendment Act 2015.

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The role of Queensland Sugar Limited
Sugar growers’ confidence in QSL is untested

Based on submissions and evidence provided at hearings, growers’ confidence in QSL isbased on long term association rather than commercial performance. For example,
Canegrowers Burdekin said:
On 3 April 2014, Wilmar attempted to take control of the marketing of all of the raw sugar
without growers’ agreement. Wilmar put forward their NO CHOICE — NO QSL marketing
proposal and gave notice to exit QSL and subsequently gave notice to cancel the long standing
CSA. CBL growers’ voted unanimously that they condemn Wilmar’s NO CHOICE — NO
QSL proposal as it takes away their rights to utilise QSL, the successful Australian, not for
profit, non-taxable, industry owned, marketing company. Many of our growers are well over
the age of 55 and QSL has faithfully served their needs for many many many decades.
Wilmar’s action lead to over 18 months of dispute and impasse which was only resolved in
December 2015 by the Sugar Industry (Real Choice in Marketing) Amendment Act 2015.
(sub. DR271, p. 2)

Grower organisations cite transparency over pricing as one reason for wanting to retain
QSL as the dominant marketer of sugar, and for rejecting alternative marketingarrangements proposed by new entrants such as Wilmar (Canegrowers, sub. 22;
Canegrowers Herbert River, sub. DR269 and Canegrowers Burdekin, sub. DR271). As
Canegrowers Herbert River said:
We actually prefer the current situation because QSL is actually owned by the growers and themills and it is at arms’ length from both parties. It delivers real transparency, that’s the whole
point of having QSL in there. (Canegrowers Herbert River trans., p. 628)

However, growers confidence in QSL has never been tested by the kinds of long-termcompetitive pressures that have driven innovation and cost savings in other industries.
Competition would test claims by millers that they can generate higher premiums forgrowers through alternative marketing arrangements.
It also appears that grower perceptions of QSL 65 affect their perceptions of millingcompanies participating in sugar marketing:… the mill actually has no interest in the growers economic interest sugar … They get theirshare through the cane price formula, it’s theirs to do with as they wish, even though I
personally believe that, as an industry, we would be better off staying with the single desk
marketer, which was QSL, which served the industry. (Canegrowers Burdekin, trans., p. 683)

65 At the Townsville hearings, the Commission heard from a number of canegrowers who were universally
supportive of retaining QSL as a marketer of raw sugar.

506

REGULATION OF AUSTRALIAN AGRICULTUREQSL is a registered charity

QSL is a registered charity (ACNC 2016e). Its broader and longer-standing status as a
not-for-profit public company limited by guarantee is an unresolved legacy from its
previous status as a statutory marketing authority (CIE 2005; QSL 2016). However, QSL’scharity status is a much more recent development. QSL was granted charity status in late2015, and began reporting to the Australian Charities and Not-for-profits Commission(ACNC) in 2016 (ACNC 2016a, 2016e).
The Charities Act 2013 (Cwlth) was introduced to provide a statutory definition of charity
to overcome considerable confusion and uncertainty that had built up from over 400 yearsof common law (Treasury 2016c). The ACNC uses the definition of charity set out in theCharities Act when making decisions on registration applications. To be registered as acharity, a not-for profit must have charitable purposes that ‘is for the public benefit’.
The Charities Act lists 12 charitable purposes that can be used by institutions to apply forcharity status (including, for example, advancing health, education, religion and culture)(ACNC 2016g). The last category is a general one covering ‘any other purpose beneficial
to the general public’. This provision was to ensure legislative flexibility for worthy
charitable organisations to be able to obtain charitable status with reasonable transaction
costs (Treasury 2016c).
QSL’s stated charitable purpose (under the general purpose category) is to ‘promote thedevelopment of the Australian sugar industry’ and support its ‘long term prosperity andsustainability’ for the benefit of the ‘general community in Australia’ (ACNC 2016a).
However, charity status appears to be inconsistent with QSL’s main activity of exporting
raw sugar for the commercial benefit of 14 sugar mills and 3600 sugarcane farming
businesses in a geographically confined region of coastal Queensland.
It is highly unlikely that QSL being granted charitable status is in the interests of the wider
Australian community. QSL generates revenue for a select group of commercial businesses
in an industry that has cost Australian taxpayers almost $2 billion since 1990. The tax
concessions from charity status adds to this taxpayer assistance.
Other agricultural commodity trading companies also have charity status. The
Co-operative Bulk Handling (CBH) Group — a bulk wheat exporter — was endorsed as acharitable institution by the Australian Taxation Office (ATO) on 21 March 2014 witheffect from 1 July 2000 (CBH Group 2014). In NSW, the Supreme Court ruled in July
2015 that GrainGrowers’ agricultural activities constitute a charitable purpose 66.
The charity status of QSL, CBH and GrainGrowers was also backdated to 3 December
2012 — the day that the ACNC was established (ACNC 2016a, 2016b, 2016d), which
66 Grain Growers Limited v Chief Commissioner of State Revenue (2015) NSWSC 925; 14 July 2015,2014/305291

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means they are entitled to charity tax concessions from the date from which they wereretrospectively endorsed as charities by the ATO (ATO 2016e, 2016f). According to theAustralian Business Register, the tax concessions that QSL has received include income
tax exemptions from 1 July 2000, as well as Fringe-Benefit Tax (FBT) rebates and GST
concessions from 1 July 2005 (ABR 2014).
Registered charities receive the highest level of tax concessions, including concessions on
income tax, fringe benefit tax, goods and services tax and franking credits 67 (ATO 2016h).
The main alternative to charity status for commodity trading organisations is a lesser
not-profit-status as ‘resource development organisations’ (ATO 2015c). However, acommodity trading organisation like QSL may not be eligible for income tax exemptions
under this lesser category if its ‘main purpose is merely to provide services to its members’(ATO 2015c). 68
The granting of charity status to commodity trading businesses is in part due to legal
interpretations of charitable purposes that serve the public interest. In 2008, the Federal
Commissioner of Taxation attempted to remove CBH’s tax-exempt status on the basis that
CBH’s activities were carried out for the profit or gain of its members. CBH appealed
against this decision, and in 2010 the Federal Court ruled in CBH’s favour. The court
ruling was largely due to the interpretation of CBH’s stated purpose as one which serves
the industry as a whole.
… [the judge] rejected the [Federal Commissioner of Taxation’s] submission that the‘development of agricultural resources’ is confined to the farm side of the ‘farm gate’ andconcluded that the term ‘agricultural resources’ has a broader meaning than the word
‘agriculture’ … His Honour concluded that CBH was and continues to be established primarily
for the purpose of promoting the development of the grain growing industry of Western
Australia. (ATO 2014)

Similarly, the New South Wales Supreme Court ruled that GrainGrowers served a purpose
beneficial to the community based on a generous interpretation of the ancillary publicbenefits resulting from agricultural activities.
It seems to me that I can, without specific proof, infer that agricultural activity benefits society
generally, and Australian agricultural activity benefits Australian society generally, and noevidence was led to suggest that the benefit that has previously existed in such activity hasceased to exist. (Grain Growers Limited v Chief Commissioner of State Revenue [2015]
NSWSC 925)

The claim that there is a general benefit to Australia from an industry can apply to allindustries in Australia (all industries produce goods and services which are traded and can
67 The legislation which allows agricultural commodity trading companies to receive tax benefits is the
Income Tax Assessment Act 1997 (Cwlth).
68 The ATO uses the example of a not-for-profit organisation set up by a group of horticultural businesses tobuy supplies and undertake joint marketing as a business that does not quality for income tax exemption
under the resource development category.

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benefit Australian consumers). Such a claim would seem to be inconsistent with thecommon view of a charity held by many in the community. Conferring charitable status onorganisations that trade agricultural commodities for the commercial benefit of farmbusinesses risks damaging the credibility of charities as a respected societal institution.
QSL’s charity structure limits its commercial potential

QSL’s not-for-profit status reduces the transparency of its performance, in part because it
prevents it from issuing shares or paying dividends (ASIC 2016). Members receive value
through the services provided by QSL rather than benefiting from increases in share priceor dividends (SRRATRC 2015a). Returns provided through services vary for each member
and are difficult to quantify or compare with the performance of competitors. This reducestransparency and the motivation that closer financial scrutiny would bring for QSL toinnovate and minimise costs.
The decision by QSL’s directors to retain its not-for-profit structure and charity status has anumber of limitations.
•

It dispossesses sugarcane growers and millers of QSL’s assets. According to the
ACNC:
In the event of the organisation being dissolved, the amount that remains after such dissolution
and the satisfaction of all debts and liabilities shall be transferred to another charitableorganisation with similar purposes which is not carried on for the profit or gain of its individual
members. (ACNC 2016h)•

It can impede structural adjustment because farm businesses wanting to expand or exit
the industry are unable to use their equity in QSL as collateral, or sell it to otherinvestors. It can also impede innovation by preventing entrepreneurs from buying into
QSL and benefitting from their innovation through dividends and increases in the shareprice.

•

It restricts QSL’s capital raising options. The Centre for International Economics(2005) highlighted the benefits of changing QSL’s corporate structure to one limited byshares rather than by guarantee, including the ability to raise capital which would open
greater commercial opportunities.
If [QSL] were to become a company limited by shares, stakeholders would be able to own andtrade its shares and transfer the benefits into their own balance sheets. This would give them an
incentive to ensure that QSL’s Board performs well commercially. An ultimate discipline inthis regard would be the threat of takeover that currently does not exist. (CIE 2005, p. 17)

The future structure of QSL could be informed by the experiences of other farmer-owned
commodity-based companies, who have identified the commercial benefits of adopting afor-profit corporate structure. For example, CBH is reviewing its tax-exempt company
structure in favour of a for-profit structure so it can capture greater commercial
opportunities and increase returns to its owners. SunRice — the single-desk rice exporter

COMPETITION509

— regards its restructuring for listing on the stock exchange as a key to ‘achieving
long-term strategic value and sustainable investment’ (SunRice 2016, p. 68).
Tax concessions and competitive neutrality

QSL’s charity status also has implications for competitive neutrality in the sugar industry.
The tax concessions conferred on QSL give it an advantage over the for-profit firms it
competes with in providing sugar marketing services.
The backdating of charity status and tax exemptions can mean that commodity trading
companies are eligible for tax refunds that can amount to windfall gains of tens of millionsof dollars. The not-for-profit status of these companies mean that any windfall gains canonly be dissipated as costs or distributed back to members via the pool price of raw
commodity exports. These are dividends by another name and amount to a further taxpayer
subsidy to sugar growers.
The tax concessions provided to agricultural trading companies (especially payroll tax andand fringe benefits tax concessions) also confer a significant advantage to the directors andstaff of these companies relative to workers providing the same services in their for-profit
competitors (PC 2010b).
QSL reports that its payroll tax exemption alone is worth $1 million per year:
As a not-for-profit entity whose purpose is to operate for the benefit of the entire industry, QSL
has successfully been granted an exemption from state Payroll Tax. This will equate to an
ongoing saving of $1 million per annum and will benefit both RSSA and domestic storage andhandling (S&H) users. This exemption was backdated to 30 June 2010 and the associatedrefund was flowed through the 2014 Pool prices for RSSA users and directly to S&H users.
(QSL 2015, p. 13)

The tax concessions and refunds that QSL is eligible for as a charity mean thatcomparisons of its pool price with those of competitors cannot be used to assess
commercial innovation on equal terms. QSL is also not subject to the same risks of capital
market takeover that motivate publicly-listed companies to innovate and minimise costs.
To the extent that these advantages are passed on through pool prices, these advantages
shield both millers and farm businesses from the market forces that drive innovation andproductivity. This is likely to constrain the reallocation of resources from smaller and lessefficient mills and sugarcane farms, to larger and more efficient mills and farms.

RECOMMENDATION 12.3

The Australian Government should legislate to exclude agricultural commodity trading
companies from being granted charity status and receiving the associated tax
concessions.

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12.2 Competition law
Statutory marketing sought to counter market power that farm businesses were thought tobe subject to by providing them with ‘countervailing’ market power. An alternative policy
strategy, relied on more heavily for the agricultural sector since the competition policy
reforms of the 1990s, is the use of competition law to regulate the misuse of market power.
Australia’s core competition law provisions are contained in the CCA. The objective of the
CCA is to ‘enhance the welfare of Australians through the promotion of competition andfair trading and provision for consumer protection’. The ACCC is responsible for ensuring
compliance with the CCA.
Competition law can increase economic efficiency by discouraging firms from interferingwith the competitive process. It can also provide a degree of certainty about whether
certain types of practices are acceptable. A difficulty that regulators can face isdistinguishing between intense commercial bargaining which is desirable for the operationof competitive markets (and may lead to some exiting the market), and behaviour that isdamaging the competitive process (to the detriment of consumers).
As discussed earlier, farm businesses continue to be concerned about an imbalance inbargaining power and inefficient or unfair commercial outcomes. For example, the NSW
Farmers’ Association said that:In the case of agriculture, there is an existing imbalance between participants in the supply
chain. (sub. 72, p. 39)

The NSW Farmers’ Association also indicated that the consolidation of the red meat
processing, grain transport and horticultural industries has made farm businesses in thesemarkets particularly susceptible to the misuse of market power.
Australian Dairy Farmers expressed similar concerns in the context of dairy farmbusinesses.
Fluctuations in input costs, the impact of climatic variations, limitations in infrastructure andthe perishable nature of produce leave some farmers in an economically vulnerable position
operating under extremely tight margins. These market factors result in imbalances between
participants in the supply chain. (sub. 63, p. 9)

Farm businesses can experience intense commercial pressure through the normal
functioning of competitive markets. Poor trading terms can reflect a lack of demand, andcan have much the same effect as the alleged exercise of market power by wholesale
merchants, traders or supermarkets — that is, the exit of less efficient farm businesses fromthe industry.
For example, in a recent study of cattle and beef markets, the ACCC found that:
There is … a cyclical element to many of the concerns about the competitiveness of market
structures in the Australian industry. For instance, there were particularly strong concerns aboutmarket concentration and buyer power during the peak of the recent drought in 2013 and 2014.
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In 2014 the industry was characterised by high rates of cattle turn-off, strong overseas demandfor Australian beef in export markets. These conditions would have been favourable to the
profitability of cattle buyers, especially export processors and placed them in a stronger thanusual bargaining position relative to producers. During this period, producers’ profits suffered
due to high costs of supplementary feed and the low cattle prices.
Since 2015 and the end of drought conditions … producers have entered markets to purchasere-stocker cattle, resulting in greater numbers of buyers in cattle acquisition markets andupward pressure on prices. The reduction in the supply of cattle is also reflected in theunder-utilisation of processing facilities, with processors reporting significant excess capacity
this year. (ACCC 2016b, pp. 3–4)

This section looks at the role that the collective bargaining and misuse of market power
provisions within the CCA play in addressing farm businesses’ concerns about imbalances
in market power.

Collective bargaining and boycotts
In general, section 45 of the CCA prohibits commercial arrangements that substantiallylessen competition. However, it also authorises exemptions that allow small businesses tobargain collectively with larger businesses and to strategically use boycotts as part of thesenegotiations (box 12.3).
In its submission to this inquiry, the NFF suggested that agriculture has some uniquecharacteristics that add to the imbalance in bargaining power with larger businesses:
The farming sector is fragmented, made up largely of small to medium sized businesses inremote areas with limited access to market information and opportunities for collective
organisation. Fluctuations in input costs, the impact of climatic variations, limitations ininfrastructure and the perishable nature of produce leave some farmers in an economicallyvulnerable position operating under extremely tight margins. These market factors result in
imbalances between participants in the supply chain. (sub. 61, p. 28)

To address imbalances in bargaining power, exemptions granted under the CCA allow
small businesses (including farm businesses) to enter into collective bargaining
arrangements when dealing with large businesses. Allowing small businesses to bargain
collectively can redress imbalances in power and result in more efficient outcomes.

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Box 12.3

Collective bargaining and boycotts

Collective bargaining is an agreement by two or more competitors to negotiate with a supplier ora customer over terms, conditions and prices. A group of businesses may sometimes appoint a
representative, such as an industry association, to act on its behalf in the negotiations.
A collective boycott occurs when a group of competitors agree not to acquire goods or services
from, or not to supply goods or services to, a business with whom the group is negotiating,unless the business accepts the terms and conditions offered by the group.
Exemptions — in some circumstances, allowing collective arrangements may be in the public
interest. The Act allows protection from legal action to be granted to parties to engage inanticompetitive conduct, including collective bargaining and boycotts, when there are publicbenefits that would outweigh the detriments to competition.
There are two ways that businesses can obtain an exemption from the competition provisions of
the Act for collective arrangements — authorisation and notification:•authorisation — following public consultation, the ACCC may ‘authorise’ businesses toengage in anticompetitive conduct when it is satisfied that the public benefit outweighs the
detriment•

notification — streamlines the approval process for small businesses by enabling one
business within a collective bargaining group to lodge a notification on behalf of the otherbusinesses in the group.

Source: ACCC (2011).

The ACCC has recognised that:… small businesses are often more likely to be heard on terms and conditions if they join withother small businesses to collectively negotiate with a larger business, rather than one-on-one.
However, negotiating collectively may breach the Act [the CCA]. (ACCC 2011, p. 6)

Collective bargaining can reduce the costs of negotiating agreements. The ACCC (2014b)
notes that collective bargaining can overcome information asymmetries, reduce the time
and transaction costs associated with establishing supply agreements, and strengthenbargaining power.
To take advantage of these opportunities, small businesses can apply to the ACCC for an
exemption to engage in collective bargaining and/or collective boycotts through theauthorisation or notification provisions of the CCA (box 12.3). For most sectors,
applications for collective bargaining notifications can be lodged if the annual value oftransactions affected is less than $3 million ($5 million for primary producers). There is nothreshold for lodging an application for authorisation of collective bargaining(ACCC, sub. DR121).
Adoption is low
A number of participants said that collective bargaining is an important tool for addressing
power imbalances in bargaining (Australian Dairy Farmers, sub. 63; AgForce, sub. 17;
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NFF, sub. 61). Canegrowers (sub. 22), for example, reported that collective bargaining isused in the sugar industry to negotiate the terms of cane supply agreements with mills.
The ACCC also told the Commission that:
Since 2007 when the collective bargaining notification process was introduced in the CCA, the
ACCC has approved notifications from nine collective bargaining groups in the agriculture
sector (the citrus, chicken and dairy industries). Over the same period, the ACCC has approved
18 applications for authorisation (excluding minor variations) of collective bargaining
arrangements involving groups in the agriculture sector. The collective bargaining
authorisations cover groups of farmers in the chicken, dairy, potato, tomato, vegetable, wine
grape and dried vine fruit industries. (sub. DR121, pp. 8–9)

The low adoption of exemption provisions is not surprising. This is because collective
bargaining is only likely to be attractive to small groups of farm businesses with similar
production characteristics. In diverse groups of farm businesses, the benefits to larger andmore efficient farms of bargaining individually are likely to outweigh the costs ofbargaining collectively. Australia’s experience with statutory marketing shows thatpreventing more efficient farms from bargaining individually raises the cost, and reduces
the quality and choice of foods available to consumers (appendix B).
However, some participants argued that amendments could be made to the CCA to
improve competition. The NFF, for example, said that:… there are opportunities to amend certain regulations placed on collective bargaining, whichin doing so will enhance competition within the market place. (sub. 61, p. 28)

The Australian Chicken Growers’ Council (sub. 51) noted that under the current
arrangements there is no requirement for either party to engage in the negotiation process,and a group of growers cannot compel a processor to enter into negotiations. The Council
recommended a provision in the authorisation process that requires all parties to participate
in collective negotiation.
Calls for the CCA to be amended, based on the low adoption of collective bargaining bysmall businesses are not new. In 2007, the Australian Government increased thenotifications threshold for the primary producers to $5 million (ACCC 2011).
In its submission to the Competition Policy Review (the Harper Review), the ACCC said
that ‘deficiencies in the current collective boycott notification provisions may be deterringbargaining groups from seeking an exemption for efficiency-enhancing conduct’ (2014b,
p. 109). It recommended amendments that would provide the ACCC with more flexibility
in the way it assesses proposals for boycotts, and that would provide bargaining groups
with more flexibility in submitting notifications for collective bargaining.
The ACCC told the Commission that its proposed amendments to the notification
provisions in the CCA will also ‘increase the flexibility and attractiveness of thenotification process for small business applicants relative to the authorisation process’(sub. DR121, p. 8).
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Why is adoption low?
Low adoption has been partly attributed to a lack of awareness by small businesses of the
CCA’s collective bargaining provisions and how to use them. The Harper Review
recommended that the notification process for collective bargaining be enhanced to
improve awareness, and that the CCA be reformed to introduce greater flexibility in the
notification process. The Harper Review also recommended that the thresholds forcollective bargaining be reviewed to ensure that they are high enough to include typicalsmall business transactions (Harper et al. 2015).
The Agricultural Competitiveness White Paper also partly attributed low adoption to lowlevels of awareness of the collective bargaining provisions among small businesses(Australian Government 2015a). As a result, the Australian Government committed$13.8 million to a two-year pilot program to provide farmers with knowledge and materials
on collective bargaining, cooperatives and innovative business models. The AgriculturalCompetitiveness White Paper stated that the ‘information will help to counter-balanceretailer and processor market power and achieve fairer farm gate prices’ (AustralianGovernment 2015a, p. 31).
The ACCC has commenced work to highlight the benefits of collective bargaining and theapproval process to farmers and small businesses generally (sub. DR121).
A challenge for all industries, including agriculture, is that larger, more efficient businesses
have an incentive to negotiate more favourable terms than the ‘pooled’ average returns
achieved by collective bargaining (Lewis 1967). Low adoption of collective bargaining
provisions may not mean that there are barriers to the adoption of exemption provisions. It
could simply reflect that the economic incentives for collective bargaining are more thanoffset by incentives for larger and more efficient businesses to negotiate their own terms.
Dealing with fewer, larger farm businesses also improves the ability of wholesale
merchants and retailers to meet consumer preferences for consistent and timely supply,
resulting in benefits to consumers (Baker and Graber-Lützhøf 2007).
The adoption of collective bargaining in the agricultural sector also depends on thepredisposition of Australian farmers to participate in cooperatives and other commercial
corporate entities. Keogh (2013), the ACCC Agricultural Commissioner, noted that one of
the interesting features of Australian agriculture is the limited presence of farmer-owned
cooperatives in the agribusiness environment in Australia compared to other countries.
Keogh discussed a number of reasons that could explain this, including:•Australian farm businesses bear more financial risk due to lower levels of government
subsidies and are therefore less willing to share profits through cooperatives•

Australian farm businesses require more capital to bear the high risk associated with
exposure to export markets, and therefore are less willing to contribute capital tocooperatives

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•

Australian farmers tend to live on large and sometimes remote farms, rather than living
in villages and travelling to their farm each day (attracting more self-sufficient people
who are less comfortable in a cooperative structure)•

a long history of statutory marketing arrangements makes Australian farmers lesswilling to participate in cooperatives.

Regardless of the merit of each theory, there appears to be a cultural aversion in Australia
to participating in cooperatives, and this may reduce the adoption of collective bargaining
in the agricultural sector.
Overall, the evidence suggests that awareness raising and changes to the CCA to makecollective bargaining easier are only likely to benefit small groups of farm businesses withsimilar production characteristics. The past use of these exemptions by small groups offarm businesses in the horticulture, poultry, and dairy industries may therefore indicate thatthese provisions are working reasonable well.

FINDING 12.3

Collective bargaining arrangements are only likely to be attractive to small groups offarm businesses with similar production characteristics. Government efforts toencourage collective bargaining under the Competition and Consumer Act 2010
(Cwlth) are unlikely to result in a significant increase in adoption among farmbusinesses.

Competitive pressures and an effects test
Section 46 of the CCA prohibits corporations that have a substantial degree of market
power from taking advantage of that power for the purpose of eliminating or substantiallydamaging a competitor, preventing the entry of a person into a market, or deterring or
preventing a person from engaging in competitive conduct.
The Harper Review recommended that section 46 of the CCA be amended to target
anticompetitive conduct that has the effect of damaging competitive processes. A key
recommendation was to amend the CCA to include an effects test to:… prohibit a corporation that has a substantial degree of power in a market from engaging in
conduct if the proposed conduct has the purpose, or would have or be likely to have the effect,of substantially lessening competition in that or any other market. (Harper et al. 2015, p. 348)

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In March 2016 the Australian Government announced its intention to amend section 46 byreplacing the ‘purpose’ test with an ‘effects’ test (Turnbull, Morrison and O’Dwyer 2016).
In September 2016 the government released an exposure draft of the Competition andConsumer Amendment (Competition Policy Review) Bill 2016 (Cwlth). The exposure draft
replaced the purpose test (s. 46(1)) with:
A corporation that has a substantial degree of power in a market must not engage in conductthat has the purpose, or has or is likely to have the effect, of substantially lessening competitionin that or any other market.

Perceptions of what an effects test will do
There is a pervasive belief in the agricultural sector that introducing an effects test to
section 46 of the CCA will protect farm businesses from intense competition passed on bytraders and supermarkets.
A number of participants indicated that they supported replacing the existing purpose testwith an effects test. The NFF said it would ‘shift the onus of consideration from what acompany’s purpose of conduct was, to what effect that conduct had on any given
marketplace’ (sub. 61, p. 29). Similarly, Canegrowers supported an effects test for
section 46 on the basis that it shifts the burden of evidence from proving the intended
purpose of anticompetitive behaviour to its impact on markets. Canegrowers suggested thatgiving the ACCC greater power to regulate anticompetitive behaviour would:… shift the decisions framework from the judicial system to a regulatory system, making it
more accessible to small producers facing large multinational adversaries. (sub. 22, p. 9)

Canegrowers comments were directed at the relationship between sugarcane farms andsugar mills, and the potential for mills to take advantage of their monopsony power to‘substantially damage or eliminate QSL as a competitor’.
… the provisions of section 46 do not adequately deal with cases where there are significant
imbalances in market power between different segments of a supply chain as occurs between
sugarcane growers and the mill they supply and where the use of that market power has thelikely effect of substantially lessening competition. (sub. 22, pp. 9–10)

Canegrowers also said that there is a:… role for government … to restore balance in the market for sugarcane and to establish aregulatory structure that prevents the misuse of market power, addresses market failure, andensures cane growers are not disadvantaged by the mills they supply. (sub. 22, p. 10)

The NSW Farmers’ Association supported the introduction of an effects test to address animbalance of market power between participants in the supply chain.
In the case of agriculture, there is an existing imbalance between participants in the supply
chain. When parties with market power engage in unilateral conduct that discriminates against
their competitors, the discrimination may be subtle and difficult to clearly distinguish from

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legitimate business conduct; however, due to the structure of the market, the conduct would
still have a substantial impact on competition. (sub. 72, p. 39)

In contrast, the Pastoralists and Graziers Association of WA noted that:… markets can be tough, unpleasant and difficult places in which to operate. Competition
should be judged on the bases of efficiencies and capacity, and a failure to compete should not
be protected by legislation. … Legislative protection should only be invoked when companies(or individuals) are using their market power to engage in malicious activities that are
anti-competitive. (sub. 70, p. 10)

CBH suggested that the proposed changes to section 46 could increase uncertainty and thecost of operating cooperative bulk handling of grain in Western Australia.
There is a risk that CBH’s efficiency enhancing behaviours, for the benefit of increasing
growers’ export capacity and competitiveness in the global market, are likely to be captured as
unintended consequences. (sub. 36, p. 11)

As a result, it contended that:… there are existing measures that could be utilised before there is a requirement for change insection 46. However, if changes are required to be implemented then care must be taken to
ensure efficiency driven behaviours such as those implemented by CBH in the best interest of
growers in Australia are not penalised as an unintended consequence. (sub. 36, p. 11)

The debate about imbalances in bargaining power overlooks the co-dependence ofbusinesses along agricultural value chains. There are potential benefits from shifting the
focus of the debate from the potential misuse of market power by wholesale merchants andsupermarkets to innovations that develop new commercial arrangements and enable farmbusinesses to participate profitably in globalised value chains.
Competition is for the benefit of consumers
The Harper Review (2015) stated that regulations that deal with anticompetitive conduct
are a necessary part of competition law, particularly given that the small size of theAustralian economy often leads to concentrated markets. The purpose of section 46 is toprotect against conduct that damages competitive processes in markets, rather than toprotect competitors from the effects of competition:… competition law is not concerned with harm to individual competitors. Indeed, harm tocompetitors is an expected outcome of vigorous competition. Competition law is concernedwith harm to competition itself — that is, the competitive process … It would not be soundpolicy to prohibit unilateral conduct that had the effect of damaging individual competitors.
(Harper et al. 2015, p. 339)

The ACCC also stated that section 46 of the CCA ‘is a crucial component of Australia’scompetition law’, noting that the High Court of Australia ‘has described the object ofsection 46 as being to protect the interests of consumers and that competition is a means tothat end’ (ACCC 2014b, p. 76).
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The NFF also acknowledged that the provisions should not be about protecting individualcompetitors:
Reforming misuse of market power provisions should be about protecting the competitive
process, rather than protecting individual competitors. A truly competitive market, wherecompanies succeed and fail as a result of merit, not as a consequence of dominant companies
misusing market power, will best foster innovation and growth. Such innovation and growth
will ultimately best serve the interests of the community. (sub. 61, p. 29)

In agricultural markets, consumer interests are served by competitive forces that lower thecost of food and improve its quality. An inquiry by the ACCC (2008) found that there wasintense competition between supermarkets in retail grocery markets. The Harper Review(2015) found that this competition had intensified in recent years.
Farm businesses are largely input suppliers to wholesale merchants and supermarkets,
rather than competitors in retail grocery markets. Intense competition in retail markets
makes the productivity and profitability of wholesale merchants and supermarkets
critically co-dependent on the productivity and profitability of input suppliers throughout
the value chain, especially farm businesses. This co-dependence means that thecompetitiveness of wholesale merchants and supermarkets depends on their ability to passon the competitive pressures that drive innovation, productivity and cost savings to farmbusinesses.
Some competition law experts argue that pressure to amend section 46 is based partly on
wanting to shield small businesses from competition. For example:
Section 46 is designed to ensure those with market power don’t use it to insulate themselvesfrom competitive pressure; but s46 shouldn’t be used to insulate small business … (Trindade,Merrett and Smith 2013, p. 6)

This inquiry has not looked at the merits (or otherwise) of the Australian Government’s
decision to amend section 46 of the CCA by replacing the ‘purpose’ test with an ‘effects’
test.
However, perceptions in the agricultural sector that the introduction of an effects test will
shield farm businesses from intense competition are not well supported by the evidence.
Also, because competition serves the interests of consumers — by creating incentives forinnovation that improves the quality and lowers the cost of food — shielding farmbusinesses from competition is not in the interest of consumers.

FINDING 12.4

The perception in the agricultural sector that introducing an ‘effects’ test to section 46
of the Competition and Consumer Act 2010 (Cwlth) is likely to shield farm businesses
from intense competition in retail grocery markets is ill-founded. In any event, doing sowould not be in the interest of consumers.

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12.3 Industry codes of conduct
An ongoing concern for the growers of perishable food products is the ability ofsupermarkets, traders and wholesalers to exercise undue market power through arbitrary
changes in supply agreements that transfer risk to farm businesses (NFF, sub. 61).
Industry codes of conduct can provide a flexible regulatory framework for identifying andsanctioning unacceptable forms of behaviour, and improving the transparency oftransactions. These can be used to improve the allocation of the risks involved inmarketing perishable fresh produce to the participants along agricultural value chainsaccording to their ability to manage these risks.
In 1999, a Joint Select Committee on the Retailing Sector recommended a mandatory codeof conduct to deal with systemic and ongoing problems in business dealings between major
supermarket chains, small retailers and farm businesses (JSCRS 1999). Part of theAustralian Government’s response to the 1999 inquiry was a voluntary Retail Grocery
Industry Code of Conduct. This was renamed in 2005 to become the Produce and Grocery
Industry Code of Conduct to better reflect its scope within the industry (Napper andWein 2015).
Industry dissatisfaction with the voluntary operation of the code led to calls to make it
mandatory.
Calls for a mandatory code were based on the fact that the [Produce and Grocery Industry Codeof Conduct] did not require signatories to enter written contracts to evidence terms andconditions of supply, and did not enable one party to require another to participate in the
mediation of a dispute. (Napper and Wein 2015, p. 63)

Calls to improve the Produce and Grocery Industry Code led to the joint development of
the Food and Grocery Code of Conduct in consultation with the major supermarkets andother stakeholders (Treasury 2014b). In horticulture, concerns about transaction costs
potentially faced by small fruit growers led to the development of a mandatory code of
conduct in 2007.

Food and Grocery Code of Conduct
The Food and Grocery Code of Conduct is administered by the ACCC under the CCA(ACCC 2015e). The Code addresses ongoing concerns in the agricultural sector that theconcentration of the grocery retail sector may lead to anticompetitive conduct bysupermarkets and wholesalers in the supply agreements they negotiate with farmbusinesses. The Code also provides a mechanism for raising and resolving disputes, but as
discussed below, this mechanism is different to other codes in operation.
Voluntary codes prescribed under the CCA have the same enforcement provisions as
mandatory codes (ACCC 2014b). The code is legally enforceable for wholesalers andretailers who elect to participate, which currently includes Woolworths, Coles, Aldi and
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REGULATION OF AUSTRALIAN AGRICULTUREAbout Life. Although there are no financial penalties for a breach of the code, other formsof redress are available including court-ordered injunctions, and compensation for loss ordamage caused by conduct in setting and varying supply agreements (ACCC 2015c).
Conduct that breaches the Code may also breach the unconscionable conduct provisions of
the Australian Consumer Law, which imposes financial penalties.
The Code in its current form is relatively new. Australia’s three major supermarkets opted
into it in mid-2015. Its establishment coincided with an expansion of the ACCC’s activities
relating to agricultural marketing. In mid-2015 the Australian Government announced$11.4 million for the ACCC to set up an Agricultural Enforcement and Engagement Unit
(ACCC 2016a; Australian Government 2015a). A Commissioner dedicated to agricultural
markets was appointed in February 2016.
The Food and Grocery Code of Conduct has only been in operation for a short period oftime, and by late-2016 there had been few formal applications of the Code. This isconsistent with a much longer term lack of documented evidence of unconscionableconduct by supermarkets, or evidence that this conduct is a result of the systemic misuse of
market power.
A comprehensive grocery sector inquiry by the ACCC found that even though the sector isconcentrated, grocery retailing was ‘workably competitive’, and that there was nothing‘fundamentally wrong with the grocery supply chain’ (2008, p. xiv). It also found nosystemic evidence of market power being exercised as unconscionable conduct in supply
agreements for fresh food. 69 No new evidence was received in this inquiry showing
exercise of market power through anticompetitive conduct by supermarkets, and no
specific evidence was cited in the Agricultural Competitiveness White Paper.
A consultation paper by Treasury indicated that this lack of evidence may be partly due toa fear of retribution:… some suppliers may have little choice but to accept particular terms for fear of losing
contracts, and may similarly be unwilling to complain to the supermarkets, or other bodies toresolve issues or enforce their legal rights during the life of the agreement for fear of
retribution. (Treasury 2014b, p. 4)

69 In December 2014, the Federal Court found that Coles Supermarkets Australia Pty Ltd had engaged in
unconscionable conduct with some suppliers in 2011 (ACCC 2014d). In November 2016, the ACCC
brought an action against Woolworths in the Federal Court alleging that the supermarket had engaged in
unconscionable conduct by demanding $60 million from 821 suppliers to reduce a profit shortfall in 2014
(ACCC 2015b; Locke 2016b).

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Without clear evidence showing the exercise of market power, and its costs to consumers,
the Commission agrees with Treasury that the goal of Government intervention should not
be to:… prevent hard bargaining and vigorous competition, but rather, to ensure that market
distortions do not compound and have a longer-term detrimental impact on consumers or thegrocery sector more broadly. (Treasury 2014b, p. 7)

The NFF (sub. 61) supported the goal of the Code in seeking to provide a more formal,
open and transparent process for supermarkets to negotiate supply agreements. The Voiceof Horticulture (sub. 42) supported the appointment of an ACCC Commissioner dedicatedto agriculture, and recommended that the focus be on improving transparency in supply
agreements.
Can the code be improved?
The benefits of the code are likely to come from achieving a balance between reduced
transaction costs for farm businesses supplying fresh produce, and maintaining thecommercial flexibility of major supermarkets to choose the lowest cost suppliers, both ofwhich affect the cost of food to consumers. Over-regulation has the potential to raise thecost of food to consumers by reducing the flexibility of supermarkets to choose lower cost
suppliers, and by protecting inefficient suppliers from market signals.
In October 2015, the ACCC raised concerns that some supermarkets were presenting
grocery supply agreements in ways that might suggest that they were non-negotiable. The
ACCC also questioned whether existing supply agreements provided suppliers with
sufficient detail about terms and conditions. Following the ACCC raising these issues, thesupermarkets concerned wrote to their suppliers to make clear that the agreements arenegotiable, and to clarify their terms (ACCC 2015g).
The NFF (sub. 61) suggested that the Code has a number of shortcomings. These include
concerns about the voluntary opt-in nature of the Code, and whether it should apply to abroader set of retailers. The NFF had also previously raised the potential for an
independent Commissioner to assist in dispute resolution and to help overcome any underreporting due to the fear of retribution (NFF 2014b).
The future costs of dispute resolution under the Food and Grocery Code of Conduct are
difficult to predict and will depend on the number and nature of disputes that arise.
However, the code may involve higher mediation costs than other similar industry codes.
This is because similar codes in the horticulture, oil and franchising industries are serviced
by a mediator (the Accord Group) centrally contracted by the Australian Government.
The benefits of the Code will come from achieving a balance between reduced transaction
costs for small input suppliers, and maintaining the commercial flexibility of major
supermarkets to choose the lowest cost suppliers. As Treasury (2014b) said, voluntary

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codes of conduct promote desirable conduct while not unduly restricting the commercial
flexibility of retailers.
It is too early to tell whether the Food and Grocery Code of Conduct is working as
intended.

Horticulture Code of Conduct
The Horticulture Code of Conduct is a prescribed, mandatory industry Code under
section 51AE of the CCA. It differs from the Food and Grocery Code in that its focus is on
the relationship between farm businesses and traders/merchants in the wholesale market,
rather than farm businesses and retail supermarkets. The code also includes funding forindependent mediation that provides low cost dispute resolution for participants.
The objectives of the Code are to:•regulate trade in horticultural produce between growers and traders, to ensuretransparency and clarity of transactions•

provide a fair and equitable dispute resolution procedure for disputes arising under the
Code or a horticultural produce agreement.

The Code seeks to ensure transparency and clarity of transactions by requiring:•parties to trade under written agreements (horticulture produce agreements)•that traders (who may be agents or merchants) publish their terms of trade and only
trade as either an agent or a merchant under one horticulture produce agreement•

particular minimum terms to be included in a horticulture produce agreement.

Is the Code used?
A recent review of the Horticulture Code of Conduct by Napper and Wein (2015) foundthat the Horticulture Code of Conduct is rarely used by industry to resolve disputes:… the Horticulture Code’s current dispute resolution mechanism is irrelevant, inappropriate
and largely not adopted by parties in the horticulture sector. In general, growers believe that the
low uptake of the code’s dispute resolution mechanism is due to a fear of retribution, whereas
central markets contend that the reason for low uptake is that there are few disputes. Further, it
is widely believed that the dispute resolution mechanism prescribed by the code does notaddress the majority of disputes that arise in the course of what appears to be acceptable market
practice in the horticulture sector. Most disputes are related to the issues of the quality andtiming of the delivery of produce, payments to growers, and the transparency of prices. (2015,
p. 2)

The Accord Group receives 15 to 20 enquires and complaints each year under the
Horticulture Code of Conduct. Most of these relate to late payment by wholesale
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merchants to farmers, or diminished payments based on contended quality assessments. In
contrast, the Accord Group receives around 650 enquiries and complaints per year (thatresult in around 150 mediation appointments) under the Franchising Code of Conduct that
addresses similar long term commercial relationships (The Accord Group, pers. comm.,
14 October 2016).
Workshops conducted by the ACCC in six regional centres around Australia confirmedthat late payment remains a significant issue for small horticultural businesses. The ACCC
noted that ‘failure to make payment within a specified time frame’ can be a breach of the
CCA (2016d, p. 6). The ACCC acknowledged that ‘imbalances in bargaining power exist
in horticulture and viticulture supply chains’ and that this underpins many of the concerns
raised in the horticulture and viticulture sector (ACCC 2016d, p. 8). However, the ACCC
also found that there continues to be a lack of evidence brought forward to support (andpotentially prosecute) specific allegations, partly due to a fear of retribution.
Why is the Code not used?
The review by Napper and Wein (2015) found that neither growers nor traders considered
the Horticulture Code to be achieving its aims, but for different reasons:•growers reported that the code ‘fails to address the issue of transparency’ in market
transactions•

traders reported that the code is ‘inflexible and does not reflect the way the wholesalehorticulture sector operates’ (Napper and Wein 2015, pp. 47–48).

The Accord Group, which provides mediation services for the Code, attributed low use to astrong preference to rely on traditional industry pathways for dispute resolution. It claimed
that the Code has attempted to ‘push the industry too far too soon’, and suggested that a
voluntary code may be more compatible with commercial relationships in the industry(The Accord Group, pers. comm., 14 October 2016). Feedback provided by industry
participants at workshops conducted by the ACCC also indicated that ‘wholesale markets
transactions are commonly taking place without a written agreement’(ACCC 2016d, p. 10).
A regulatory design issue is that, although the Horticulture Code of Conduct became
operational in 2007, it did not apply retrospectively to supply agreements that were alreadyin place (Napper and Wein 2015). The ACCC told the Commission that:
The Code only applies to transactions between growers and horticulture traders made under
Horticulture Produce Agreements made after 15 December 2006. This results in over 80% oftransactions not being covered by the Code. There are no financial penalties available for abreach of the Horticulture Code. This means that the ACCC is unable to provide a strong
deterrent incentive for compliance. Grandfathering and lack of penalties result in low
compliance … (sub. DR121, p. 9)524

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Can the Code be improved?
The NFF told the Commission that the code ‘has failed to adequately address the key issueof transparency across the supply chain’ and recommended strengthening the code
‘through its enforcement and dispute resolution provisions, ensuring all contracts arecovered by the Code, and harmonising provisions with the Food and Grocery Code of
Conduct’ (sub. 61, p. 29).
The Voice of Horticulture (sub. 42) restated the growers’ perspective that the Code isineffective in improving transparency, and supported strengthening the Code generally,
and making it more binding by merging it into the Food and Grocery Code of Conduct.
The review by Napper and Wein (2015) recommended a number of amendments to the
Horticulture Code, including:•the introduction of an obligation on growers and traders covered by the Code to act ingood faith•

the removal of the distinction between agents and merchants•

the introduction of civil penalties and infringement notices•

improved dispute resolution services.

Napper and Wein (2015) also found that a lack of understanding of how the Code operates
has limited its effectiveness and caused industry stakeholders to disengage. To address thisissue, the review report recommended that the amended Horticulture Code should beaccompanied by an education campaign to assist in its implementation. The ACCC hascommitted to undertaking ‘widespread education and compliance activities to provide
industry with information’ should a revised Horticultural Code be adopted(ACCC 2016d, p. 5).
Many aspects of the horticultural industry’s trading arrangements have changed since theCode commenced in 2007 (Napper and Wein 2015). Growers are increasingly trading
directly with supermarkets and other retailers, and technological changes have allowed for
greater transparency, improved communication on quality issues and the opportunity to
improve price reporting.
Following its workshops throughout regional Australia in 2016, the ACCC concluded thatthe Horticulture Code had potential to be effective if its coverage was expanded topre-December 2006 contracts, and if compliance was enforced through penalties andinfringement notices.
The Australian Government is currently considering the recommendations of the review of
the Horticulture Code of Conduct.

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13 Foreign investment in agriculture

Key points•

Foreign investment has been, and will continue to be, critical to the competitiveness andproductivity of the Australian agricultural sector.

•

Despite the benefits of foreign investment to agriculture (and the economy), it has attracted
considerable negative public attention over recent years. Public surveys show that many
Australians are concerned about foreign investment in agriculture. Many of the concerns aremisplaced and appear to have arisen partly due to a lack of information and informed
debate.

•Changes in 2015 to Australia’s foreign investment review framework (which aims to balance
the benefits of foreign investment against any risks to Australia’s national interest)
significantly lowered the screening thresholds for agriculture that trigger review of foreign
investment proposals by the Foreign Investment Review Board.

•

The lower screening thresholds (combined with different thresholds depending on theinvestor’s country of origin) increase the cost and complexity of investing in Australian
agriculture — and ultimately risk deterring foreign investment in the sector — without
offsetting public benefits. Lower screening thresholds are the incorrect policy tool to addresscommunity concerns about foreign investment in agriculture — they are not in the long-term
interests of farmers or the broader community.

•

The Australian Government should increase the screening thresholds for foreign investment
in agricultural land and agribusiness to $252 million — in line with the thresholds that applied
to agriculture prior to the changes in 2015, and those that currently apply to businessacquisitions and developed commercial land.

•

The Register of Foreign Ownership of Agricultural Land, by providing facts, increases
transparency and helps dispel some myths about foreign investment in agriculture. But facts
alone can only go so far in addressing public concerns about foreign investment (and if
misinterpreted, the data can reinforce public concerns).

•

To facilitate a more informed public debate about foreign investment, the Productivity
Commission could analyse and report on the trends, drivers and effects of foreign
investment in agriculture and other sectors in its annual Trade and Assistance Review.

•

Application fees for foreign investment proposals should be based on the Foreign
Investment Review Board’s cost of processing applications (and no higher). Fees should beclosely monitored to ensure no over- or under-recovery of costs.

•

The Treasurer’s decisions on foreign investment proposals should be transparent (to theextent that it is consistent with national interest considerations) as it provides information to
the public about foreign investment.

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Australia has a long history of openness to foreign investment because of the important andbeneficial role it plays in the Australian economy. As the Treasurer, the Hon. Scott
Morrison MP, said recently:
To ensure we continue on our growth path, we must keep the door of our economy open toinvestment. Australia’s economic success has been built on capital from overseas — fromBritain, China, Japan and … the United States. It was imported capital that created wealth andjobs. It helped develop Australian farms and businesses. It helped build our houses, factories
and shops. Australia knows how important this investment is to our future … it isunquestionably in our national interest to welcome foreign investment. (Morrison 2016b)

And back in 2009, the former Treasurer, the Hon. Wayne Swan MP, said that:
We want to ensure Australia’s regulatory framework promotes our competitiveness andattractiveness as a destination for international capital. Our mission is to compete globally more
effectively — to take a larger slice of a currently smaller pie … (Swan 2009)

Foreign investment has been critical to Australia’s economic development throughout its
history; domestic investment opportunities have consistently exceeded domestic savings.
As the Reserve Bank of Australia Deputy Governor, Guy Debelle, said:
The Australian economy has been a net recipient of capital inflows from the rest of the world
for almost all of its history … Put differently, investment in the Australian economy has
consistently exceeded domestic saving and this gap has been funded from offshore … In
Australia’s case, foreign investment … has helped to expand our domestic productive capacity.
(Debelle 2014)

This view was recently reiterated by the former Reserve Bank of Australia Governor,
Glenn Stevens.
In this country, for 200 plus years, we’ve imported other people’s capital and we’ve grown richby doing that. We want to keep doing it and you need to maintain confidence and credibility inorder to do that. (Stevens 2016)

However, foreign ownership of Australian agricultural land and businesses continues toattract substantial negative public attention. Increased global interest in Australian
agriculture and a number of high-profile agricultural investments have renewed publicdebate about the role and regulation of foreign investment in Australian agriculture.
Examples include the proposed sale of the S. Kidman and Company Limited group of
properties to a Chinese-led consortium70, and the sale of Australia’s biggest dairy farm,
Tasmania’s Van Diemen’s Land Company (which has never been Australian–owned) to a
Chinese company (Moon Lake Investments).
In May 2015, the Australian Government announced a package of measures aimed at‘strengthening’ Australia’s foreign investment review framework (Hockey and
Abbott 2015).
70 The sale was twice blocked by the Treasurer on national interest grounds (Morrison 2015, 2016d).

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REGULATION OF AUSTRALIAN AGRICULTURE

The package included measures to:•increase scrutiny of agricultural investment — by lowering screening thresholds (thattriggers an examination of foreign investment proposals by the Foreign Investment
Review Board (FIRB))•

improve transparency — by establishing a national register of foreign-held agriculturalland.

Concerns were raised in this inquiry about the new arrangements and the potential effectsof the changes on foreign investment in the sector.
This chapter looks at the regulation of inward foreign investment in Australia, with a focus
on agriculture (section 13.1), and the importance of foreign investment to the Australianeconomy and the agricultural sector (section 13.2). It also examines the new arrangements
for agriculture in terms of what they seek to achieve, how effective they are, and whatcosts they impose (section 13.3). Community concerns about foreign investment inagriculture (and what lies behind them) are also discussed.

13.1 About Australia’s foreign investment framework
Australia’s foreign investment review framework 71 primarily consists of the Foreign
Acquisitions and Takeovers Act 1975 (Cwlth) (FATA) and Australia’s Foreign Investment
Policy (the Policy), which guides the Australian Government’s decision-making process
for foreign investment proposals. The framework allows the Treasurer to review foreign
investment proposals on a case-by-case basis to ensure they are not contrary to Australia’s
national interest. The Treasurer can make an order to prohibit a proposed foreign
investment that is contrary to the national interest, or impose conditions on an investment
on national interest grounds.
FIRB is a non-statutory body in the Treasury portfolio responsible for examining foreign
investment proposals that fall within the foreign investment framework, and for advising
the Treasurer and the Government on the Policy and its administration. FIRB only provides
advice. The Treasurer (or delegate) has final responsibility for decisions regarding foreign
investment proposals.
Commenting on its role, FIRB stated that:
The Board recognises that foreign investment is integral to Australia’s economy and takes
seriously the need to ensure that foreign investment proposals are consistent with Australia’s
national interest. The Board reviews foreign investment proposals against the national interest
on a case-by-case basis and seeks to strike an appropriate balance between maintaining
71 The framework is supported by the Foreign Acquisitions and Takeovers Fees Imposition Act 2015
(Cwlth), the Register of Foreign Ownership of Agricultural Land Act 2015 (Cwlth), associatedregulations and Guidance Notes (on the specific application of the law).

FOREIGN INVESTMENT

529

community confidence in foreign investment, protecting the national interest and ensuring that
Australia remains an attractive destination for foreign investment by providing certainty forinvestors. (2015b, p. 1)

Australia’s foreign investment review framework aims to balance the benefits of foreign
investment against any risks to the national interest (Treasurer 2016). ‘National interest’ isnot defined in the FATA or its associated regulations; however, the FATA confers upon
the Treasurer the power to decide whether a given investment would be contrary to thenational interest. The Policy guides the interpretation and application of Australia’s‘national interest’ by outlining the factors typically considered by FIRB and the Treasurer
when assessing foreign investment proposals (Treasurer 2016). They are:•national security•

competition•

other Australian government policies, including taxation•

the impact on the economy and the community•

the character of the investor.

For foreign investment proposals in agriculture, the following factors are also typicallyconsidered:•the quality and availability of Australia’s agricultural resources, including water•

land access and use•

agricultural production and productivity•

Australia’s capacity to remain a reliable supplier of agricultural production, both to theAustralian community and its trading partners•

biodiversity•

employment and prosperity in Australia’s local and regional communities.

The screening thresholds for private (non-government) foreign investors in the agricultural
sector are $15 million for agricultural land (which is cumulative and not indexed) and$55 million for agribusiness 72 (which is not cumulative and is indexed).

72 Section 4 of the FATA and Regulation 12 of the Foreign Acquisitions and Takeover Regulations 2015

(Cwlth) define an ‘agribusiness’ as an Australian business, entity or a subsidiary of the entity that derives
earnings (or uses assets) in carrying on a business in agriculture, forestry, fishing (including food productmanufacturing), and the value of its earnings (or assets) exceeds 25 per cent of the entity’s total earnings(or assets). The agribusiness threshold of $55 million refers to the value of the investment in theagribusiness, regardless of the value of that agribusiness (Treasurer 2016).

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REGULATION OF AUSTRALIAN AGRICULTURE

These thresholds do not apply where special arrangements have been negotiated under
preferential trade agreements, which include higher or otherwise more liberal screening
thresholds (table 13.1).
•

The threshold of $1094 million for both agricultural land and agribusiness (which is not
cumulative and is indexed) applies to investors from the United States, New Zealandand Chile. 73•

The agricultural land threshold for investors from Thailand and Singapore is$50 million (which is not cumulative and not indexed).

•

In more recent preferential trade agreements with South Korea (which came into force
in December 2014), Japan (January 2015) and China (December 2015), the AustralianGovernment reserved the right to screen proposals at the lower agricultural screening
thresholds (DFAT 2015, 2016a, 2016b).
Table 13.1

Foreign investment review thresholds for agriculture
As at 1 December 2015

US, NZ and Chile (notcumulative)

Other countries$m$m
55 (252)aAgribusiness

1 094

Agricultural landb (including leases)
Foreign government investors

1 094
0

15c (252)0aPrevious thresholds in parentheses. b The agricultural land threshold for Singapore and Thailand is$50 million (which is not cumulative), where land is used wholly and exclusively for a primary production
business. c Cumulative.
Sources: Treasurer (2016); Treasury (2015d).

Screening thresholds in agriculture are different from other sectors. For example, thethreshold for foreign investment proposals in residential land, vacant commercial land,
media, and mining and production tenements is $0 (that is, all proposals are subject toscreening by FIRB, for investors not from Chile, New Zealand or the United States).
Foreign government investors (in all sectors) are also subject to a $0 threshold andadditional national interest factors (Treasurer 2016). In contrast, the thresholds for(non-agricultural) business acquisitions are either $252 million or $1094 million,
depending on whether the private investor is from a country with which Australia has a

73 The agribusiness threshold of $1094 million is triggered for acquisitions of a ‘substantial interest’ (20 per
cent or more, or $218.8 million) in an agribusiness valued above $1094 million (AustralianGovernment 2015c).

FOREIGN INVESTMENT

531

preferential trade agreement, and if so, whether it is a ‘sensitive’ business. 74 These
thresholds are indexed and are not cumulative.
Historically, most foreign investment applications considered under the foreign investment
review framework (including those in agriculture) have been approved (table 13.2). In
2014-15, FIRB received 37 953 applications and all were approved — 77 proposals(valued at $5.3 billion) were approved in the agricultural, forestry and fishing sector.
Conditions were attached to about 40 per cent of all approved foreign investment and 799
applications were withdrawn (FIRB 2016b).
However, some applications may not be submitted because of concerns about delay,
rejection or uncertainty. This may imply a higher implicit rejection rate (and cost ofcapital), but the number of foreign investment applications deterred by the application
process is unknown.
Table 13.2

FIRB foreign investment applicationsa and rejectionsb
1979-80 to 2014–15

Financial year

Rejection rate (% ofapplications)Rejections

Applications

1979–1984
1985–1990
1991–1996

2.89
1.90
1.79

255
332
470

8 829
17 44926 2791997–2002

1.87

524

27 966

2003–2008
2009–2014

0.57
0.06

212
62

37 095104 238a Total number of applications considered consists of applications that were approved, rejected, withdrawn
and exempt by FIRB. b Most rejections related to the real estate sector. According to FIRB’s annual
reports, there have only been 15 rejections of foreign investment proposals in the agricultural, fisheries
and forestry sector: 13 were rejected in 1983-84, and one each in 1984-85 and 2013-14. In 2014-15, there
were no proposals rejected in this sector.
Sources: FIRB annual reports (various years).

Agriculture-specific arrangements are relatively new
The current foreign investment framework reflects changes made by the AustralianGovernment in 2015 to foreign investment arrangements in agriculture. The changes
included:•

the lowering of thresholds for agribusiness from $252 million to $55 million (which

74 Sensitive businesses include: media; telecommunications; transport; defence- and military-relatedindustries and activities; encryption and securities technologies and communications systems; and theextraction of uranium or plutonium; or the operation of nuclear facilities (Treasurer 2016, p. 14).

532

REGULATION OF AUSTRALIAN AGRICULTUREtook effect on 1 December 2015), and for agricultural land from $252 million to$15 million (cumulative and not indexed) for investors not from the United States, New
Zealand, Singapore, Thailand and Chile (from 1 March 2015). This represents a
departure from the long-term trend in liberalisation of thresholds (box 13.1).
•

the establishment of the Register of Foreign Ownership of Agricultural Land (from1 December 2015)•

the introduction of application fees for all foreign investment proposals (from1 December 2015).

Prior to the changes in 2015, foreign investment proposals in agriculture were assessed as
general business acquisitions and not subject to agriculture-specific thresholds. 75 In
January 2012, the Australian Government released a policy statement outlining theadditional national interest factors typically considered in foreign investment applications
in agriculture (FIRB 2012).
Box 13.1

Reversing the trend in screening thresholds for agriculture

Screening thresholds for agricultural land and businesses were progressively increased
between 1975 and 2014 (from $1 million to $252 million for agricultural land, and from $2 million
to $252 million for agribusiness). The changes in 2015 reversed that trend. The AustralianGovernment increased the thresholds over time for a number of reasons, including:•concerns that the $1 million agricultural land threshold would dampen demand from foreign
buyers and therefore disadvantage Australian vendors (in 1986)•

to lower and remove unnecessary compliance costs for businesses, particularly for
proposals that are routinely approved (in 1999, 2006 and 2009)•

to ensure that thresholds keep pace with inflation by indexation to the GDP implicit pricedeflator (from 1 January 2010).

Sources: FIRB (2013, 2014, 2015a, 2016b); Treasury (2011a).

13.2 The importance of foreign investment to Australia
Foreign investment contributes to higher Australian living standards
As a small 76 open economy, Australia relies (and has historically relied) on foreign
investment to bridge the gap between national savings and national investment (McKissack
75 There was a rural land threshold from 1975-1999, but this was harmonised with the general businessthreshold at $50 million in September 1999 (Treasury 2011a).
76 Although Australia was ranked 12th highest in gross national income per capita (in current US dollars)and 30th largest (in PPP current international dollars) out of 217 economies in 2015 (World Bank
Group 2016b), Australia is still regarded as a small open economy for two main reasons. First, Australia

FOREIGN INVESTMENT

533

and Xu 2016; Saynal 2014). For the past few decades, the investment-savings gap has
averaged about 4 per cent of GDP (figure 13.1).
Australia’s savings and investment gapa

Figure 13.1

September 1988–December 201535

Percentage of GDP

30
25
20
15
10
5
0

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

-10

1989

-5

Year
Current Account Balance

Gross national savings

Total Investment

Savings-Investment gap (derived)a There may be statistical discrepancies due to net errors and omissions in the investment data. The

savings-investment gap is derived by total investment less gross savings. Total investment refers toinvestment financed by Australia and the rest of the world. Investment consists of capital formation(non-produced, non-financial assets) and financial investment (direct investment, portfolio investment,
financial derivatives, other investment and reserve assets). The current account balance measures
exports and imports of goods and services, primary income and secondary income in the Balance ofPayments.
Sources: Productivity Commission estimates based on ABS (2015a, 2015b, 2016c, 2016e).

Foreign ownership of Australian assets falls broadly into two categories: foreign direct
investment (FDI) and portfolio investment.
•

FDI refers to investment in an enterprise where the foreign investor has control or asignificant degree of influence over the management of the enterprise. Direct
investment occurs when the foreign investor has an equity interest in an enterprise of
10 per cent or more of the voting power (of ordinary shares or voting stock) and tends
to involve a lasting relationship with the enterprise (ABS 1998; IMF 2009).

is considered to be a price taker in many of its export and import markets, and has little influence overprices. Prices are exogenously determined by global factors such as world output. Second, themacroeconomic outcomes and policy in Australia are unlikely to have any significant effect on world
output, inflation and interest rates (Nimark 2007).

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REGULATION OF AUSTRALIAN AGRICULTURE

Portfolio investment refers to the purchase of equity and debt securities (apart fromdirect investment and reserve assets), where the foreign investor has an equity interest
in an enterprise of less than 10 per cent of the voting power (of ordinary shares orvoting stock). It does not result in managerial control or influence in the operation of
the enterprise. Portfolio investment can be more transient, passive and speculative than
FDI because negotiable securities can be bought and sold within a short period of time
(ABS 1998; IMF 2009).

•

The majority of foreign investment in Australia is portfolio investment. In 2015, the level(or stock) of total foreign investment in Australia was about $3024 billion. Portfolio
investment accounted for approximately 54 per cent, direct investment 24 per cent, otherinvestment 16 per cent and financial derivatives 6 per cent.
In 2015, the level of FDI in the agricultural, forestry and fishing sector was about$1.6 billion (or 0.05 per cent of total foreign investment). This does not include
agricultural-related investment in the food product manufacturing sector — total
investment in the manufacturing sector was $85.9 billion (ABS 2006, 2016g).
Net inflows of foreign capital support higher rates of economic growth and employment, as
well as higher living standards in Australia (box 13.2). Capital inflows increase investment
and capital stocks. As a result, employment and real wages are higher, along with terms oftrade, production, consumption and allocative efficiency.

Box 13.2

Evidence that foreign investment benefits Australia

Empirical research quantifying the contribution of foreign investment to Australia’s economic
growth, while limited, show that foreign investment increases Australia’s income and living
standards.
•

Layton and Makin (1993) estimated that between 1984 and 1989, foreign capital raised
Australia’s real national income by 15 per cent more than would have occurred in theabsence of foreign capital inflow.

•

Iyer, Rambaldi and Tang (2009) found that foreign direct investment increased Australia’s
economic growth in both the short and long term over the period 1988 to 2003.

•

Access Economics estimated that a 10 per cent increase in foreign direct investment inflows
over the period 2010–2020 would increase real GDP by 1.2 per cent ($16.5 billion)(BCA 2010).

•

Economic modelling by Treasury estimated that a reduction of foreign capital inflow andinvestment of 1 per cent of nominal GDP would reduce Australia’s gross national income byabout 0.5 per cent each year over a ten-year period (relative to the baseline) — that is, otherthings being equal, restrictions on capital inflow would reduce the wellbeing of Australians(Gali and Taplin 2012).

FDI is an important source of new technology and management practices for Australianbusinesses, which in turn encourages innovation and helps drive productivity growth.

FOREIGN INVESTMENT

535

Foreign investment can also open up access to global supply chains and markets, andprovide additional export opportunities. The productivity gains from FDI are likely to havepositive spillover effects to other industries and the wider economy (PC 2015a). As a
Treasury working paper said:
FDI can also help deliver improved competitiveness and productivity performance over time,
including by: providing much needed infrastructure; allowing access to global supply chainsand markets; and enhancing Australia’s skill base — through greater knowledge transfer fromforeign enterprises to domestic firms by exposure to more innovative work practices.
(McKissack and Xu 2016, p. 11)

The importance of foreign investment to Australian agriculture
Foreign investment has been critical to Australia’s agricultural sector for almost two
centuries. It was crucial in the early stages of development of the sector when large-scaleland improvements (for example, clearing and fencing), machinery, livestock and irrigation
were required (Hooke 1967; Shaw 1967). Two of Australia’s oldest operating agriculturalbusinesses — the Australian Agricultural Company (established in 1824) and Van
Diemen’s Land Company (1825) — were established as a result of British investment(AACo 2016; VDL 2014). British investment also contributed to the expansion of
S. Kidman and Company Limited, one of Australia’s largest beef producers and Australia’s
largest private landholder (Bowen 1987; Morrison 2015; S. Kidman & Co Ltd 2016).
Foreign investment has also led to the introduction of new technology in Australian
agriculture. For example:•

American cotton growers who purchased agricultural land in Australia in the 1960s
brought with them the technology and expertise to produce cotton on a large scale,
which increased the scale and intensification of cotton growing in Australia(Moir 2011; Myers 2010). Australia is now a major world producer of cotton — in2014-15, it was the third largest exporter of cotton in the world (ABARES 2015a).

•

Australia’s beef industry has a long history of foreign investment, with the British—
Argentinian family Vestey (a significant investor in the beef industry in the Northern
Territory) pioneering a number of innovations (Moir 2011). The Cattle Council ofAustralia (2015, p. 1) noted that ‘Australian cattle properties have previously received
foreign investment from England, the United States, China, Japan and Brazil, amongst
others.’Given Australia’s geographic isolation and the relatively small size of many farmoperations (ABS 2012, 2016b), the transfer of foreign technology, skills and knowledge,
and access to global supply chains, is particularly important to agriculture.
Foreign investment can also promote competition, which in turn can improve thecompetitiveness of Australian agriculture (PC 2014f). This can benefit both consumers(through lower prices and greater product variety) and producers.

536

REGULATION OF AUSTRALIAN AGRICULTURE

Foreign investment is necessary to improve the productivity of Australian agriculture, andexpand food production to meet increased global demand. According to the Australia and
New Zealand Banking Group Limited (ANZ Bank), Australia’s agricultural sector will
require high levels of capital investment (including foreign investment) to support growthin the sector (Port Jackson Partners 2012). In a report prepared for the ANZ Bank, Port
Jackson Partners estimated that by 2050, the total capital requirement for agriculture could
be up to $1.6 trillion, and the shortfall between capital requirements and available domestic
capital could reach $850 billion (Port Jackson Partners 2012).
Referring to the $1.6 trillion capital requirement for agriculture, the Voice of Horticulture
acknowledged that:… there is not this volume of money in our economy and in our ag[ricultural] sector to enable
us to become more efficient and productive to be able to assist the world in its quest for safe
quality food to feed the growing population. (sub. DR232, p. 5)

Similarly, Agribusiness Australia noted that:
Australian investment alone is not sufficient for agribusiness to grow and develop … In a world
where capital with a long-term focus is in huge demand, agriculture needs to find innovative
ways of attracting domestic and foreign investment, particularly given strong domestic
competition from sectors such as mining. This analysis does not account for all parts of the
supply chain, and improved estimates will be required to understand the full picture.
(2016, pp. 2–3)

The Australian Government recently identified the food and agribusiness sector in the
Northern Territory as a potential area of high growth that will require substantial foreign
investment (Australian Government 2015e). Preparing extensive tracts of land for
cropping, including the infrastructure required to support cropping, will involve asignificant amount of capital. The Western Australian Government (sub. 54) also notedthat foreign investment is needed for investment in the state’s irrigation infrastructure.
The importance of foreign investment to Australian agriculture was widely acknowledged
by a number of participants to this inquiry (box 13.3). For example, the National Farmers’
Federation (NFF) said that:
The NFF supports foreign investment in Australian agriculture and recognises the importantrole it has and will continue to play in a vibrant agricultural supply chain. To date, foreign
investment has proven to be overwhelmingly positive for Australian farmers and regional
communities. It has delivered significant amounts of capital into our production systems at atime when finance from the banks has been harder to access. This capital has improved our
efficiency and ensured that our farmers can continue to compete in a highly distorted global
marketplace for agricultural commodities. (sub. 61, p. 31)

The Cattle Council of Australia also noted that foreign investment can facilitate access toexport markets.

FOREIGN INVESTMENT

537

As an industry that exports over 65% of our product to over one hundred markets around theworld, foreign investment only strengthens relationships between Australia and these markets.
(2015, p. 1)

Box 13.3

Participants point to the importance of foreign investment toAustralian agriculture

Primary Producers SA said that:
Australian agriculture and the food industry needs significant investment to achieve what it can do for
the Australian economy … Unfortunately we are aware the major source of funds in Australia(superannuation funds) have no vision for food and wine, so foreign investment is needed.
(sub. 41, p. 5)

Voice of Horticulture said that it:… recognises that foreign investment provides greater availability of capital to invest in the upgrade of
on-farm and supply chain facilities. Foreign companies operating in Australia can often form better
direct links between growers in Australia and the import/retailers from their home country. A better
understanding of the overseas customer also enables them to focus on delivering product that willmeet consumer needs. Additionally, foreign investment also has the potential to improve export market
access and the commercial viability of protocols through links between the foreign investor and officials
or key influencers in the home country. (sub, 42, p. 30)

GrainGrowers said that:
Overall, foreign investment has had a positive impact on the Australian grains industry, providing
significant capital injections across the supply chain and assisting some farmers to sell their assets andretire. (sub. 73, p. 20)

Australian Pork Limited said that it:… supports foreign investment in Australian agriculture and recognises the important role it has andwill continue to play … The Australian pork industry has significant foreign ownership, with three of theseven export abattoirs owned by foreign entities. (sub. DR282, p. 12)

Australian Sugar Milling Council said that:Around 75% of the milling capacity in Queensland is owned by foreign parent companies. Regardlessof whether the capital has been from Australian-based or internationally based parent companies, themilling sector in Australia has seen much-needed substantial investment and upgrade of assets andprocessing facilities. Australian agriculture must continue to attract capital investment, including frominternationally based companies. (sub. DR234, p. 4)

The Tasmanian Government said that:
Foreign investment in Tasmanian agriculture has been historically significant since colonisation with
one of Australia’s oldest farms, Van Diemen’s Land Company, being established in 1825 by virtue ofBritish investment. In 2013, the Tamar Valley Dairy was sold to New Zealand agribusiness Fonterra,
which secured 122 jobs and preserved existing milk supply arrangements. Mitsubishi recently invested
in Murray Goulburn’s new milk dryer in Tasmania. More recently, in March 2016, Moon Lake
Investments Pty Ltd, 100 per cent owned by a Chinese national, acquired the substantial land andassets of Tasmanian Land Company Ltd (TLD) including the Van Diemen’s Land Company; Australia’s
biggest dairy business. The proponents have publicly made strong commitments about future
investment in expansion, growth and innovation in the future operations of the business, including
productivity, new dairy farms and value-adding. (sub. DR287, p. 20)

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REGULATION OF AUSTRALIAN AGRICULTURE

Trends in FDI in agriculture
Approved FDI in the Australian agricultural, forestry and fishing sector was $5.3 billion in
2014-15, or about 3 per cent of the total value of approved foreign investment(FIRB 2016b) (figure 13.2), compared to $3.4 billion in 2013-14 (or about 2 per cent of thetotal value of approved foreign investment) (FIRB 2015a).
Figure 13.2

Agriculture’s share of total approved foreign investmenta
2014-15a ‘Agriculture’ includes forestry and fishing industries. ‘Services’ excludes tourism. ‘Other’ refers to thefinance, insurance, tourism (4 per cent), manufacturing (10 per cent), mineral exploration and development(14 per cent) industries. Approved investment in real estate includes off-the-plan approvals given to realestate developers and approvals for annual programs. Totals may not add due to rounding errors. There ispotential double-counting as one proposal that operates in multiple sectors was recorded as one approval
per sector. Corporate reorganisations are excluded (85 in 2014-15).
Source: FIRB (2016b).

Over the past five years, the average level of approved foreign investment in the sector wasjust over $3.3 billion (FIRB 2016b). In 2014-15, about 2 per cent of approved foreign
investment (valued at $3.8 billion) was in the food, beverages and tobacco industry(FIRB 2016b).
While information on FDI in Australian agriculture is limited (and subject to limitations),
the available data show that the majority of Australian agricultural land and businesses are
Australian-owned (box 13.4). And the top ten largest foreign investors in agricultural land
(by land area) are the United Kingdom, the United States, the Netherlands, Singapore,
China, Philippines, Switzerland, Jersey, Indonesia and Japan (box 13.4).

FOREIGN INVESTMENT

539

Box 13.4

What do we know about foreign investment in agriculture?

Almost all (98.9 per cent in 2013) agricultural businesses are Australian-owned (compared to98.5 per cent in 2010) (ABS 2011, 2014b).
The majority of Australian agricultural land is Australian-owned. The highest proportion offoreign holdings are in the Northern Territory (30.1 per cent) and Tasmania (21.8 per cent)(ATO 2016d). The proportion of foreign holdings in agricultural land has increased marginallyfrom 2010 — from 11.4 per cent to 13.6 per cent in 2016 (ABS 2011; ATO 2016d).
Most foreign holdings of agricultural land are leasehold interests (82.2 per cent) and areconcentrated in the hands of a few businesses (ABS 2011, 2014b; ATO 2016d).
Foreign-held agricultural land is mostly used for livestock production (87.8 per cent), and ishighest in the sheep, beef cattle and grain farming subsector (ABS 2011, 2014b; ATO 2016d).

Proportion of agricultural land that is foreign-held in each state and territory,
June 2016(Continued next page)

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REGULATION OF AUSTRALIAN AGRICULTURE

Box 13.4(continued)

The largest proportion of agricultural land is held by investors from the United Kingdom,
followed by the United States, the Netherlands, Singapore and China (ATO 2016d).

Top ten source countries for foreign investment in agricultural land, June 2016aa There may be measurement errors as entities and trusts are required to provide their country ofincorporation, but this does not necessarily reflect the source country of the foreign investor or ultimate
beneficial owner. The top ten source countries collectively make up about 12 per cent of total agriculturalland in Australia and 88 per cent of foreign-held agricultural land.

Investment patterns from source countries have changed over time. In 2014-15, China
became, for the first time, the largest source of approved foreign investment in the
agricultural, forestry and fishing sector. Approved investment from China increased from
$32 million (about 1 per cent) in 2013-14 to $2.5 billion (47 per cent) in 2014-15(FIRB 2015a, 2016b).
It is important to distinguish between the stock and flow of foreign capital in agriculture.
For example, while China has recently dominated approved foreign investment flows into
the sector over a given period (as shown by FIRB data), its existing (accumulated) stock orlevel of investment at a single point in time is still relatively low, and therefore primarily 77
77 The stock of Australia’s foreign assets or liabilities is affected by capital flows, asset prices and theexchange rate (RBA 2006).

FOREIGN INVESTMENT

541

reflects growth from a low base (as reflected in the ABS and ATO data) (McKissack andXu 2016).

13.3 A closer look at the new arrangements
Community concerns underpin the shift to lower screening thresholds
Community concerns about foreign ownership of Australian agricultural assets, while notnew, have gained prominence in recent years. A number of public surveys (including the
ABC’s Vote Compass surveys, Essential Media polls and annual polls conducted by the
Lowy Institute for International Policy) consistently show that many Australians do notsupport foreign investment in agriculture (box 13.5).
Some community concerns appear misplaced, and may be partly due to a lack of
information and informed debate about foreign investment in Australian agriculture. The
Financial Services Institute of Australia pointed out that Australians seem to have puzzling
attitudes to foreign investment.
The Australian public display paradoxical attitudes to foreign investment. Polls show that
Australians recognise the benefits of globalisation and free trade but also strongly oppose
foreign ownership of Australian assets. (2014, p. 14)

A number of government inquiries and information collection projects have sought to gaina better understanding of the extent of foreign investment in agriculture.
•

In 2010, an inquiry on food production in Australia by the Senate Committee on
Agricultural and Related Industries concluded that screening thresholds in agriculture(then $231 million) provided limited public scrutiny of foreign investment proposals(for national interest concerns). The Committee recommended that:… an audit be undertaken to establish the extent of foreign ownership of commercial
agricultural and pastoral land, and ownership of water, in Australia, with particular emphasis on
ownership by sovereign and part-sovereign-owned companies. (SSCARI 2010, p. 21)•

An information gathering process was subsequently undertaken to address emerging
community concerns about foreign ownership of agricultural land and food productionin Australia. 78 The ABS was directed by the Australian Government to collect78 This process commenced following the introduction of the Foreign Acquisitions Amendment(Agricultural Land) Bill 2010 into the Senate by Senators Nick Xenophon and Christine Milne on
24 November 2010. The main provisions of the Bill proposed to increase the scrutiny of foreign
investment in agricultural land through the introduction of a spatial screening threshold of five hectares(which is the approach currently used in New Zealand) for foreign investment in agricultural land, createa ‘national interest’ test for proposed acquisitions of agricultural land, and require the Treasurer to publish
on the Treasury website information about agricultural land applications. The proposed definition of‘interest in Australian agricultural land’ included agricultural businesses. The Bill ultimately failed topass the Senate.

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Box 13.5

Many Australians are concerned about foreign investment inagriculture

Various public surveys consistently show that many Australians are concerned about (and do
not support) foreign investment in agriculture.
•

A 2012 Lowy Institute Poll of public attitudes to foreign investment found that 81 per cent of
those surveyed (1005 respondents) were against the Australian Government allowing
foreign companies to buy Australian farmland to grow crops and farm livestock (and63 per cent of those surveyed were strongly against). Of the respondents who said that theAustralian Government was allowing too much investment from China, 54 per cent citedconcerns that ‘China is seeking to buy Australian mining and agricultural companies andthese need to be kept in Australian hands’ (Hanson 2012). And the 2016 poll found that87 per cent of those surveyed (1202 respondents) were against the Australian Government
allowing foreign companies to buy Australian farmland (an increase of 6 percentage points
from 2012), with 69 per cent strongly against foreign investment in Australian farmland(Oliver 2016). Those in favour fell from 18 per cent to 11 per cent.

•The 2013 Lowy Institute Poll found that 57 per cent of those surveyed (1002 respondents)
considered that the Australian Government is allowing too much investment from China(Oliver 2013). And the 2014 poll found that 60 per cent of those surveyed(1150 respondents) were against foreign investment in agriculture (equal opposition to ports
and airports). This was the lowest level of support across all sectors, and in contrast with
58 per cent of respondents in favour of foreign investment in manufacturing and 55 per centfor the financial sector (Oliver 2014).

•

A 2016 ABC survey (Vote Compass) found that 80 per cent of those surveyed (212 170
respondents) agreed that the Australian Government should further restrict foreign
ownership of agricultural land, compared to almost 84 per cent of those surveyed (1.4 million
respondents) who were in favour of more restrictions in the 2013 survey (ABC 2013; Jasper,
Felton-Taylor and Vidot 2016). A 2013 Essential Media Poll found that 55 per cent(1075 respondents) disagreed that foreign investment in Australian agriculture is good forAustralia’s economy (EMC 2013).

Another study (based on a sample of 1523 respondents) undertaken by Laurenceson, Burkeand Wei (2015) looked at how the Australian public’s preferences over foreign investment inagriculture are determined, and found that the attributes of foreign investment that are ofgreatest concern to Australians are (in order of their significance):•

the share of foreign ownership in Australian agriculture — foreign investment is preferredmore the lower the total share of foreign ownership•the financial status of the Australian agricultural business — foreign investment is preferredmore when the business is not in financial distress•local management and control — foreign investment is preferred more when Australian
citizens occupy a majority of senior management and board positions•

the country of origin of the foreign investor — investment from the United Kingdom and theUnited States is preferred more than investment from China and Japan•the dollar value of foreign investment — foreign investment is preferred more the higher thevalue of the investment.

The authors also noted that the attributes that are of greatest concern to the public (according
to the study) are not the same as those attributes used (or used less often) to flag agriculturalinvestment proposals for scrutiny in Australia’s foreign investment review regime.

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information about the level of foreign ownership of agricultural businesses, land andwater entitlements in a farm survey (ABS 2011).
•

The Rural Industries Research and Development Corporation in 2010 also
commissioned ABARES to examine ‘the role and history of foreign investment in thedevelopment of agriculture, the extent of foreign ownership of Australian agriculturalland and the factors driving foreign investment in Australian agriculture’(Moir 2011, p. iii). The report observed that:
Information on foreign investment in agriculture and agribusiness is limited … there is no
systematic source of data on foreign ownership of agribusiness companies. Nor is there regular
information on the nationality of foreign investors or about the type of entity involved. The
extent of investment by foreign government entities is also unknown. (Moir 2011, p. 1).

To increase transparency and facilitate better informed policy making, ABARES proposed
the regular collection of information on foreign investment in agricultural land, either by
periodic collection of data by the ABS, or a land register of foreign ownership.
A Coalition policy discussion paper on foreign investment in Australian agricultural land
and agribusiness in 2012 also observed that there was:… growing community and industry concern that some types of acquisitions may be contrary to
the national interest and that a strengthening of the regime may be advantageous to thelong-term prosperity and food security of Australia. (Liberal Party of Australia 2012, p. 3)

The paper identified several areas for public discussion, including:•establishing a national register of foreign ownership of agricultural land•

lowering the screening threshold for agricultural land where the investment exceeds$15 million and making it cumulative•lowering the screening threshold for agribusiness where the investment exceeds
15 per cent in an agribusiness valued at $244 million (indexed annually), which isequivalent to about $53 million.

The discussion paper also stated that there was:… a common perception that the thresholds for the FIRB to assess foreign acquisitions are toohigh for the agricultural sector and do not adequately reflect the average value of agricultural
assets or land holdings … The result is that many purchases of agribusinesses, and virtually all
sales of agricultural land, are never reviewed by the FIRB against the national interest. (Liberal
Party of Australia 2012, p. 8)

And like ABARES, it also noted that there were concerns that the extent of foreign
ownership was insufficiently documented and that the lack of data ‘undoubtedly stirred
rather than dampened concerns about the extent of foreign land ownership that may (ormay not) be occurring throughout Australia’ (Liberal Party of Australia 2012, p. 3).

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In June 2013, a report by the Senate Rural and Regional Affairs and Transport References
Committee identified two key issues with the size of the foreign investment threshold for
agricultural land and businesses (which at the time was $248 million and not cumulative):•the potential for cumulative purchases of agricultural land by foreign companies toavoid FIRB review•

the lack of review of major agricultural purchases that could impact local economies(SRRATRC 2013).

The Committee also pointed to concerns raised by participants that foreign investment
arrangements were making it difficult for local producers to gain access to farm assets in
the region (in that local farmers were being priced out of the market).
Very few Australian farm purchases trigger a FIRB review yet the impact of foreign
investments below the $248 million threshold on local economies could be significant. The
committee is concerned that many and perhaps virtually all private foreign acquisitions ofagricultural land and business are proceeding without any consideration of whether it is inAustralia’s national interest. In the committee’s view this is largely out of step with
contemporary community expectations. (SRRATRC 2013, p. 74)

The Committee recommended that the screening threshold for private foreign investment
in agricultural land be lowered to $15 million (and be made cumulative). It also
recommended that any proposed foreign investment in an agribusiness should be reviewed
by FIRB where the investment exceeds 15 per cent or more of an agribusiness valued at$248 million, or exceeds $54 million.
In February 2015, the Australian Government announced that it would reduce thescreening threshold for agricultural land to $15 million (cumulative) and to $55 million for
agribusinesses to increase public scrutiny of foreign investment proposals in the
agricultural sector. These changes were implemented later in 2015.

Mixed views on the lower screening thresholds for agriculture
The new screening thresholds were considered too low by some inquiry participants. 79 For
example, the Australian Forest Products Association said that:
The recent lowering of the FIRB thresholds … represents a significant hurdle for overseas
investors in rural land. (sub. 11, p. 5)

The Australian Lot Feeders’ Association agreed and said that:
A large proportion of feedlots in Australia would be valued above $15 million … Feedlots(particularly large ones) are high value investments with foreign companies often the only
79 Participants who commented that the thresholds were too low included: Australian Forest Products

Association (sub. 11); Australia Pacific LNG (sub. DR206); Australian Sugar Milling Council(sub. DR234); Institute of Public Affairs (sub. DR164) and Voice of Horticulture (sub. DR232).

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potential purchasers who have the necessary funding capacity to acquire such businesses.
Decreasing the threshold to $15 million has potentially deterred a significant proportion ofbuyers for such assets. This is not in the interest of the sector, nor the many others that rely on
the sector for employment and a market for their products. (sub. DR294, pp. 17–18)

WAFarmers, while supportive in principle of the reduction in the agricultural land
threshold from $252 million, suggested that:… there is scope to increase the threshold from $15 million to $55 million as this is more inline with purchases purchased through foreign investment. (sub. DR226, p. 32)

The Western Australian Government supported a return of the agricultural land thresholdto $252 million because it was concerned that the lower threshold:… is seen by foreign investors as a potential impost to investment. DRD [The Department ofRegional Development] is concerned that investment opportunities will be missed as mixed
messages are being sent to investors by the change in policy, which in turn disadvantages
Australian agriculture. (sub. DR285, p. 5)

The Business Council of Australia, in its submission to the Treasury options paper onstrengthening Australia’s foreign investment framework, expressed concern about thenegative message that the lower thresholds send to foreign investors.
Over 99 per cent of applications to the FIRB are approved. The introduction of new lower
thresholds for foreign investors in Australian agribusiness and for Australian rural land
introduces an additional hurdle for potential investors. It sends a strong negative message about
Australia’s attitude towards foreign investors. This risks having a chilling effect on future
investment. (2015, pp. 8–9)

Australia Pacific LNG (sub. DR206) also said that the reduced agricultural land thresholdcreates additional regulatory hurdles that must be overcome by foreign investor resource
developers seeking to purchase agricultural land, such as for natural gas production.
However, other participants supported the lower screening thresholds for agriculture. 80 For
example, AgForce argued that the lower thresholds increase transparency of foreign
investment in agriculture.
A $15M threshold for land purchases is more relevant to Queensland broadacre agriculture than
the recommended $252M … which would trigger very few proposed purchases … Moreevidence is also needed that these lower thresholds will actually be a disincentive for further
foreign investment and gathering this evidence may require a review after a couple of years ofoperation. (sub. DR246, p. 6)

80 Participants who supported the lower screening threshold included: AgForce (sub. DR246); Annette
Prehn (sub. DR173); Cattle Council of Australia (sub. DR290); Environmental Farmers Network(sub. DR174); Grain Growers Limited (sub. DR247); Katherine Snoswell (sub. DR297); NSW Farmers’
Association (sub. DR161); Stuart Chignell (sub. DR208); Tasmanian Farmers and Graziers Association(sub. DR281); Victorian Farmers Federation (sub. DR189) and WAFarmers (sub. DR226).

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According to GrainGrowers Limited, the lower thresholds provide transparency that isotherwise lacking in FIRB’s review process.
… [Increasing the threshold] would not be appropriate … when there is still a significant issue
with transparency in the way decisions are made following the FIRB review process.
(sub. DR247, p. 12)

The Victorian Farmers’ Federation argued that the scrutiny afforded by lower thresholds
help maintain community confidence in the foreign investment system.
… current screening thresholds for foreign investment in agricultural land must remain … it isimportant that there is a comprehensive review undertaken by the Foreign Investment Review
Board, to provide confidence to the community about their operation of foreign owned
businesses going forward. The National Interest Test process is one measure which is in place
to provide additional transparency and confidence to both government and the community
about the ongoing business intentions of the investor. (sub. DR189, p. 33)

The NFF expressed a similar view.
… safeguards enacted by the amendments, including the $15 million cumulative screening
threshold for agricultural land and $55 million for agribusiness, help to ensure that due
consideration is given to foreign ownership coming into the sector. (2016c, p. 1)

However, it also cautioned that:… the thresholds should be monitored and supported by evidence. Consideration needs to begiven to whether potential foreign investors are being dissuaded by the sector-specificthresholds. (sub. DR216, p. 61)

The lower thresholds for foreign investment in agricultural land and agribusinesses resultin more foreign investment proposals being subject to FIRB review and application fees.
This not only creates a wedge between the price faced by buyers and sellers, but alsodelays any sale and may prevent foreign investors from bidding at auctions.
Unnecessarily restrictive foreign investment review arrangements in agriculture can reduce
foreign investment, which can have negative effects on the Australian economy both in the
short and long term.
•

In the short term, lower foreign investment can lead to lower employment in agriculture(Gali and Taplin 2012).

•

In the long term, effects can include a lower net capital stock, lower agricultural land
and agribusiness prices, and consequential adverse effects on production, productivity
and income (Gali and Taplin 2012; ITS Global 2008).

The distortions associated with foreign investment restrictions may also be larger in themedium to long term than in the short term — when the supply of agribusinesses and to alesser extent, agricultural land, is more responsive to changes in price (Hertel 2011).
At the margin, the lower thresholds act to deter potential foreign buyers by increasing thecost and uncertainty of investment in agricultural land and businesses valued above
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$15 million and $55 million respectively. In 2014-15, the average value of a farm inAustralia was about $3.5 million (ABARES 2016a; Treasury 2015c). During public
hearings, the Commission was told that many members of WAFarmers held properties
valued below the $15 million threshold for agricultural land (trans., p. 97). However, land
prices can vary considerably by region and sub-industry (ABARES 2016a;
Treasury 2015c).
The regulation impact statement (RIS) supporting the changes to the foreign investment
framework for agriculture estimated that as a result of the lower thresholds, FIRB will needto screen an additional 120 agricultural land and five agribusiness applications each year ata cost of $1.2 million per year (Treasury 2015d). In the four months between 1 March 2015
and 30 June 2015, 17 proposals were screened and approved for agricultural land which
would not have been captured by the previous thresholds (FIRB 2016b). In 2014-15, noapplications in agriculture were rejected, although some approvals were subject toconditions (FIRB 2016b).
The new lower thresholds, by requiring more proposals to be reviewed, increase public
scrutiny of foreign investment proposals in agriculture, but also imposes additional costs toforeign investors, industry and the Australian community.
And the lower thresholds could deter investment (that is, they do not get to the approvalstage). As the Financial Services Institute of Australasia said:
Lost FDI can deny Australia access to much needed capital, employment opportunities, newtechnologies, international managerial networks, and global supply chains. (2014, p. 7)

The Commission questions whether the benefits of greater scrutiny outweigh the costs,
particularly given that the Register of Foreign Ownership of Agricultural Land improvestransparency of foreign investment in agricultural land.

The lower cumulative threshold could also deter investment
The cumulative threshold for agricultural land was strongly criticised by some participants.
The Consolidated Pastoral Company (CPC) argued that it represented excessive regulatory
coverage.
A threshold of a cumulative value of $15 million for agricultural land as a trigger for FIRB
approval means that very small investment above $15 million can trigger a full FIRB
assessment process. This is an extreme example of regulation with excessive cover[age].
(sub. 71, p. 17)

AgForce, while supportive of the lower threshold for agricultural land, also expressed
reservations about its cumulative nature.
… further justification for making this land purchase threshold cumulative and not indexed isneeded. (sub. DR246, p. 6)

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Warakirri Asset Management said that the threshold means approval is required for ‘add
on’ transactions such as the purchase of neighbouring properties, paddocks and roadclosures.
… the current FIRB rules are inefficient, costly and act as a disincentive to invest in Australian
Agriculture. Australian agricultural land ownership is fragmented and often multiple
transactions are required to consolidate land holdings to achieve the desired economies of scaleand deliver acceptable investment returns. Introducing the cumulative trigger for FIRB
approval … may lead to one investor submitting many requests for FIRB approval over a 1 to 3
year time frame. (sub. DR310, p. 4)

Wellard Group Holdings Limited (Australia’s largest livestock exporter) said that the
cumulative threshold can create disincentives for foreign investors to make ongoingproductivity improvements to their property.
… the time and cost associated with preparing and submitting a FIRB approval and obtaining
consent are significant, particularly in the context of small and multiple rural land acquisitions
and having regard to current values … the new threshold will disproportionately impact on thepossible acquisition of small parcels of rural land by companies like us. For example, under the
proposed changes, if Wellard was offered the purchase on a single paddock worth let’s say$10,000, next door to our existing farming operations, we would be required to seek FIRB
approval. Given this is a relatively immaterial acquisition, the requirement for FIRB approval
would require a disproportionate expense of time and money, and associated delay, incompleting what should be a relatively straightforward transaction between a willing vendor
and purchaser. (2015, p. 3)

The cumulative threshold change means that every purchase of agricultural land by aforeign investor with current holdings valued above the threshold, no matter how small theinvestment, will require FIRB approval (except where an exemption certificate has been
granted by FIRB, in most cases for a fee of $25 300 (box 13.6)). This raises the cost ofinvestment, which adversely affects existing foreign investors in Australian agriculture
who wish to increase the scale of their agricultural landholdings or business operations.
The NSW Farmers’ Association suggested that exemption certificates may undermine thepublic scrutiny afforded by the agricultural land threshold.
It is clear that the farming community is completely aligned with the vast majority of theAustralian population in seeking greater scrutiny of the levels and spread of foreign investment
in agricultural land. Given the small number of applications rejected, it is not clear that keeping
the threshold is providing an appropriate screen of potential investors, especially given theexistence of exemption certificates. (sub. DR161, p. 30)

Interim FIRB data show that three applications for exemption certificates for agriculturalland have been granted from 1 December 2015 (FIRB, pers. comm., 6 June 2016). While
exemption certificates may reduce the regulatory burden of the cumulative threshold for
agricultural land, this is only likely to be the case where the total value and expected net
return from the proposed investment exceeds the $25 300 application fee. It is unlikely toaddress the type of situation outlined by Wellard, and may have the effect of adding further

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cost and complexity to the system, with potentially limited benefit in terms of assessmentof national interest concerns.
It is the Commission’s view that the exemption certificate is very much a band-aid
approach to address a policy that has the potential to dampen productivity-enhancing
investment and prevent efficient structural adjustment in the agricultural sector.
Box 13.6

Exemption certificates for agricultural land

From 1 December 2015, all foreign investors can apply for an exemption certificate, which
provides FIRB pre-approval for multiple investments in agricultural land for a fee ($25 300 if theacquisition is valued at $1 billion or less, and $101 500 if the value exceeds $1 billion), without
the need to seek separate approvals. Applications must be decided within 30 days, but thisperiod can be voluntarily extended by the applicant’s written consent. Exemption certificates are
generally granted if the Treasurer is satisfied that the following conditions are met:•

the acquisitions would not be contrary to the national interest•

the total proposed value of multiple acquisitions (where a single acquisition cannot exceed$10 million) over a three-year period does not exceed $100 million (or $30 million if the landis being acquired for use for another activity)•

periodic reporting on acquisitions made during the three-year period•

the regions or localities for the proposed acquisitions of agricultural land are clearly defined.

Sources: FIRB (2016c); Treasurer (2016).

Lower screening thresholds could contribute to processing delays
A related concern is that an increase in the volume of foreign investment applications dueto the lower thresholds could cause processing delays. Under the FATA, the Treasurer
must make a decision regarding the application within 30 days, although the Treasurer can
extend this period to 90 days by publishing an interim order in the Gazette. The CPC notedthat it has:… been advised that since the introduction of the new rules there have been significant delaysin the processing of applications. CPC notes that … the problem lies with the policy not thepersonnel. It is clear that FIRB has not been adequately resourced to managing the flood of
applications triggered by the new system … CPC understands that nearly all applications havebeen given extensions; CPC’s [sic] has an application before FIRB that has received
2 extensions. (sub. 71, p. 21)

Australia Pacific LNG also reported delays in processing applications for exemption
certificates for agricultural land.
APLNG [Australia Pacific LNG] also recently experienced a significant delay (of nearly
7 months) in receiving an annual program/exemption certificate, impacting relationships withcounterparties and resulting in additional costs. (sub. DR206, p. 2)

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The large size of some financial transactions involved can mean that delays will impose asignificant economic cost on both foreign investors and domestic vendors. As explained by
the NZ Treasury, foreign investors may incur higher costs from investing in forward
contracts to mitigate the foreign exchange risk associated with delays in processing foreign
investment applications.
… the cost of delay to business activity can be high. For example one potential cost would be if
the investor hedges their investment capital while seeking consent. Hedging a NZ$100m
investment (the minimum business investment that would be screened) for two months would
cost around $650,000, increasing to $2 million for six months. The longer the time taken to
seek consent, the greater the cost of hedging, and this cost exceeds the fees paid by the investor.
(2009, pp. 4–5)

A lengthy approval process increases the time and cost of lodging applications, andtherefore uncertainty, which could ultimately deter foreign investors. Delays may also
encourage speculation of the relative acceptability of bidders (PC 2014d).
Additional funds, including from the new application fees, were provided to FIRB toadminister the foreign investment review system (Treasury 2015a). To the extent that there
have been some delays, this may only be a temporary issue while FIRB establishes andadjusts to the new system. Although the exact numbers for investment applications in the
agricultural sector are unknown, in 2014-15, over 99 per cent of proposals were processedby FIRB within the statutory period of 30 days (FIRB 2016b).

Do the benefits of increased scrutiny exceed the costs?
As noted earlier, Australian agriculture requires significant investment, which it mustcompete for in global capital markets (and with other sectors in the Australian economy).
Australia is estimated to account for less than 5 per cent of global institutional investment
in agriculture, and increasingly competes for foreign capital with other countries, including
those in Asia, South America and Africa, that seek investment to develop their economies(Makunike 2009; Montemayor 2009; Valoral Advisers 2015). As the Australian Food andGrocery Council said:
The sense that Australia deserves foreign investment as of right, and that investors will queue
up to invest here, reflects a dangerous confidence in matters that can rapidly change. Global
capital is flexible, mobile, at times impatient and hungry for return. Australia is a high costs
market compared to our regional neighbours … every Government intervention needs to beevaluated against these two market realities lest the investment instead be directed to a lessproblematic, higher return market. Government … has a role in actively promoting Australia asa destination for foreign investment where the global market for capital is so competitive.
(sub. DR251, pp. 4–5)

Foreign capital flows are generally mobile internationally and there are many competinginvestment destinations for foreign capital in agriculture (HRSCE 2014). The discretionary
nature of FDI also means that foreign investors can choose the associated regulatoryburden.
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Factors influencing inward FDI decisions include: the restrictiveness of foreign ownership;
the general business environment (such as market size, domestic interest rates and taxation
policy); exchange rates; cost, availability and quality of labour; the presence of industry
clusters or agglomeration; and infrastructure and its accessibility (OECD 2007). While
many of these factors are beyond the control of the Australian Government, it can control
the restrictiveness of foreign ownership arrangements. It is important that Australia’s
foreign investment review framework does not unnecessarily restrict investment for
agriculture (or any other sector).
Australia’s foreign investment policy arrangements in agriculture are considered to berelatively restrictive compared with other developed countries (which have different
restrictions, box 13.7) mainly due to its screening processes (OECD 2015a) (box 13.8).
Australia’s foreign investment rules for agriculture have become more restrictive as aresult of the changes in 2015, resulting in a deterioration in Australia’s ranking in
agriculture (OECD 2015a).
While specific estimates of the cost of regulating foreign investment in agriculture are notavailable, the total cost of regulating foreign investment (across all sectors) is likely to besignificant. For example, the economic cost of delays and withdrawn investment as a resultof mandatory FIRB screening and approval requirements is estimated to be a minimum of$5.5 billion a year, equivalent to 0.6 per cent of nominal GDP (ITS Global 2008). Moregenerally, an OECD study estimated that if Australia reduced FDI restrictions to the levelin the United Kingdom (the most open OECD country at that time according to theindicators used in the study), it could increase the stock of FDI by about 45 per cent overthe long term (based on bilateral FDI relationships between 28 OECD countries over the
1980–2000 period) (Nicoletti et al. 2003).
Box 13.7

International comparisons of foreign investment screening
thresholds in agriculture

In the United States, there are no specific restrictions on foreign investment in agriculture at thefederal government level (and no monetary screening thresholds). However, under the Code ofFederal Regulations, screening is required for transactions that could result in control of a US
business by a foreign person. There are also some restrictions (including prohibitions) on theforeign ownership of agricultural land in about half of the states (Moir 2011; OECD 2013;
USDT 2008).
The current screening threshold for foreign investment in agricultural businesses in Canada
under the Investment Canada Act 1985 is Can$600 million (approximately A$595 million).
However, it will be progressively increased over time, to Can$800 million (A$794 million) from
April 2017, and to Can$1 billion (A$992 million) from April 2019 (Industry Canada 2013).
Additional restrictions on the size of foreign-owned agricultural landholdings also exist in someprovinces (Bowler and Ackhurst 2015; Moir 2011).
In New Zealand, the screening threshold for agricultural land is five hectares and for agriculturalbusinesses, it is NZ$100 million (approximately A$95 million) under the Overseas Investment
Act 2005.

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Box 13.8

Restrictiveness of Australia’s FDI rules in agriculture

The OECD foreign direct investment (FDI) regulatory restrictiveness index gauges the
restrictiveness of a country’s FDI rules by looking at four main types of statutory restrictions on
inward FDI:•

foreign equity limitations•

screening or approval mechanisms•

restrictions on the employment of foreigners as key personnel•

other operational restrictions. For example, restrictions on expansion on branching andcapital repatriation, or on land holdings by foreign-owned enterprises.

Index scores range from 0 to 1, where 0 indicates that a country’s agricultural sector has no
barriers to FDI, and 1 indicates that it is completely closed to FDI (OECD 2015a). While theindex does not provide a complete measure of a country’s investment climate because of data
and methodological limitations (for example, it only captures foreign investment restrictions at
the national level (Moir 2011), does not measure the actual enforcement of statutory restrictions
on foreign investment (Kalinova, Palerm and Thomsen 2010) and multiple countries can havethe same ranking), it nonetheless provides some insight into the restrictiveness of foreign
investment rules.
In 2015, Australia was ranked as the 4th most restrictive out of 35 OECD countries (7th in 2014)
based on all four restrictions in agriculture — equal in restrictiveness to New Zealand, but more
restrictive than the United Kingdom (10th most restrictive), Canada (11th) and the United States(one of the least restrictive countries) (OECD 2015a).
Australia was also ranked the most restrictive out of 35 OECD countries and 59 OECD andnon-OECD countries in 2015, based on its screening and approval restrictions for foreign
investment in agriculture. The restrictiveness of Australia’s screening arrangements for
agriculture is equal to New Zealand and Myanmar, but higher than China, Mexico, Brazil,
Malaysia and Ukraine (OECD 2015a). In 2014, Australia was 3rd most restrictive among theOECD countries, and 5th most restrictive among all countries examined — including Canada,
New Zealand and the United States.

It is also difficult to objectively demonstrate that national interest considerations aredifferent for foreign investors proposing to invest in agriculture compared with othersectors of the economy that have retained a higher screening threshold of $252 million(such as private acquisitions in sensitive businesses, including telecommunications,transport, defence and military related industries). As noted earlier, few foreign investment
proposals in agriculture have been rejected by the Treasurer on national interest grounds.
Interim FIRB data show that from 1 July 2015 to 6 June 2016, 173 agricultural proposals
were approved. Of these, only two proposals were above the agricultural land thresholdthat applied prior to 1 March 2015, and a further 72 were applications from foreign
government investors (FIRB, pers. comm., 6 June 2016). Therefore, it is unclear thatnational interest considerations justify the significantly lower thresholds — or indeed,
whether there are additional national interest issues (if any) associated with lower valued
agricultural land and businesses that were not being captured by the previous threshold of$252 million.
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Also, under the cumulative threshold for agricultural land, there could be proposed
investments that are of such low value that it would be highly unlikely that they would becontrary to Australia’s national interest. The cumulative threshold, combined with the new
application fees, could have the unintended consequence of deterring low-value but
important foreign investment aimed at increasing the scale and efficiency of existing
agricultural operations.
The lower agricultural thresholds, combined with the different thresholds for other sectors
and for investors from different countries, increases the complexity of the system. The
CPC raised concerns about the inconsistency in the value and cumulative nature ofthresholds for agricultural land.
This new foreign investment regime is inconsistent with the existing rules. Investors from
Chile, the United States and New Zealand have a threshold of $1 094 million before the FIRB
approval is triggered. If an investor comes from Singapore or Thailand, the threshold is$50 million. The thresholds in these two categories [are] not cumulative. However, if aninvestor comes from China, South Korea or Japan, or indeed even Ireland or the United
Kingdom, the threshold is just $15 million and cumulative. (sub. 71, p. 17)

Investors are also subject to different definitions of ‘agribusiness’ and ‘agricultural land’ asa result of preferential trade agreements, which affect the scope of the thresholds.
Whether national interest considerations are materially different for investors fromcountries who have been afforded higher and different thresholds, compared with those
who have not, is unclear. Lower foreign investment screening thresholds should not be
maintained solely for use as a bargaining chip in trade and investment negotiations(PC 2015a). The different thresholds affect the relative restrictiveness of Australia’s
foreign investment framework for each country, and may therefore distort foreign
investment flows in agriculture (and in other sectors of the economy) by encouraging someinvestment over others (Hanratty 1995; Kirchner 2008). Different thresholds can also send
mixed signals to foreign investors (that investment from some countries is welcome whileothers are not). The Western Australian Government (sub. 54) suggested that a moreconsistent approach to foreign investment in agriculture would provide greater confidence
and certainty for investors.
In the Commission’s view, the lower thresholds (combined with different thresholds
depending on the country of origin of the investor) increase the cost and complexity ofinvesting in Australian agriculture and ultimately risk deterring 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 ofAgricultural Land) are in place to increase transparency and public confidence of foreign
investment in Australian agriculture.
Lowering the screening thresholds is not the most effective or efficient way of addressing
community concerns about foreign investment in agriculture, particularly as some concerns
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appear to be misplaced and based on a misunderstanding of the effects of foreign
investment (box 13.9). As acknowledged by the Treasury, increased screening is an‘awkward way’ to address information gaps.
More active screening of rural land proposals would indeed generate a flow of new data to
FIRB, but it would take time for this data to be useful … regulation of the kind proposed [anagricultural land threshold of 5 hectares] would appear to be an awkward way to tackle data
gaps. An alternative approach would be to build greater regulatory insight through improved
research, analysis and information about how foreign investment is actually impacting on the
agricultural sector; the extent to which foreign investment in rural land is occurring and what
national interest issues arise from this investment. (2011b, p. 8)

Concerns about the effects of foreign investment were apparent in the sale of Cubbie
Station (box 13.10). However, the perceived negative effects of the sale did not appear toeventuate following the sale. If anything, the available evidence suggests that foreign
investment had positive effects.
The Commission’s view is that the Australian Government should increase the screening
thresholds for foreign investment in agriculture to $252 million (indexed annually and not
cumulative) — the level that they were prior to the changes in 2015. This would bring thearrangements for agriculture back in line with the thresholds that currently apply to(non-agricultural) business acquisitions and developed commercial land (for investors from
non-preferential trade countries), while maintaining the additional transparency provided
by the Register of Foreign Ownership of Agricultural Land.

RECOMMENDATION 13.1

The Australian Government should increase the screening thresholds for examinationof foreign investment in agricultural land and agribusinesses by the Foreign
Investment Review Board to their previous level of $252 million (indexed annually andnot cumulative).

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Box 13.9

Public concerns about foreign investment in agriculture

Public attitudes towards foreign investment in agriculture appear to stem from a variety ofconcerns, including that:•

foreign investment will reduce Australia’s food security. This assumes that food produced
using agricultural land will be diverted overseas, resulting in lower food supply, productchoice and higher prices for Australian consumers. However, as noted by ABARES:
Australia has a high level of food security. Food is abundant, and Australia is highly self-sufficient aswell as food secure, producing more than twice the amount of food it consumes … Although items thatcannot readily be produced in Australia are purchased freely on world markets, imports amount to a
relatively small proportion of food requirements. Australians have a high level of prosperity than mostof the world’s population and, with only a very small number of exceptions amongst disadvantaged
groups, consumers can easily afford their food requirements. (Moir 2011, p. 13)

Further, global markets for agricultural products mean that price pressures (upwards or
downwards) are likely to arise irrespective of whether Australian agricultural land is held bydomestic or foreign interests, as producers will generally seek to sell their output in themarket that provides the highest economic return.
•foreign investment may result in a ‘land grab’ and loss of control over (prime) agriculturalland, which is a scarce non-renewable resource. At all times, the Australian Government
retains sovereign control over all land and business activities that take place on Australiansoil. Foreign investors operating in Australia are no exception. Also, land use activities are
regulated (including for the purposes of addressing environmental impacts and effects on
residents) in the same way regardless of ownership (chapters 2 and 3).

•

foreign investment makes it difficult for local producers to gain access to farm assets in theregion (in that local farmers who wish to purchase agricultural property are being priced outof the market by foreign buyers) (SRRATRC 2013). However, property owners will generally
seek to sell their property to the highest bidder — with the bid reflecting the expected net
return on the asset — hence domestic vendors benefit from higher prices and increased
ability to exit the industry when necessary. Government intervention that limits such market
transactions distorts the efficient allocation of land in the economy (and prevents structuraladjustment), resulting in adverse effects on the incumbent land owner and the wider
Australian community.

•

foreign investment in agriculture will reduce employment in local and rural communities, as
foreign labour may displace Australian jobs (CEDA 2008; SRRATRC 2013; Alison Walpole,sub. 46). However, many farm businesses rely on overseas temporary workers to fill gaps inthe local workforce, especially due to seasonal demand and lack of suitably skilled staff(chapter 11). Some high-profile cases of foreign investment in agriculture suggest that
foreign investment can increase employment opportunities for locals in rural communities(Jasper, Felton-Taylor and Vidot 2016; Locke 2013). Foreign companies have an incentive
to employ local workers as they are likely to have the necessary skills, knowledge andexperience to help run their farm businesses (ABARES 2015c; Schwartz and
McCarthy 2016).

•

Australian agricultural companies (particularly iconic companies) should be kept inAustralian hands. Australia has a long history of foreign investment in agriculture, including
major agricultural businesses and food brands (Spencer and Kneebone 2012). Many
Australian agricultural companies were initially established as a result of foreign investment,
which has generated significant benefits, including bringing in new technology and businesspractices. Foreign investment is also particularly important in maintaining the continued
existence of major Australian agricultural businesses that are in financial distress(Locke 2013). Without foreign investment, these companies may have collapsed.

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Box 13.10

Cubbie Station and RuYi / Lempriere

In August 2012, the Treasurer approved the sale of Cubbie Group Limited, Australia’s largest
cotton farm located in Dirranbandi, Queensland, to a Chinese-led consortium — Shandong
RuYi Scientific & Technological Group Company Limited (RuYi) and Lempriere Proprietary
Limited (Swan 2012). The station had been in voluntary administration from 2009 (Swan 2012).
There was initial public concern about the sale, particularly from locals in Dirranbandi, including:•loss of employment (and economic activity) in Dirranbandi and surrounding towns, such as
St George (Jasper, Felton-Taylor and Vidot 2016; Swan 2012)•

mismanagement of water and land (Jasper, Felton-Taylor and Vidot 2016)•

non-commercial management of the enterprise (SRRATRC 2013).

As part of its proposal, RuYi gave voluntary undertakings to sell down its interest in the Cubbie
Group from 80 per cent to 51 per cent and to reduce its board representation within three years
from completion of the acquisition (SRRATRC 2013; Swan 2012). The Treasurer also sought
and received undertakings from the consortium relating to employment, ownership, board
composition, management and water use as part of the approval process. This included
undertakings to:•make offers of employment to all existing employees and maintain existing arrangements•comply with all Australian laws, including those in relation to water management•

investigate ways to improve water use efficiency and sell any surplus water allocations
through the water market•

have Cubbie Group managed and operated by a wholly owned subsidiary of Lempriere (anAustralian family-owned group of companies) (Swan 2012).

Many of the initial concerns about the sale did not materialise once the property changed
hands. The new owners retained and expanded the workforce, and kept the local manager(Jasper 2016a). And there has been major reinvestment in the property, including upgrades ofwater-saving infrastructure (such as new engines and irrigation pumps) and doubling thecapacity of a cotton gin (a machine that processes cotton bales) it purchased at Dirranbandi(Jasper 2016b; Locke 2013). Some local cotton farmers supported the sale. In 2013,
Dirranbandi cotton farmer Frank Deshon said:
Cubbie is operating as they have in the past. Cubbie is investing on the farm, and a lot more
infrastructure is going on … I think it’s all great for the local area. (Locke 2013)

And in 2016, a local woman in Dirranbandi interviewed by the ABC said:
I talk to the businesspeople in Dirranbandi and they all say that without Cubbie operating as it is today,that they would have to close their doors. They’re very much dependent on Cubbie and the businessthat it brings and I know that that also applies to St George as well. (Jasper 2016a)

Then-mayor of Balonne Shire, Donna Stewart, who described herself as initially ‘very strongly
opposed’ to the sale, subsequently changed her views.
… I have changed my view to strongly support the foreign ownership of Cubbie. Shandong RuYi andLempriere, the Australian interests, have done an amazing job with Cubbie. They’ve further developed
it, they’ve doubled the capacity of the cotton gin that has enabled them to make bigger profits. (FeltonTaylor and Jasper 2016)

On 21 June 2016, the Treasurer, consistent with FIRB advice, granted RuYi a three-year
extension to meet its voluntary undertaking to sell down its interest. It was also noted that RuYi
had met all other undertakings (Jasper 2016b).

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Lack of data and ineffective communication may be contributing to community
concerns
Knowledge gaps on the extent of foreign investment in Australian agriculture could becontributing to public concerns. The Coalition’s 2012 policy discussion paper on foreign
investment in Australian agriculture claimed that the:… knowledge gap is feeding public and industry concern about whether all approved foreign
investment in the agricultural sector is not contrary to the national interest, especially set
against the global and highly publicised phenomenon of significant pools of investment funds
targeting the agriculture sector worldwide in recent years. (Liberal Party of Australia 2012,p. 10)Media discussion about foreign investment in agriculture can exacerbate public concerns.
The Northern Territory Department of Primary Industry and Fisheries (sub. 67) argued that
there needs to be a further national conversation about foreign investment. It expressed
concern that a poor understanding of foreign investment could have a negative effect on
investment and expansion opportunities in agriculture. Indeed, public concerns could
create uncertainty for foreign investors (as to whether their investment is welcome), which
may reduce the international competitiveness of Australian agriculture in attracting foreign
investment.
The Australian Government has a role in providing information, and fostering publicawareness and understanding about foreign investment in Australian agriculture. Indeed,
one of the roles of FIRB is to ‘foster an awareness and understanding, both in Australia
and abroad, of the Policy and the … [FATA]’(FIRB 2016a). That said, the benefits to the
public from such information must be carefully balanced against the added administrative
burden (and cost) of any additional reporting requirements imposed on foreign investors.
The Register of Foreign Ownership of Agricultural Land seeks to provide greater public
information on foreign investment in Australian agricultural land.
Foreign investors must give the ATO notice of their holdings of agricultural land(regardless of the value of the land) within 30 days of the transaction. In October 2016, theAustralian Government introduced a Bill to amend the Agricultural Land Register toinclude foreign ownership of water entitlements.
While the Register is based on self-reported information provided by foreign investors(ATO 2016d), land title data from the states and territories are being used for complianceand verification purposes (ATO, pers. comm., 18 October 2016).
Some inquiry participants said that the introduction of the register will help address publicconcerns about foreign investment in agriculture and inform policy making. For example,
the NFF stated that:
Collecting this data will aid policy development with regards to foreign investment into thesector by presenting a facts based picture of the investment ownership landscape. Additionally,

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REGULATION OF AUSTRALIAN AGRICULTURE

such a register will assist in addressing community concerns around investment in Australian
agriculture, where misconception is commonplace. (sub. 61, p. 31)

Similarly, Primary Producers SA commented that:… a register of overseas owned assets would be helpful from both a policy point of view, andalso managing criticisms. There is an uninformed and loud view of the level of overseas
ownership, and the profile therein. (sub. 41, p. 5)

It is unclear why foreign-owned agribusinesses are not required to be on the national
register, given that the register’s stated purpose is to increase transparency of foreign
investment in agriculture. Public concern appears to be directed at foreign ownership ofboth agricultural land and agribusinesses (as partly reflected by the recent lowering ofscreening thresholds for both types of acquisitions). Indeed, the value of the first ABS
Agricultural Land and Water Ownership Survey was questioned because of the small
number of agricultural businesses it covered (less than one in ten) and because some small
businesses were included (earning at least $5 000 per year) (Liberal Party ofAustralia 2012). While it is likely that most foreign-held agricultural land is accompaniedby the operation of an agribusiness on the land, this is not necessarily the case asagribusinesses can be run without land ownership through new ownership and operational
structures (Agribusiness Australia 2016).
The Commissioner of Taxation must provide the Treasurer with an annual report on
statistics derived from the register as soon as practicable after 30 June each year, which is
to be tabled in Parliament and published on a website (currently FIRB’s website).
However, the register itself is not publicly available (SERC 2016).
Unrestricted public access to the register would achieve maximum transparency on theextent of foreign ownership in agricultural land. This was supported by a number ofparticipants (University of Southern Queensland, sub. DR184; Victorian Farmers
Federation, sub. DR189; WAFarmers, sub. DR226).
For example, the NSW Farmers’ Association said that:
A register increases transparency in the administration of the FIRB approval regime and allows
the public and the industry to map any investment that increases consolidation in the
agricultural sector. It is therefore vital that the register is regularly updated and publicly
available. Without this there cannot be an informed public discussion and industry discussion
on foreign investment. (sub. DR161, pp. 30–31)

However, complete and open public access to the register is likely to raise privacy issues
and commercial sensitivities (and could therefore discourage foreign investment) if fullaccess identifies the details of individual owners or taxpayers (Treasury 2012). As a result,the ATO’s report only provides aggregated statistics.
The information provided in the ATO’s report needs to be sufficient to improve public
understanding of the nature, extent and distribution of foreign ownership in Australian

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559

agricultural land. Agribusiness Australia emphasised that the report should meet the
information needs of the public and said that:… public concerns about foreign investment in agribusiness remain … It is becoming apparent
that the national register introduced recently will also fail to provide sufficient information toaddress both industry needs and public concerns. (2016, p. 2)

Australian Pork Limited was also critical of the effectiveness of the register in allaying
public concerns.
The foreign investment land and water registers have failed to deliver information to thebroader Australian public on foreign ownership, and how this changes over time.
(sub. DR282, p. 12)

To increase transparency and address public concerns, there have been calls for additional
information from the register to be released, including:•the level of foreign interests in agricultural land held by type of investor (private or
government) (Barbour and Gribbin 2016; Moore 2016)•

the proportion of foreign interests in agricultural land (for example, 10 per cent) andbusiness structure (for example, partnership) (Moore 2016)•

the level of foreign interests by land value. There are concerns that size data can be
skewed by large areas of land in Northern Australia owned by a few foreign investors(Moore 2016; Varischetti 2016) and may not reflect the recent trend of foreign interests
buying smaller but higher value farms (Neales 2016)•

the level of foreign interests in agricultural land by region (Moore 2016) or local
government area (NAB 2013; AgForce, sub. DR246)•

the level of foreign interests in agricultural land by commodity (NAB 2013;
Neales 2016; NFF 2011).

However, it is not clear that data from the register (or from other sources) by itself canadequately address underlying public concerns about foreign investment in agriculture.
There may be a mismatch between the nature of public concerns and what information canbe conveyed by data. For example, data alone cannot address public concerns that reflectvalues such as food security, national sovereignty and nationalism, whereas data may be
more effective in alleviating concerns about the level of employment and type of land use.
Public concerns (and any misunderstanding) should be addressed directly through targeted
analysis and information, supplemented by data.
The Australian Government currently provides some information on foreign investment.
•

560

Both the Department of Foreign Affairs and Trade and FIRB publish information on
the benefits of foreign investment (Australian Government 2015c; DFAT 2016a). The
Treasurer also highlights the importance of foreign investment to the Australianeconomy in foreign investment decisions, public speeches and media interviews.

REGULATION OF AUSTRALIAN AGRICULTURE

•In 2014, the Commonwealth Parliamentary Library published a one-off research paperon foreign investment in Australian agriculture, which provided some wider context forthe public debate on foreign investment in agriculture (Saynal 2014).

•

The Treasury has published research on the macroeconomic effects of lower capital
inflow (Gali and Taplin 2012), as well as a working paper which examined the trends,
sources, data and positive effects of foreign investment into Australia (McKissack andXu 2016). Similarly, the US Government has produced a number of reports on foreign
investment in the US that review the trends, drivers and benefits of foreign investment(Nickerson et al. 2012; Telles Jr. 2016; USDC and CEA 2013).

Current communication approaches appear to either be ad hoc or only discuss the benefitsof foreign investment in a general and abstract manner (which may not be easily
understood or accessible to the public). This has limited their effectiveness in addressing
public concerns and increasing public understanding about foreign investment.
The benefits and costs (including any risks to Australia’s national interest) of foreign
investment in agriculture (and other sectors) should be clearly communicated to thecommunity. Effective and timely communication of this information would help reduce therisk of factual information being misinterpreted (which can reinforce concerns) and help
alleviate community concerns. It could also reduce the need for governments to resort toregulation such as screening thresholds (which impose costs on the community and havequestionable benefits) to address public concerns about foreign investment.
The need for more effective communication was acknowledged by the Senate Economics
References Committee in their inquiry on foreign investment by state-owned entities.
The committee believes that a higher degree of public education would arrest some community
anxiety about foreign investment. (SERC 2009, p. 14)

A more effective communication strategy (rather than merely providing data from theregister) is to publish an annual report on foreign investment. Ideally, the release of thisreport would coincide with the public release of the ATO’s report on the register. The
report on foreign investment should go beyond merely providing descriptive information— it should provide specific analysis and commentary on issues that concern thecommunity, such as the effect of foreign investment on local or regional employment andfood security. It should analyse the trends, drivers and effects (costs and benefits) of
foreign investment, and be presented in a manner that can be easily understood by the
public — this could include input from farmers and communities about their personalviews and experiences with foreign investment.
While the report alone is unlikely to address all public concerns about foreign investment,
it would help provide a more balanced and informed context for public debate about the
implications of foreign investment in Australia (including national interest issues).
Given the complex, wide-ranging and dynamic nature of public concerns, all relevant dataand information (not just from the register) should be used in the preparation of the reports.
For example, information could be drawn from other government agencies such as the

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ABS, ATO, ACCC and FIRB (Saynal 2014). Coordination and sharing of data between
these agencies will be necessary.
The Treasury could publish annual reports on foreign investment — regulation of foreign
investment falls within the Treasury portfolio and the Treasury has the resources andexpertise necessary to provide analysis and commentary on foreign investment issues. The
Productivity Commission is also well placed to analyse and comment on foreign
investment regulation, and could do this through its annual Trade and Assistance Review.
Under its Act, the Commission is required to report annually on assistance and regulations
affecting industry, and the effect of these on industry and the economy. Foreign investment
rules fall within the scope of this requirement because they affect domestic firms and thewider economy, including by restricting competition and access to foreign capital.
The key advantage of the Commission undertaking this task is that it is at arm’s lengthfrom foreign investment policy. This would help to enhance the credibility of the analysis.

RECOMMENDATION 13.2

The Australian Government should request that the Productivity Commission, in its
annual Trade and Assistance Review, analyse and report on the trends, drivers andeffects of foreign investment.

Application fees should be based on cost recovery
New fees for foreign investment applications (indexed to the CPI) were introduced on
1 December 2015. Previously, there were no fees and the cost of administering the foreign
investment review framework was funded by general taxation revenue. The application fee
must be paid before an application will be processed, subject to the Treasurer’s statutory
power to waive and remit fees. Although the fees are capped and payable per application,
they vary by the type of acquisition and the value of agricultural land or agribusiness underconsideration (table 13.3).

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Table 13.3

Application fees for foreign investment proposals inagriculture
2016-17

Agricultural Land

Fee

$

$

1 million or less

5 000

More than 1 million and less than 2 million

10 100

2 million and less than 3 million
3 million and less than 4 million

20 30030 400

4 million and less than 5 million

40 600

5 million and less than 6 million

50 700

6 million and less than 7 million
7 million and less than 8 million

60 90071 000

8 million and less than 9 million
9 million and less than 10 million
10 million or more

81 20091 300101 500

AgribusinessesFee$
1 billion or lessMore than 1 billion$
25 300101 500

Source: Treasurer (2016).

The fees are intended to recover the cost of administering the foreign investment system by
FIRB and the ATO, including the cost of processing applications, data collection,
monitoring, compliance and enforcement activities. The fees are also expected to provide
FIRB with additional resources to reduce assessment timeframes. The Treasury stated that:
The revenue from application fees would be used to improve service delivery to foreign
investors and would help offset the direct and indirect costs of managing the foreign investment
regime. This includes the enhanced compliance and enforcement regime for the foreign
investment in residential real estate and the establishment of a national register. The ATO will
be funded to conduct more detailed audits and ensure proper compliance with the law.
(Treasury 2015d, p. 54)

Charging a fee-for-service is consistent with the Australian Government Cost Recovery
Guidelines for government services as it can improve economic efficiency in the allocationof resources and promote equity (DoF 2014; PC 2001a). Cost recovery may enhance
government efficiency as FIRB is the monopoly provider of foreign investment review
services and self-funding may promote greater administrative efficiency in processing
applications. Investors who are charged for the cost of processing their application may
also have more incentive to ensure the screening process is as efficient as possible (such as
avoiding delays by providing sufficient information to FIRB) to minimise their compliancecosts (FIRB 2016b).

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However, broader activities associated with administering the foreign investment
framework for agriculture, such as data collection and dissemination, primarily benefit theAustralian public in addressing their concerns about foreign ownership in agriculture andprotecting Australia’s national interest. The cost of these activities is unrelated toprocessing applications for foreign investment in agriculture and arguably falls outside thescope of full cost recovery. As the Australian Financial Markets Association said:
The government has noted that the proposed fees are also intended to cover the cost of broader
regulatory functions, including data collection, compliance and enforcement activities, inaddition to the application and approval process. Given that these activities are undertaken forthe public benefit and not the direct benefit of foreign investors or resident vendors, it is more
appropriate that these activities are funded through general tax revenue. (2015, p. 4)

The Treasury (2015c, p. 11) also acknowledged that there is ‘limited evidence to suggest
non-compliance in these areas [business, commercial real estate and agriculturalinvestment applications]’.
Participants to this inquiry generally accepted the need for fees to be based on full cost
recovery, but raised concerns that the current fees are higher than full cost recovery and are
more like a tax on foreign investment in agriculture. For example, the CPC said that:
The new charges imposed by the Government are not linked to the cost of administering thescheme. Rather they are a financial penalty, or a tax, that only applies to foreign investors. This
direct cost or tax is in addition to the range of administrative and other costs incurred byapplicants seeking to navigate through the FIRB approval process. (sub. 71, p. 20)

The Tasmanian Government (sub. DR287, p. 21) described the application fee as ‘anartificial tax on foreign investment’. Other participants supported application fees only ifthey were based on cost recovery. 81
This assessment was also shared by participants in the Treasury consultation process onchanges to the foreign investment review framework. The RIS supporting the changes tothe foreign investment framework for agriculture acknowledged these concerns, butjustified the fees on the basis that they will have little effect on foreign investment and costforeign investors $116 720 per year (Treasury 2015d).
As the proposed fees are greater than the costs of administering the system, they could beviewed as potentially reducing Australia’s attractiveness as an investment destination.
However, the decision to invest in a particular country is based on a wide range of factors.
Treasury considers that an application fee of less than 1 per cent of the value of the investment
is unlikely to result in a material behavioural impact on foreign investment decisions.
(Treasury 2015d, p. 53)
81 Participants included: Australia Pacific LNG (sub. DR206); Australian Lot Feeders’ Association(sub. DR294); Australian Pork Limited (sub. DR282); Cattle Council of Australia (sub. DR290);
Environmental Farmers Network (sub. DR174); National Farmers’ Federation (sub. DR216); NSW
Farmers’ Association (sub. DR161); Tasmanian Farmers and Graziers Association (sub. DR281);
Victorian Farmers Federation (sub. DR189) and WAFarmers (sub. DR226).

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REGULATION OF AUSTRALIAN AGRICULTURE

The burden of the fees depends on the fee and the value of the proposed investment. The
fees (as a proportion of the value of the investment) are likely to be higher for proposals
relating to agricultural land (particularly for small investment in agricultural land)
compared with agribusinesses. For example:•

for a relatively small investment in agricultural land valued at $15 million (which
triggers FIRB review), the fee is $101 500 or 0.68 per cent of the value of theinvestment•

for a relatively small agribusiness valued at $55 million (which triggers FIRB review),
the fee is $25 300 or 0.05 per cent of the value of the investment.

As a result, the current fees may lead to some applicants cross-subsidising others, which
could distort the composition of foreign capital inflows in favour of agribusiness rather
than agricultural land, as well as between agriculture and other sectors of the economy.
Fees above cost recovery act as a de facto tax and may therefore lead to ‘deadweight’ orefficiency costs of tax-related distortions to investment decisions (PC 2001a). High fees
may deter foreign investment by increasing the transaction cost of investing in Australian
agriculture (ITS Global 2008). Because of the economy-wide benefits of foreign
investment, this will impose a cost on the agricultural sector and the broader economy.
These effects were not considered in the RIS.
The level of fees that would only recover overhead and administrative costs of processing
applications is difficult to determine, as data on the cost of administering the foreign
investment framework are not publicly available. The only comparable figures were
produced by the Parliamentary Budget Office (PBO) for the House of Representatives
Standing Committee on Economics report on foreign investment in residential real estate,
which estimated departmental expenses based on amounts allocated to the Australian
Securities and Investments Commission and the ATO for measures with similaradministrative complexity (HRSCE 2014). The PBO recommended that:
The level of the fee should be such that it does not significantly deter future foreign property
investment. It could be determined based on the value of the transaction, such as 0.1 per cent of
the property investment value, but this would be difficult to administer. A simpler
administrative arrangement would be a flat fee for every application. A fee of between $500
and $1500 could be considered. (2014, p. 38)

The PBO assumed that there would be no behavioural impact given the small cost of thefee relative to the cost of purchasing residential real estate (HRSCE 2014).
While not directly comparable to residential real estate applications, current agriculturalland and agribusiness application fees range from $5000 to $101 500 per application, wellin excess of the maximum $1500 suggested by the Office for residential real estate
applications.
The NZ Overseas Investment Office (OIO), the counterpart to FIRB in Australia, charges
application fees for foreign investment proposals based on a full cost recovery framework
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565

(LINZ 2016b, 2016c). The objective of the fees is to provide sufficient revenue to recover
the OIO’s operating costs so that investment applications are assessed with minimal delay.
The fees for agricultural land and agribusiness applications range from NZ$22 500(approximately A$21 400) and NZ$54 000 (approximately A$51 300), depending on thevalue and type of the proposed investment, and whether the investment is considered by
the OIO or the Minister for Finance (LINZ 2016d). The fees were increased in July 2016 tocorrect for under-recovery of costs and to address inequity, as some applicants werecross-subsidising others (LINZ 2016c).
The Commission’s view is that application fees should be set at the level that recovers
FIRB’s costs of processing foreign investment applications, and should be closely
monitored to ensure no under- or over-recovery of costs (like any Australian Government
entity). Fees that exceed cost recovery may deter foreign investment and impede
productivity growth in the agricultural sector.

RECOMMENDATION 13.3

The Australian Government should set application fees for foreign investment
proposals at the level that recovers the costs incurred by the Foreign Investment
Review Board in reviewing proposals, and should closely monitor the fees to ensure
no over- or under-recovery of costs.

Transparency of FIRB’s review process
FIRB’s recommendations and advice to the Treasurer are not publicly available. However,
the Treasurer’s decisions and brief reasons are generally published on the Treasury
website, particularly for large proposals that are already in the public domain. The
Treasurer also generally indicates whether the decision was in accordance with FIRB’s
recommendation, which has been the approach in recent decisions (see for example,
Hockey 2013a, 2013b, 2015, Morrison 2015, 2016a).
Some participants to this inquiry raised concerns about the lack of transparency,
particularly with regard to the application of the ‘national interest’ test by FIRB and theTreasurer. For example, Australian Pork Limited said that it supported:… improved transparency, on both the FIRB advice and the Government’s decision,
particularly when the Government’s determination differs from the advice of the FIRB.
(sub. DR282, p. 12)

And the NFF said that:… what constitutes the National Interest Test must be publicised to the greatest extent possible
to ensure both the sector and investors clearly understand the criteria their applications will beassessed against. (sub. 61, p. 31)

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REGULATION OF AUSTRALIAN AGRICULTURE

The NFF (subs. 61 and DR216) further argued that FIRB and/or the Treasurer should
publish more detailed reasons for decisions, including the weights given to each factor withthe exception of national security criteria (in a manner similar to court judgments), where
this does not breach privacy and commercial confidentiality requirements.
The Senate Economics References Committee, in its inquiry into the foreign investment
framework, concluded that lack of transparency in the foreign investment review process
and its outcomes (combined with the inconsistent thresholds for agricultural land andagribusiness) could ‘serve as a disincentive to foreign investors and continue to undermine
public confidence in foreign investment in Australia’ (SERC 2016, p. 51). It suggested
that, in addition to establishing a publicly available register for foreign-held agriculturalland, transparency of the review process could be improved by:•

the Treasurer publishing guidance on the foreign investment review assessment
process, including information on some of the steps and key features of the process•

the Treasury publishing the Treasurer’s reasons for all its decisions regarding foreign
investment, in order to inform the public, and to instil public and investor confidence inthe review process (SERC 2016).

Transparency is important because it can promote investor certainty and community
confidence that Australia’s national interest is being adequately protected. It may also
make it easier for the Treasurer to ascertain public preferences, which may be important indeciding whether a foreign investment proposal in agriculture is contrary to Australia’s
national interest (SERC 2016). However, full transparency of FIRB’s review process isunlikely to be possible. A foreign investment application could involve sensitive
information relating to Australia’s national security or strategic interests (Treasury 2012).
It also typically includes foreign investors’ confidential personal or commercial
information, which is protected by law (FIRB 2016b).
There appears to be greater transparency of foreign investment decisions in New Zealand.
The NZ OIO publicly releases short summaries of all decisions online, including thefactors that were taken into account, in accordance with the Official Information Act 1982
(NZ) (LINZ 2016a).
In contrast, there is less transparency in North America. The Committee on Foreign
Investment in the United States does not publish its advice to the President (Jackson 2016).
Industry Canada (when providing advice to the Minister of Industry) also only lists detailsof the foreign investor and its Canadian business (Industry Canada 2016).
Although full transparency of foreign investment decisions is unlikely to be possible,
greater transparency (to the extent that it is consistent with national interest considerations)is important to help inform the public about foreign investment. To this end, theintroduction of the Register of Foreign Ownership of Agricultural Land, combined withmore effective public communication of the benefits and risks of foreign investment, will
go some way towards increasing transparency and alleviating public concerns about
foreign investment in agriculture.
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14 Export regulation

Key points•

Australia’s agricultural sector has historically been, and continues to be, highly dependent
on, and exposed to, international trade. The sector benefits from open markets with minimal
entry requirements into other countries.

•

Australian agricultural producers are price takers in global markets. This limits their capacity
to pass on costs to consumers and means that unnecessary regulatory burdens, and othertrade restrictions on exports, can significantly reduce their international competitiveness.

•

The Australian Government has a role to play in export certification — to assure importing
countries that their requirements have been met, which helps protect Australia’s reputation
as a reliable and safe supplier of agricultural exports.

•

Participants’ concerns about export certification related to: user charges; processing delays;
duplication between Australian and importing country requirements; and excessively strict
domestic requirements (relative to importing country requirements).

•

Australia’s agricultural exporters could benefit from greater private sector involvement inexport certification, as well as harmonisation and mutual recognition of Australian andimporting country requirements.

•

Concerns about the efficiency of export certification can be addressed by:– the Australian Government continuing to implement full user cost recovery to ensure
export certification services are provided at minimum cost and delay– ongoing review, reform and negotiations on importing country requirements with foreign
governments.

International trade can benefit Australia’s agricultural exporters as it leads to increased
efficiency and productivity (due to comparative advantage, specialisation, intra-industry
trade, economies of scale and increased competition). It also contributes to higher
economic growth and living standards, and expands consumption possibilities (consumers
can purchase a wider variety of products at lower prices) (Krugman, Obstfeld andMelitz 2015).
Australia’s agricultural sector is highly dependent on, and exposed to, international trade.
The sector has exported the majority of its produce for almost two centuries (AustralianGovernment 2015b). About two–thirds of Australia’s agricultural production is exported,
generating export revenue of about $44 billion in 2014-15, or 14 per cent of Australia’s
export revenue (ABARES 2015a; ABS 2015b; DAWR 2016i). Major agricultural exports
include meat, livestock, grains, oilseeds and wool. The sector’s top five trading partners
are China, the United States, Japan, Indonesia and South Korea (ABARES 2015a).

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Australian agricultural producers are price takers in global markets as Australia is arelatively small exporter by world standards. In 2014, the value of Australian agricultural
exports accounted for about three per cent of world food exports (12th in the world)(FAO 2015). As a result, Australian agricultural producers (including exporters andprocessors) have limited capacity to pass on costs to consumers. This means that
unnecessary regulatory burdens and trade restrictions on agricultural exports cansignificantly reduce their international competitiveness.
This chapter examines the regulation of agricultural exports and its effect on theinternational competitiveness of Australian agriculture.

14.1 Regulation of agricultural exports
Australian agricultural exports are affected by trade protection and technical barriers totrade imposed by other countries.
•

Trade protection includes tariffs, export subsidies, import quotas, export taxes, local
content requirements, export credit subsidies, national procurement and voluntary
export restraints (Krugman, Obstfeld and Melitz 2015; Vousden 1990).

•

Technical barriers to trade (such as importing country requirements) are directed atachieving domestic policy objectives such as biosecurity, animal welfare,environmental protection and food safety (DoA 2015a; WTO 2014).

The distinction between importing country requirements and trade protection is not always
clear (AFGC 2015; Krugman, Obstfeld and Melitz 2015). Although the objective of apolicy may not be to restrict international trade, it can have the unintended consequence ofprotecting local agricultural producers from international competition.
While participants raised concerns about the cost of exporting agricultural produce, manyof these concerns related to costs resulting from technical barriers to trade. For example,
the Australian Meat Industry Council stated that technical barriers to trade are significant.
Poor trade outcomes in market access … [have] been issues. We applaud the government
negotiation of free trade agreements (FTA’s) … FTA’s however only address import tariffs.
The meat industry, as a producer of a time and temperature sensitive product, has a highexposure to technical barriers to trade. These technical barriers can undermine any tariff
benefits. Unless they are addressed with the same priority as tariff reductions, technical barriers
to trade can add huge cost, reduce productivity and limit overall market access. (sub. 77,
pp. 3-4)

The Australian Food and Grocery Council estimated technical barriers to trade result in anannual loss of $1.3 billion for the red meat export industry (AFGC 2015), and argued that
non-tariff barriers had the potential to impede and constrain Australia’s export growth in
the food and grocery manufacturing sector (sub. DR251).

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REGULATION OF AUSTRALIAN AGRICULTURE

Similarly, Australian Dairy Farmers claimed that the annual loss to the dairy exportindustry as a result of technical barriers to trade is $1.6 billion.
… when aggregated, the impact of TBTs [technical barriers to trade] on the Australian dairy
industry is staggering. In many instances addressing these TBTs in key markets could produce
gains even more beneficial to the industry than just tariff reductions. The Australian dairy
industry is presently unable to seize major competitive advantages (like strong food safety,
credible domestic regulators and reliable cold storage supply chains) because of international
standards and requirements that are incoherent with those of Australia. There is even consistent
feedback from Australian dairy exporters about “losing interest” in doing business in foreign
markets as a response to frustrating TBTs. (sub. 63, p. 8)

The challenge is that these barriers relate to legislation and policy frameworks in the export
destination country, both at and behind the border. As such, the removal of barriers toexport requires ongoing commitment, coordination and action from both Australian andforeign governments. The Australian Food and Grocery Council pointed out that importing
country requirements can also depend on equivalent requirements imposed by Australia.
It is one thing to make the Australian systems cost- and time efficient, but the effort may bebetter spent in addressing the need for certification in the first place … Australian regulators
may not be aware, when introducing requirements that apply to imports, of the potential for
retaliatory or even simply equivalent measures to be placed on Australia’s exports.
(sub. DR251, p. 5)

International negotiations and trade agreements can play an important role in reducing
trade barriers to Australian agricultural exports. The greatest benefits of trade liberalisation(including improving market access for Australian agricultural exporters) would be
realised from multilateral trade agreements on a non-discriminatory basis (PC 2010a,
2014f). While bilateral, regional or plurilateral trade agreements can also provide market
access benefits, they can result in offsetting economy-wide costs due to complex rules oforigin and ‘trade diversion’ (where goods originally imported from lower-cost countries
are displaced by goods from higher-cost countries due to lower trade barriers, such as
reduced tariffs, faced by the latter group) (PC 2010a, 2014f).
The Australian Government recently negotiated a number of agreements to reduce barriers
to trade for agriculture, which included importing country requirements. For example, as aresult of government-to-government market access agreements:•

in January 2016, the first exports of goat meat were sent to India, and eggs were sent to
Taiwan•from May 2016, Australian pumpkins and a range of melons can be exported to Japan.
Market access was also gained for nectarines to China (DAWR 2016o, 2016q).

International negotiations will continue to be important to further reduce barriers forAustralian agricultural exporters. But difficulties securing trade agreements should not be
used as a reason to delay reducing Australia’s own trade barriers. It is in Australia’sinterest to unilaterally reduce trade barriers. Unilateral reform should not be delayed toretain a bargaining chip in international trade negotiations (PC 2010a).
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It should also be noted that importing country requirements are also affected by Australia’s
national biosecurity system (chapter 8).

The role of government in export certification
The Australian Government’s Department of Agriculture and Water Resources (DAWR),
commenting on agricultural export legislation, said that it:… enables the department to oversee the export supply chain and provide assurance toAustralia’s trading partners that their specific requirements for exported goods have been met.
This underpins Australia’s reputation as a reliable supplier of quality products and has helped
us capture and maintain overseas markets. (DAWR, sub 50, p. 8)

Under the current export regulation framework, there are 21 Acts — including the Export
Control Act 1982 (Cwlth) and the Australian Meat and Live-stock Industry Act 1997
(Cwlth) — and over 40 pieces of delegated legislation (DAWR, sub. 50). The legislation
sets out the requirements, conditions and controls that govern the export of agricultural
goods from Australia. It also provides for the enforcement of regulations, as well as
offences and penalties for non-compliance. For example, officials are given legal authority
to carry out inspections and certification activities, including audit and verification, along
the export supply chain (DoA 2015a).
Government export certification was widely accepted by participants to this inquiry as
necessary for access to export markets — by meeting importing country requirements andAustralia’s obligations under international agreements.
The Australian Meat Industry Council, for example, acknowledged the government’s rolein assuring importing countries that their requirements have been met.
In formulating the proposed changes to the inspection, certification and verification system formeat exports we should recognise that: certification and system verification remains a functionof the central competent authority (DAWR). The delivery of the inspection service is dependenton what the markets will accept … (sub. 77, p. 10)

Similarly, the Sheepmeat Council of Australia and the Cattle Council of Australia pointed
out that:… export registered [beef and sheepmeat processing] plants must meet additional regulations
set by the Commonwealth which relate to importing country requirements and observance of
these bilateral agreements underpins Australia’s premium market access worldwide.
(sub. 88, att. 1, p. 67)

The Voice of Horticulture also noted that it:… understands that the Australian Government imposes export regulations on horticulture to
reassure trading partners that Australian agricultural products meet import requirements and are
fit for purpose. (sub. 42, p. 46)

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REGULATION OF AUSTRALIAN AGRICULTURE

Australian Government export certification is effective in facilitating market access. In
2014-15, less than 1 per cent of government certified export consignments were rejected byimporting countries for failure to meet their requirements (DoA 2015b). This compliance
rate has been maintained from 2012-13, when a target (a rejection rate of less than 1 percent) was introduced by DAWR (DAFF 2013; DoA 2015b).

14.2 The regulatory burden of export certification
Export certificates in paper form are usually provided to importers and are required forimport clearance in the destination country. An Australian government export certificate issigned by either a veterinary officer or an ‘authorised officer’ (AO) depending onimporting country requirements (DoA 2016). Certificates generally relate to food safety,
animal health, human health, plant health and product integrity conditions, and may
include details to meet specific importing country requirements, such as the date andspecific boning room of an abattoir where meat was slaughtered (DoA 2015a; PC 2009).
For example:•

Horticultural and grain exports will usually require a phytosanitary (plant health)certificate to assure that the goods are free from pests, soil, weed seeds and extraneousmaterial. Meat and meat products (including live animals) may need organic or halal
certificates, and health certificates that certify that the goods are free from specificdiseases and fit for human consumption (DoA 2015a).

•

Separate export certificates may also be issued to meet any specific and additional
declaration, or importing country endorsement requirements (DAWR 2015q;
DoA 2015a). Of the 160 countries that receive Australian meat exports, 138 countries
require measures additional to certification by DAWR, and compliance with Australianmeat standards for hygiene and safety for human consumption (ANZFRMC 2007;
PC 2009).

Farm businesses and other businesses along the export supply chain incur both direct andindirect costs from export certification, often before export transactions are finalised.
•

Direct costs include government user charges, time, financial and administrative costsof compliance.

•

Indirect costs could include forgone export opportunities resulting from costs or delays
in certification, or use of alternative (less efficient) measures to reduce the costs ofcompliance. For example, instead of having their produce directly certified for export,
agricultural producers can send their produce to a bulk exporter, where the goods are
subject to bulk inspection. While bulk export reduces the costs of complying with
export certification, it also leads to double-handling and product damage, ultimately
reducing the price importers are willing to pay. This was the experience of one large
horticultural business that the Commission interviewed (appendix C).

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Australian Pork Limited said that the audit costs of export certification are particularlyhigh and that it:… supports any initiatives that reduce the costs to the pork industry and its supply chain andwhich reflect the actual cost of the export certification process. Pork export establishments haveadvised APL [Australian Pork Limited] that one of the most significant cost impacts they faceis that of audit fees … pork establishments are reporting increased time to undertake individual
audits. (sub. 37, p. 5)

Australia’s agricultural export regulations are the subject of review and reform by DAWR
(box 14.1).

User charges
DAWR conducts export certification on a full cost-recovery basis. Export certification fees
recover the costs of assessment, inspections and audit, incident management (including
investigation support and corrective action), program management and otheradministration activities (DoA 2015b). A proportion of the fees is also levied to recoup
expenses for marketing and foreign market access arrangements (PC 2009; Whittle etal. 2015). In 2014-15, DAWR collected about $121.4 million in user charges for its export
certification and supporting services, which represents about 0.3 per cent of the value ofagricultural exports (ABARES 2015a; DoA 2015b).
Some participants expressed dissatisfaction with current cost recovery arrangements. For
example, the Australian Meat Industry Council said that:
The return … to full cost recovery for government inspection services and export certification
has meant the [meat] industry is now faced with an annual bill exceeding A$85 million a year
and rising in order to raise a health certificate for each shipment. These are not costs faced byour major competitors such as the United States and Brazil … (sub. 77, p. 4)

Similarly, the Sheepmeat Council of Australia and Cattle Council of Australia asserted thatfor sheepmeat and beef processors:… export certification is one of [the] 3 largest costs for their operations and has become
unwieldy and inflexible [which] may put them at a financial disadvantage against competitors.
Government should absorb more of the cost … (sub. 88, p. 65)

Grain Producers Australia also said that:
The return to full cost recovery has substantially increased the costs to the export industries.
Ultimately increasing the charges paid by farmers. (sub. DR201, p. 6)

Ausveg, in its submission to DAWR’s agricultural export regulation review, raised
concerns about certification costs.
In regard to regulatory burden, the cost of certification, registering as a Registered
Establishment and training staff as Authorised Officers for the volume of exports that areundertaken by smaller growers are entirely cost prohibitive. (2015a, p. 8)
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REGULATION OF AUSTRALIAN AGRICULTURE

Box 14.1

Australia’s agricultural export regulations are under review

Agricultural export legislation is currently under review by the Department of Agriculture andWater Resources (DAWR). The review will assess whether current export legislation:•

meets the needs of industry and government today and into the future•is flexible and enables industry and government to respond to a range of situations andcontemporary issues•

ensures that importing country requirements are met without imposing an unnecessary
regulatory burden on users•

is clear, transparent and easy to understand (DAWR 2016b).

Stage 1 of the review (conducted during July-September 2015) found that while the legislation
had served agricultural exporters for more than 30 years, there was scope for improvement. On
3 December 2015, the Australian Government announced that it would ‘make improvements toagricultural export legislation to better support farmers and exporters, and facilitate market
access into the future’ (DAWR, sub. 50, p. 8). Stage 2 of the review, which will take place overthe next few years (before 1 April 2020, when the legislation will ‘sunset’, or cease to be law),
will involve reforms to the legislation to reduce the regulatory burden on farm businesses,
including:•a simpler legislative structure that is easy to understand and administer. For example,
creating a single set of requirements relating to audit and establishment registration•a more effective set of enforcement tools to deal with breaches or non-compliance•clearer provisions for the performance of verification activities (such as audits andinspections) across the supply chain•

clearer requirements relating to the appointment and duties of departmental and third-party
authorised officers who perform functions and exercise powers under the legislation(DAWR 2016g)

Cost recovery arrangements (for import and export services) and livestock export certification
are also currently the subject of separate reforms by DAWR (DAWR 2016m). The outcomes ofthese related reforms will be included in the revised agricultural export legislation(DAWR 2016b). The Department of the Environment is also currently reviewing and reforming
the wildlife export system to address instances of what it considers to be excessively strict
regulation of commercial wildlife export permits (such as kangaroo and emu products) (sub. 80).

Cost recovery charges can promote efficiency in the delivery and use of export
certification services. They provide signals to exporters about the cost of the resources
involved in providing certification services and may influence exporters’ decisions about
which export market to target (Beale et al. 2008; PC 2001a). To the extent that cost
recovery reduces the government’s need to draw on general taxation revenue, the‘deadweight’ or efficiency losses of distortions arising from higher general taxation can be
minimised (PC 2001a).
Provided there are no significant positive spillovers or public good characteristics,
exporters who directly benefit from export certification and related services (such as
DAWR’s export programmes and market access arrangements) should incur the cost of the
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service (PC 2001a; Whittle et al. 2015) Cost recovery means that ‘Australian exporters
who earn income from overseas markets because of regulatory services provided by theAustralian Government are not asking Australian taxpayers to fund the health andbiosecurity protection of the citizens of other countries’ (Beale et al. 2008, p. 195). This isconsistent with the Australian Government Cost Recovery Guidelines (DoF 2014).
Most participants to this inquiry supported full user cost recovery, but argued that user
charges were unnecessarily high, and expressed concerns that certification is used as asource of revenue, or that the charges reflect inefficient service provision (Australian Meat
Industry Council, sub. 77; Australian Livestock Exporters’ Council, sub. 78; Sheepmeat
Council of Australia and Cattle Council of Australia, sub. 88). The Australian Livestock
Exporters’ Council noted that:
Under the cost recovery arrangements for the live trade, all costs associated with certificationand ESCAS [Exporter Supply Chain Assurance System] are 100% recovered from exporters,
regardless of whether the services provided or the regulatory system on which those costs areassessed is efficient, effective or appropriate. (sub. 78, p. 34)

The Commission did not find any evidence to suggest that export certification charges arerecovering more than the cost of providing certification services, although this does notmean that the efficiency of certification services cannot be improved. ABARES found that
Australia’s export certification fees are roughly commensurate with those of our maincompetitors in agricultural export markets 82 in 2013-14, but noted that comparisons may
be difficult due to differences in cost recovery arrangements (Whittle et al. 2015).

Certification processing times
Participants also raised concerns about the time required to obtain export certification. The
Export Council of Australia stated that export certification is a lengthy process.
There are many steps involved in getting agricultural products approved for export and multiple
touchpoints with government along the way. While some processes have moved to an online,
self-regulated system, other manual administrative steps remain a necessity, which can causedelays and additional costs. (sub. 74, p. 5)

Such delays may be particularly costly for farm businesses exporting perishable produce orlive animals.
The Australian Food and Grocery Council said that:… a number of companies report that government documents required by companies forexporting will only be sent by government through the mail. This results in unnecessary delays
to export shipments and is a particularly important issue for fresh, perishable products.
(sub. 28, p. 19)
82 For selected commodities in New Zealand, the United States, Canada, Chile, Thailand, the Netherlands,
Germany, Ireland and Poland.

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It also identified long and variable timeframes for approval as a ‘common challenge’
across the agri-food export sector (AFGC 2015, p. 10).
The Commission previously found that there is scope for improved communication
methods to reduce delays, particularly through greater use of electronic processing(PC 2009). Australian Dairy Farmers also suggested that the shift to electronic certification
should be expedited and, where possible, it should occur across a multi-commodity
platform to deliver gains more broadly (sub. DR218) and to achieve economies of scale.
DAWR is gradually moving to electronic processing of certificates and is working with
Australia’s trading partners to develop and refine an electronic government-to-government
export certification system to replace manually issued paper-based certificates via‘EXDOC’. Electronic export documentation is currently available for dairy, eggs, seafood,grains, horticulture, meat, inedible meat products, wool, skins and hides, subject toimporting country requirements (DAWR 2016a). This is in addition to existing electronicsystems maintained by DAWR, such as ‘eCert’ (for food and agricultural exports) and‘TRACE’ (for livestock exports) (DoA 2015a).
Increased private sector involvement in export certification
Greater private sector involvement in export certification has the potential to increase
efficiency, and reduce the cost and delay of certification. A number of participants to thisinquiry (including Australian Dairy Farmers, sub. 63; Australian Livestock Exporters’Council, sub. 78; Australian Meat Industry Council and Voice of Horticulture, sub. 42),and to DAWR’s review of agricultural export regulation, proposed a greater role for theprivate sector in export certification. For example, the Voice of Horticulture recommendedthat:… co-regulatory approaches between industry and government be adopted where these offer
similar outcomes at lower cost (e.g. use of ‘in-house’ export inspection processes instead ofdefaulting to government monopoly priced inspection, legislation and formal regulation).
(sub. 42, p. 4)

Private sector involvement could include the agricultural export industry conducting its
own certification or engaging third-party providers. The use of third-party providers ofinspection, verification, testing and certification, such as Société Générale de Surveillance
and Bureau Veritas (Bureau Veritas Australia & New Zealand 2016; SGS Australia 2016),
may increase efficiency and reduce costs for industry (and government) (World Bank
Group 2016a).
There are already some options for private sector involvement in export certification.
Under the Export Control Act, eligible agricultural exporters may apply to have risk-based‘approved arrangements’ to streamline export certification (which may reduce the numberof audits and inspections, and therefore costs), and to have non-departmental authorised
officers carry out certain export certification functions (plant and meat exports only).
Approved arrangements currently apply to all ‘prescribed goods’ under the Export Control
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Act and related legislation (dairy, egg, fish, meat/meat products, organic/biodynamic
products and livestock exports) (DAWR 2015b; Joyce 2016a). The use of AOs usuallyrequires exporters to have the resources and capacity to have an employee act as an AO.
The Commission generally supports greater private sector involvement in export
certification as it is likely to lead to increased efficiency and innovation, and promotecompetition among third-party certification providers. However, there are two potential
hurdles that may need to be overcome to achieve greater private sector involvement.
•

Importing countries may insist on government control of export certification functions
for some goods (such as for meat and meat products, live animals, wine and some plant
products) (DoA 2015a).
– Only eight countries 83 have accepted external AOs for the inspection of plant
exports (DAWR 2016n, 2016s), and importing countries generally only recognise asmall number of third parties as authorised halal certifiers for meat exports(SERC 2015). The United States also requires DAWR to undertake audits ofestablishments that prepare or store meat for export, and issue health certificates forlivestock exports (Austrade 2016; DAWR 2016d). Inspection of beef products by
AOs may also not meet the requirements of Europe and Japan (Neales 2015).
– Greater private sector involvement ultimately requires agreement by importing
countries. Ongoing government efforts are being made in this regard (DoA 2015a)
and there have been some recent successes. For example, the use of external AOs
for plant exports commenced in October 2015 as a result of DAWR negotiating
technical market access arrangements. In March 2016, the Australian Government
announced plans to invest $800 000 to increase the number of industry-based plant
export AOs by more than one-third (DAWR 2015m, 2015n; Joyce 2015a; Joyce andRuston 2016).

•

Despite exporters having commercial incentives to comply with export certification
requirements (to be able to export and to maintain their reputation), increased private
sector responsibility for certification functions may increase non-compliance andfailure rates.
– There is a risk of (actual and perceived) conflict of interest associated with AOs
drawn from industry (such as employees), as they may feel pressured not to give
adverse assessments even in circumstances when they are required to do so under
the legislation. This is notwithstanding a requirement of appointment that they haveno unresolved conflicts of interest (DAWR 2015l, 2016k). The Community andPublic Sector Union claimed that:… the majority of these [AO] inspectors are directly employed by the companies that they
are inspecting for … There have also been reports of some AOs leaving one company
because of undue pressure to do the wrong thing. (sub. 6, pp. 4–5)

83 China, Japan, South Korea, New Zealand, Taiwan, Thailand, the United States and Vietnam.

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REGULATION OF AUSTRALIAN AGRICULTURE

– Some participants to DAWR’s review of agricultural export regulation also raised
concerns about the increased use of AOs and greater industry self-regulation. They
felt that a strong compliance regime would be needed for importing countries to
accept export activities being conducted by AOs (DAWR 2016b).
Any change that compromises the current system’s ability to maintain high rates ofcompliance with importing country requirements (and therefore Australia’s reputation)needs to be carefully balanced against the benefit of increased efficiency. That said, there
are likely to be cases where these risks are less pronounced, particularly where industry
standards (for example, the requirements of importing businesses or quality assurance
systems) are equivalent to or exceed importing country requirements (DoA 2015a).
The Commission supports greater private sector involvement in export certification, butnotes that this requires government-to-government negotiation for importing countries torecognise and accept private certification. DAWR will also need to evaluate this option ona case-by-case basis to ensure that risks of non-compliance and conflicts of interest are
adequately addressed.

Duplication between Australian and importing country requirements
The terms of reference for this inquiry ask the Commission to consider ways of minimising
duplication between domestic regulation and importing country requirements. Inquiry
participants did not raise significant concerns about duplication, although in its submission
to DAWR’s agricultural export regulation review, Ausveg suggested that:… there is a degree of overlap between these two certificates [Certificate of Origin andAustralian Phytosanitary Certificate] and … a single certificate that satisfies all requirements
could reduce the level of ‘red tape’ that exporters must comply with. (2015a, p. 8)This type of duplication is being examined in DAWR’s current review and reform of
agricultural export regulations (box 13.1). There are also ongoing diplomatic processes andefforts aimed at reducing duplication, through harmonisation and mutual recognition, as
part of government-to-government and preferential trade agreements. For example, under
the Trans-Tasman Mutual Recognition Arrangement between the governments of Australia
and New Zealand, the food safety systems in both countries covering dairy products,
seafood, uncooked pig meat, chicken meat, coconut, pepper, paprika, peanuts andpistachios were determined to be equivalent. This led to the removal of the requirement forborder inspection for these agricultural goods (DAWR 2016l).

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Australian standards set higher than importing country requirements
The high cost of complying with Australian standards for agricultural exports, where they
go beyond importing country requirements, was raised by participants to this inquiry. For
example, the Voice of Horticulture noted that:
The phytosanitary export requirements imposed upon Australian exporters appears to be much
tougher than those imposed by some of Australia’s competitors. For example, Australia
requires that exporters apply a universal standard that consignments are free from pests, soil,
weed seeds and extraneous material … This minimum standard applies to all export
destinations including those countries that do not possess individual phytosanitary importation
requirements. (sub. 42, p. 50)

Similar concerns were expressed by the Pastoralists and Graziers Association of Western
Australia in relation to organic certification of agricultural exports.
Third party organizations are accredited by the department to certify produce with organic,
biodynamic, biological or ecological trade descriptions in compliance with the National
Standard for Organic and Biodynamic Produce. The current ‘organic’ standard has a zero
percent tolerance for genetically modified organisms, when the US standard is 5% and the EU
standard is 0.9%. (sub. 70, p. 10)

Participants to DAWR’s review of agricultural export regulations also provided examplesof where Australia’s agricultural export regulations exceed importing country
requirements. For example, participants claimed that exports of grain for non-humanconsumption is regulated in the same way as grain for human consumption, even though
importing countries do not require this. And plant products are regulated to require
inspection, but importing countries often do not require it (DAWR 2016b).
This situation can also arise where only a proportion of production is exported to countries
with higher standards (such as the European Union and the United States), and it is too
costly or not possible for the business to segment their production for different markets(PC 2009).
The National Farmers’ Federation suggested that Australia adopt international standards(such as those developed by the International Chamber of Commerce and the World
Customs Organisation) to consolidate import and export requirements, but only where thisdoes not compromise Australia’s strict biosecurity standards (sub. DR216).
Under the current approach, Australian export standards are generally set at the level
required by importing countries. In response to the National Competition Policy Review of
the Export Control Act, the Australian Government agreed to use Australian standards as
the basis for the underlying standard for all exports (Tier 1) (Australian Government 2000;
Frawley et al. 1999). Standards set by overseas governments (Tier 2) and market-specificrequirements in addition to domestic standards (Tier 3) would only apply to producers
wishing to access those markets (Australian Government 2000).

580

REGULATION OF AUSTRALIAN AGRICULTUREThere may be legitimate reasons why Australian standards are set higher than importing
country requirements. Australian standards may be designed to meet domestic policy
objectives relating to agricultural production and consumption, as well as to meet binding
internationally agreed standards, such as the World Trade Organisation Agreement on the
Application of Sanitary and Phytosanitary Measures (WTO SPS Agreement) (DoA 2015a;
Guasch et al. 2007).
Australian standards may also be set to ensure agricultural exports meet importing country
requirements across the board for all countries for administrative efficiency reasons. Thismeans that all agricultural exporters would be required to meet the highest standard,regardless of the export destination country (DoA 2015a; Frawley et al. 1999). The
certainty and simplicity of one standard may not only benefit consumers in the destination
market, but also exporters, as there may be cost savings from not having to search for andcomply with specific importing country requirements. Indeed, the costs of complying with
Australian standards may also partly depend on the exporter’s choice of overseas markets,
which is a commercial decision (PC 2009).
Ongoing review of this issue by DAWR will help ensure that the additional benefits of
having a single standard, including administrative efficiency gains for the AustralianGovernment, outweigh the additional costs imposed on exporters from meeting higher
standards in some cases, and therefore deliver a net benefit to the Australian community.

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A

Public consultation

In keeping with its standard practice, the Commission actively encouraged public
participation in this inquiry.
•

Following receipt of the terms of reference on 20 November 2015, an advertisement
was placed in major and rural Australian newspapers in Australia and a circular wassent to identified interested parties.

•

An issues paper was released in December 2015 to assist those wishing to make awritten submission. Following consultation with stakeholders and receipt ofsubmissions, a draft report was released in July 2016.

•

In total, the Commission received 312 public submissions throughout the inquiry, as
well as a large number of brief submissions from private individuals and organisations
expressing opinions on the regulation of farm animal welfare in Australia(tables A.1, A.2 and A.3). Submissions are available on the inquiry website.

•

The Commission also received a large number of personal responses and views fromprivate individuals expressing opinions on the regulation of Australian agriculture, but
in many cases there was insufficient information to confirm author disclosure. To aidtransparency and ease of reading by others with an interest in this inquiry, theCommission placed the text of a selection of the personal responses and views on theinquiry website after removing any identifying material.

•

As detailed in table A.4, consultations were held with representatives from theAustralian, and state and territory government departments and agencies, academics,
peak bodies, and Australian farm businesses.

•

The Commission also had discussions with a number of government agencies, businessgroups, community organisations and academics in New Zealand (table A.4).

•

Eight days of public hearings were held for this inquiry. Hearing participants are listed
in table A.5 and transcripts are available on the inquiry website.

The Commission thanks all those who contributed to this inquiry.

PUBLIC CONSULTATION

583

Table A.1

Submissionsa

Participant
AccordActive Bio-Culture Pty Ltd
Acton, Larry
Adamson, Peter
Aerial Application Association of Australia
AgForce

Submission number
DR222
DR191
55
DR175
12
17, DR246

AgInstituteAlexander, Mick

DR182
DR288

Allergy and Anaphylaxis Australia

DR134

Animal Defenders Office

DR249

Animal Health Australia
Animal Justice Party Victoria
Animal Law Institute, The
Animal Liberation
Animal Medicines Australia
Animal Welfare League of Queensland (AWLQ)
Animals Australia
Animals Tasmania
AusBiotech Ltd

DR250
DR112, DR311
DR213
DR143
52
DR238
53, DR268
DR146
20, DR195

Australasian Society of Clinical Immunology and Allergy (ASCIA)
Australia Pacific LNG Pty Limited
Australian Bureau of Statistics (ABS)

DR203
DR206
59

Australian Cane Farmers Association

DR155

Australian Centre for Agriculture and Law
Australian Chicken Growers’ Council
Australian Chicken Meat Federation
Australian Competition & Consumer Commission (ACCC)
Australian Conservation Foundation
Australian Dairy Farmers
Australian Dairy Goats
Australian Food and Grocery Council (AFGC)
Australian Food Sovereignty Alliance (AFSA)

2
51, DR149
40

63, DR218
DR120
28, DR251
27, DR211
11

Australian Honey Bee Industry Council (AHBIC)
Australian Industrial Hemp Alliance

34
69

Australian Livestock and Rural Transporters Association (ALRTA)

47

Australian Lot Feeders' Associations (ALFA)
Australian Meat Industry Council (AMIC)

*#

DR121
DR252

Australian Forest Products Association

Australian Livestock Exporters’ Council (ALEC)##

78, DR305
DR294
77(continued next page)584

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.1(continued)

Participant
Australian Meat Processor Corporation
Australian Meat Producers Group (AMPG)

Submission number
DR283
DR293

#

Australian Pesticides and Veterinary Medicines Authority (APVMA)

21, DR228#

Australian Pork Limited

37, DR282

Australian Property Institute
Australian Sugar Milling Council

66
68, DR234

Australian Veterinary Association
Ausveg26
DR193

Baines, Karen
Beal, James

13
DR275

Beer, Patricia
Bennett, Christine
Birds Queensland

DR124
DR96, DR140
DR108

Bisshop, Gerard
Bittar, RosalieBlackburn, William

DR110
DR116
DR196

Bongers, Anthony
Burdekin Shire Council
Burns, Michael

DR301
35
DR280

Campbell, Dr Lindsay
Canegrowers
Canegrowers Burdekin Limited

DR205
22, DR169
DR271, DR272

Canegrowers Cairns Region

DR138

Canegrowers Herbert River
Canegrowers Innisfail
Canegrowers Isis

DR269
DR119
DR230

Canegrowers Mackay
Cattle Council of Australia (CCA)

DR225
DR290

Centre for Ecosystem Science, UNSW

DR200

Chamarette, Steve and Joann

DR148

Chignell, Stuart
ChoiceDR208
33

Clinch, Margaret
Community and Public Sector Union (CPSU)
Consolidated Pastoral Company
Cooke, Dr John
Co-operative Bulk Handling (CBH) Group

#

#

DR150
6, DR20471
29, 30, DR263
36

Cordina Farms
Cotton Australia

64, 6523, DR262

Coughran, Chris

DR93

*#

(continued next page)

PUBLIC CONSULTATION

585

Table A.1(continued)

Participant

Submission number

CropLife Australia
Dairy Goat Society of Australia (DGS)

14, DR156
DR97

Department of Agriculture and Water Resources (DAWR)

50, DR183

Department of Environment and Energy

DR274

Department of Foreign Affairs and Trade (DFAT)
Department of Health

56
DR261

Department of Industry, Innovation and Science
Department of the Environment

DR258
80

Edgar’s Mission

DR145

Environmental Defenders Offices of Australia (EDOs of Australia)

DR174
DR221
DR299

Export Council of Australia
Farmer from southern NSW (name withheld)
Farmer Power

74
83
DR99

Fitzpatrick, Duncan
Flanagan, Peter
Food Standards Australia New Zealand (FSANZ)

DR304
DR107
1, DR98

Forrest-Smith, Cheryl
Fox, Lucy
Freight on Rail Group

DR279
DR190
DR266

Friends of the Earth Australia

DR125
DR101
DR312
82, 84, 86, 89, 90,
DR243, DR308

Gibson, Maya

DR160

Gingin Private Property Rights GroupGM Cropwatch

DR194
DR113

Goat Veterinary Consultancies

DR104

Goulburn Broken Catchment Management Authority
Grain Growers Limited (GrainGrowers)
Grain Producers
Grand Ridge Organics – Richard Nankin & Rosemary Cousin
Grazing BestPrac
Greedy, Jill
Growcom
Hall MLC, James and Armstrong, David
Harmer, Ronda and Harmer, Allen
Harvest Launceston Community Farmers Market#

60, DR241

Environmental Farmers Network
Environmental Justice Australia
Equestrian Australia

Gardiner, Bruce
GBP Qld Pty Ltd
Gene Ethics

*

DR198
73, DR247
DR201
DR248
DR296
DR212

#
*#

#

#

#

43
DR276
15
DR186
(continued next page)

586

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.1(continued)

Participant

Submission number

Hayes, Mary
Hemsworth, Prof. Paul and Coleman, Prof. Grahame

DR185
87

Horticulture Innovation Australia

DR165

Humane Society International

DR253

Institute of Public Affairs
Invasive Animals Cooperative Research Centre (IACRC)

DR164
DR240

Jones, Prof. Michael
Kendall, Jan
Klein, Herta
Kovess, Charles

DR141, DR289
DR106

#

#

38
DR126

Laurent, Nathan
Law Society of South Australia
Lawson, Prof. Charles

DR133
44, DR181
81#

Lawyers for Animals
Limestone Association of Australia
LiveCorp

DR153
48, DR152
75, DR300

#

DR172
DR303
91, 92, DR224#

Livestock & Rural Transport Associations of Western Australia (Inc)
Livestock SA
Madge Australia Inc.
McKenzie, Alan
McLaren, Michelle
Medcalf, Kerry

DR114
DR256
DR132

Minerals Council of Australia (MCA)

DR244

Miriwinni Lime Pty Ltd
Moore, Susan
Murray-Darling Basin Authority (MDBA)

DR257
DR168
DR127

Musgrove, Janine
Nadolny, Chris

DR129
DR118

Name withheld

DR291

National Association of Sustainable Agriculture Australia (NASSAA WA)

DR242

National Association of Sustainable Agriculture Australia (NASSAA)
National Boer Goat Association

DR259
DR111

National Farmers’ Federation (NFF)61, DR216

National Heavy Vehicle Regulator
National Irrigators’ Council

DR192
18

National Parks Association of NSW & Nature Conservation Council of
NSW

DR209

Network of Concerned Farmers

DR128

Nichols, Negeen
Nillumbik Proactive Landowners
North Queensland Bio-Energy Corporation Limited

DR94
DR159
DR298
(continued next page)

PUBLIC CONSULTATION

587

Table A.1(continued)

Participant
Northern Territory Department of Primary Industry and Fisheries (NTDPIF)NSW Department of Primary Industries
NSW Egg Farmers Association

Submission number
67
DR292
7, DR95

NSW Farmers’ Association (NSWFA)

72, DR161

NSW Irrigators’ Council
NSW Young Lawyers Animal Law Committee

3, DR239
DR284

NT Farmers
Office of NSW Small Business Commissioner (OSBC)

8
4Office of the Gene Technology Regulator (OGTR)

76

Ovens Valley Branch of the Victorian Farmers Federation

DR267

Pastoralists and Graziers Association of Western Australia (PGA)
Paton-Boxall, Felicity
Pavetto, Jonathan

70
DR236
DR227

Payne, Lance
People for the Ethical Treatment of Animals (PETA)
Peri Urban Group of Rural Councils

DR231, DR273
DR109
DR220

Pez, Miguel
Pioneer Cane Growers Organisation
Potterton, Phil

DR177
DR144
DR163

Prehn, Annette
Primary Producers SA
Producers Forum

DR173
41
DR277

Property Rights Australia
Qld Regional NRM Groups Collective
Queensland Department of Agriculture and Fisheries
Queensland Farmers’ Federation (QFF)
Queensland Government
Queensland Sugar Limited
Rea, Andrew

DR130
58
32, DR217

9, DR309
DR215
DR176
DR162

Ricegrowers Limited

DR197

Riedl, Maria
Ristich, Roks

DR219
DR178

Ross, Estelle

DR100

Safe Work Australia

#

DR154
DR188

Regional Development Australia Wheatbelt WA
Ricegrowers’ Association of Australia (Ricegrowers)

RSPCA WA
Safe Food Production Qld#

45, DR254, DR286

Regional Development Australia – South WestRSPCA Australia#

31, DR223
DR306
DR135
10, DR264(continued next page)

588

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.1(continued)

Participant

Submission number

Sallivan, Sydnee
Sentient, The Veterinary Institute for Animal Ethics

DR103
DR188

Sheepmeat Council of Australia

DR245

Sheepmeat Council of Australia and Cattle Council of Australia

88

Singleton, John
SISL Group

DR105
DR117

Slow Food Australia
Slow Food Hobart

DR278
DR123

Small Farm Stuff

DR102

Snoswell, Katherine
South Australian Government
South Cost Natural Resource Management Inc
Sri, Anna

DR297
57, DR295
DR229
DR122

Tallentire, Chris
Targett, Stephen
TasFoods Ltd

DR142
5
DR210

Tasmanian Beekeepers Association (TBA)
Tasmanian Department of Primary Industries, Parks, Water andEnvironment (TDPIPWE)
Tasmanian Farmers and Graziers Association (TFGA)

DR131

Tasmanian Government

DR287

Tasmanian Red Meat Industry Council
Taylor, Peter
Thiriet, Dominique

DR158
DR157
DR136

Tim Harding & Associates
Tropical Pines Pty Ltd
Tully Cane Growers

DR255
39
DR170

Tully Sugar Ltd

DR171

University of Southern Queensland
Vegan Australia

62

Veterinary Manufacturers and Distributors Association
Vets Against Live Export
Victorian Farmers Federation

79
DR199
DR189

Warakirri Asseet Management Pty Ltd (WAM)
Ward, RyanWest Australian Pork Producers Association

#

DR184
25, DR115
DR214

Walpole, Alison#

16

Vegan Right

Voice of Horticulture
Volker, PC
WAFarmers#

42, DR232
DR307
DR226

#

#

46
DR310
DR235
24
(continued next page)

PUBLIC CONSULTATION

589

Table A.1(continued)

Participant
West Wimmera Shire Council
Western Australian Government

Submission number
49
54, DR285

Whiteley, Liam

DR179

Whyte, Lyndell

DR180

Wilderness Society, The
Wilmar Sugar Australia

DR207
DR139

Wilson, Meg and Paul
Wimmera Catchment Management Authority

DR270
DR147

Wimmera Development Association#

19

WoolProducers Australia

DR237

World Animal Protection
WWF Australia

DR137, DR260
85##

a An asterisk (*) indicates that the submission contains confidential material NOT available to the public. A
hash (#) indicates that the submission includes attachments.

590

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.2

Brief submissions

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Abberton, S

Bailey, Jenny

Bertram, Laura

Bradshaw, Nicole

Adam, Jane
Alberts, Nikki

Baker, Alison
Baker, JanetBest, Anne
Best, Helen

Brand, Denise
Brereton, Dorelle

Alderman, Tamara
Aldrick, Robyn

Baker, Jessica
Ballan, Justine

Bethune, Shirley
Bettridge, Cheryl

Brereton, Julie
Brett, Michael

Aldridge, Debra

Barber, Susan

Bettson, Julie

Brewer, Amanda

Alkins, Gloria

Barclay, Tony

Bhinda, Elsa

Brewer, Anna

Allan, Amelia

Barker, Michael

Bianco, Patty

Brieden, Cornelia

Allen, Donna
Allison, Jennifer

Barnett, Stephanie
Barraclough, Katherine

Biber, Hana
Bibes-Taulelei, Dianne

Bright, Adrian
Brittain, Susan

Al-Wahabi, Omar

Barrett, Gillian

Biggs, John

Broad, Aasha

Anagno, Anna

Barrett, Ruth

Bingham-Powell, Marion Brokken, Corinne

Anandam, Anne
Anders, Lindsey

Barry, Carmel
Bartels, Prue

Bisson, Elaine
Bittar, Rosalie

Brooks, Patricia
Brooks, Rachel

Anderson, Felicia
Anderson, Kellie
Anderson, Maree

Bartlett, Michael
Bask, Tanya
Bateman, Jessica

Blachut, Joanne
Blair, Emma
Blakely, Angela

Brough, Andrea
Brown, Akosita
Brown, Candace

Anderson, Margaret
Anderson, Rebecca
Anderson, Samantha
Andoni, Alexandra

Batra, Nonie
Battams, Kate
Battye, Lee
Bay, Lisa-Maree

Boll, ValerieBond, Kathryn
Bondy, Sharon
Bonich, Mary

Brown, Elizabeth
Brown, Josephine
Brown, Michelle
Brown, Nicolette

Anthony, Andrew
Antoniozzi, Marina
Antulov, Cynthia

Beard, Nakeshia
Beasley, Michael
Bechmann, Elisabeth

Booth, Melissa
Borda, Carolina
Bostock, Vic

Brown, Rachael
Brown, Roger
Browne, Philip

Aretoulis, Spiro
Argropoulos, Salome
Argyle, Chris

Beck, Lynae
Bedford, AlanBeer, Susan

Bottrill, Susan
Bourgeois, Helene
Bowden, Jacqueline

Bruce, Carolyn
Brunskill, Caitlin
Brunt, Emerald

Argyropoulos, Salome

Bell, Frances

Bowen, Vera

Brusen, John

Armstrong, Linda
Arndt, John

Bell, Mary-Ann
Bell, Shanon

Bowerman, Anne
Bowers, Stephen

Buckland, Susan
Buckman, James

Arrese, Catherine

Bellhouse, Sonia

Bowles, Lauren

Buckton Collins, Natalie

Asbury, Gordon
Aschenbrenner, Helma

Bellman, Katherine
Benlow, Shirley

Bowra, Elizabeth
Box, Regina

Buijs, Scott
Bulgarelli, Alana

Ashman, Joanne
Atkins, RosemaryBenz, Karen
Berens, Jo

Box, TonyBoyd, Bronwyn

Burke, Gill
Burke, Mike

Atkinson, Sarah
Atsidaftis, Tahila

Berettieri, Maurice
Bergmann, Iris

Boyland, Susan
Boyle, Meredith

Burley, Anne
Burnet, Maria

Audus, Harry

Bernal, Barb

Bracken, Mary

Burns, L

Avery, Sarah
Bacon, Brenda

Berns, Elizabeth
Berry, John

Bradfield, Kay
Bradley, Irina

Burnup, Debbie
Burrough, Carole(continued next page)

PUBLIC CONSULTATION

591

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Bury, Carolyn

Chase, Linda

Cordingley-Palmer, Magda

Czintos, Christine

Buslot, Chantal
Butke, Marcia

Chauvin, GrahamChi, AniMae

Cork, Farrah
Cossins, Kerry

Da Silva, Eliana
Da Silva, Fernando

Butler, Sharron
Buttrose, Gayle

Chimilar, Andrea
Chival, Jennie

Costa, Chris
Costello, Megan

Da Silva, Nicole
Dadon, Debbie

Byrne, Kate

Church, Paul

Costigan, Jane

Dal Castello, Linda

Cabrera, Jose

Cigana, Rina

Cottee, Jennifer

Daly, Brian

Cabrera, Tracey

Clague, Denise

Coveney, Janine

Danaher, Skye

Caldwell, Andrea
Caldwell, Malcolm

Clark, Linda
Clarkson, Michael

Cowper, SalinaCox, Brad

Dassanayake, Sajini
Davey, Genevieve

Callander, Meryn

Clayton, Danica

Cox, Eileen

Davey, Joe

Callard, Angela

Clayton, T

Craig, Antonia

Davies, Carolyn

Callow, Terence
Cameron, Christina

Clifford, Jonathon
Clifton, Christine

Craig-Jones, Ros
Crane, Rachel

Davies, Jane
Davis, Amanda

Cameron, Jane
Cameron, Liv
Camm, Ron

Clunies-Ross, Tony
Cochrane, Wayne
Coghlan, Madalin

Cranney, Cathie
Crawley, Michael
Crees, Marina

Davis, Charles
Davis, Debbie
Davis, Tania

Campbell, Annie
Campbell, David
Campbell, Fiona
Carberry, Nichola

Colbert, Andrea
Collins, Carole
Collins, Laura
Collis, Judith

Croke, Gina
Croker, Evan
Cromback, Felicity
Crook, Lorraine

Davison, Andrew
De Araugo, Samantha
De Blasio, Maico
De Groot, Judy

Carr, Donna
Carroll, Stephanie
Carroll, Tracey

Colson, Clare
Condon, Bunty
Connell, Joy

Cross, Dee
Cross, Rosie
Cross, Tara

De Krester, Sean
De Savigne, Faith
De Silva, Gerard

Carter, Christine
Cartland, Vanessa
Casely, Carmelina

Connolly, Michelle
Conroy, Faith
Consedine, Anthony

Cruz, G
Csenger, Adam
Cuarnieri, Cindy

Dean, Lee
Dean, Pamela
Debono, Marianna

Caust, Rosalind

Constance, Shannon

Cuarnieri, Tony

Debrincat, Lucy

Cecile, Nicola
Chain, Kylie

Cook, Annette
Cook, Julie

Cudmore, Maureen
Cullen, Miesha

Deer, Peta
DeGerolamo, Jennifer

Chalmers, Karen

Cook, Kaye

Cummins, Joanna

Deguchi, Junko

Chamberlain, Jenna
Chambers, Andrea

Cook, Marion
Cooke, Adrian

Cunningham, Debra
Cunningham, Teresa

Deighton, Viv
Demarche, MaryChampion, Wendy
Chandler, Rosie

Coop, Lindy
Cooper, Cathy

Curran, Kerrie
Curtin, Elizabeth

DeMarchi, Robert
Demers, Christina

Chapman, Jeeva
Chapman, Sarah Jane

Cooper, Jodie
Cooper, Sylvia

Curtis, Dale
Curtis, Jackie

Denby, Richard
Dennis, Meredith

Chapman, SJ

Coorey, David

Curtis-Pryce, Debra

Desmond, Lynette

Chard, Deborah
Chase, Dianna

Cordemans, Muriel
Cordiner, Anne

Cutler, H
Cutting, Sarah

Devlin, Donna
Devlin, Susan(continued next page)592

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Dewsbury, Katelyn

Eisner, Sara

Flann, Janet

Gleeson, Sarah

Dexter, Rob
Diaz, Amanda

Elberg, Joanne
Eldret, Kim

Flitter, Jane
Flockhart, Eaine Joy

Glove, Margaret
Glover, Marion

Dick, Antonia
Dietrich, Allison

Elek, Morika
Ellem, Sharon

Florence, Maryann
Fogarty, Olga

Gnanachandran, Lorrae
Goff, Anthony

DiGregorio, Jodi

Elliott, Katy

Foley, Stephanie

Golias, Kerrie

Dimech, Jacqueline

Ellison, RobertFord, Karen

Gollasch, Jennifer

Dixon, Suanne

Emmitt, Zoe

Ford, Lynda

Gones, Rhia

Donaldson, John
Donnelly, Kathy

Endre Pattersen, Odd
Eriksen, Liana

Ford, Marilyn
Ford, Nicole

Goodhue, Martha
Goudi, Andrea

Dorey, Monique

Erskin, Carol

Fornaro, Sally

Gowan, Donna

Dorn, Alison

Esposito, Nancy

Forsyte, Irene

Grace, Leonie

Douglas, Norm
Doull, Alison

Estep, Enid
Evans BVsc, Dr David

Foster, Andrew
Foster, Anthony

Grace, Marcia
Gradowski, Wanda

Dowell, Fiona
Downer, LoranDrage, Marian

Evans, Bronwen
Evans, David
Evans, Emily

Foster, Sandra
Foy, Kathy
Frank, Mitzi

Graham, Robert
Gravolin, Michelle
Gray, Kristie

Drennan, Matthew
Drew, Gerard
Driessen, Danya
Drinkwater, Fabienne

Ewing, Jack
Fabian, Judith
Fabian, Margaret
Falcon, Cary

Fraser, Glenys
Freeman, Joni
Freeman, Luke
Freund, Kerrie

Gray, Marion
Green, Alex
Greenhalgh, Michelle
Gregory, Jennifer

Du Ross, Jean
Dubois, Raphael
Dueholm, Tina

Fallander, Kaii
Fanning, Susan
Farkas, Lindsay

Freyer, Melinda
Gange, Mandy
Garland, Megan

Gregory, Max
Griffin, Charlie
Grimes, Belinda

Duggan, Elizabeth
Dugmore, Wendy
Dunn, Kathy

Farley-Higgins, Amanda Garling, Lyn
Faulkner, Alison
Garner, Megan
Fee, Samantha
Gatmaitan, Melani

Grinblat, Rebecca
Grisdale, Maureen
Grosse, Andrew

Dunn, Kelly

Fenstermacher, Lisa

Gauci, Jessika

Grosso, Rosanna

Dunstan, Philippa
Dunton, Lesley

Fernando, Dilan
Fernando, Shamali

Gay, Jenny
Gentle, Andrew

Grover, Matthew
Guilford, Deborah

Durlacher, TrishFerns, Sandra

Geoghegan, Fiona

Guilfoyle, Penelope

Durrant, Christine
Dwyer, Michael

Ferrante, Steven
Ferro, Jane EliseGeorge Mulgan, Aurelia
George, Adrian

Guy, Natalie
Haden, Andrew

Dyer, Louise
Dyer, Susan

Filipczuk, Elizabeth
Finnigan, Julie

George, Natalie
Gercama, Robyn

Hadoulis, ApostolicHaeberlein, Monique

Ebbage, Glen
Edmonstone, Kerry

Fisher, Catherine
Fisher, Mark

Gibson, Diane
Gilpin, Carolyn

Haggie, Esme
Hall, Ryan

Edmunds, Hayley

Fisher, Sue

Gissing, Margaret

Hall, Sandra

Egger, Marion
Eggleston, Lynette

Fisher-Smith, John
Flanagan, Richard

Glasencnik, Traudy
Gledhill, Ruth

Hanafin, Adele
Hands, Gerarda(continued next page)

PUBLIC CONSULTATION

593

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Hannaford, Anita

Herrador, Jane

Horry, Janine

Johnson, Deborah

Hansen, Jesper
Harding, Reuben

Heselwood, Stephen
Hessing, Melissa

Horton, Sandy
Hough, Porscha

Johnson, Karen
Johnson, Nola

Harper, Roger
Harrington, Helena

Hetherington, Iwona
Hewitt, Anne-Marie

Howcroft, Jill
Howes, Anna

Johnson, Vicki
Johnston, Helen

Harris, Jeffrey

Hewstone, Michael

Hucker, Patricia

Johnstone, Patricia

Harris, Lesley

Hickman, Karin

Hughes, Bronwen

Jolley, Gwyn

Harrison, Damien

Hicks, Annie

Hughes, Cheryl

Jones, Christine

Harrison, Patricia
Harry, Jasmyn

Higgins, Ian
Higgins, Kelsea

Hughes, Michael
Hungerford, Judy

Jones, Danni
Jones, Felicity

Hart, Ani

Hii, Nicole

Hussar-Welton, Helen

Jones, John

Hartridge, Anita

Hilder, Margaret

Hutchinson, Darci

Jordan, Joyce

Hartwig, Dieter
Harvey, LeanneHill, F
Hill, Ginger

Huynh, Sharon
Huynh, Trieu

Jordan, Neralyn
Jordan, Sherie

Harvey, MarkHarzmeyer, Elizabeth
Hastings, Anne

Hinton, Vivien
Hintz, Linda
Hird, Fiona

Hvasanov, Michael
Hyslop, Debra
Ibrahim, Carol

Joseph, Emma
Jovicic, Vanessa
Jubber, Rose

Hastings, Stevie
Hatzievangelou, Belinda
Hauswirth, Susan
Hawes, Gina

Hoare, Matthew
Hoberg, Rosie
Hockley, Robyn
Hodge, Lara

Ilic, Helen
Innes, Dahle
Inwood, Belinda
Ison, Pamela

Kahlau, Sara
Kajiuvee, Paul
Kan, Angela
Kastel, Diane

Hayes, Martina
Hayes, Pamela
Haynes-Lovell, Kerrie

Hodge, Raelene
Hodges, Suzanne
Hodie, Jake

Ison, Ray
Isseyegh, Letitia
Jacobs, Elizabeth

Kavanagh, Caron
Kazak, Lamis
Keeffe, Shirley

Hayward, Michelle
Head, Peter
Healand, Tracey

Hoendervoogt, Sabine
Hofmockel, Barbi
Hogg, Julie

James, BerniceJames, Diana
James, Sarah

Kehane, Melissa
Kelly, Christine
Kelly, Denise

Hedley, Carol

Hole, Jennifer

Jansson, Rae

Kelly, Jody

Hedley, Richard
Height, Nathan

Holland, James
Holland, Lisa

Jarrett, Lorraine
Jarrett, Stephen

Kelly, Karen
Kelly, Vanessa

Heijineman, Sungee

Holland, Lou

Jarvis, Trisha

Kelsey, Bart

Heiner, Conrad
Heinrich, Susan

Hollway, Diana
Holman, Pamela

Jenkins, Jana
Jensen, Hayley

Kent, Deborah
Keough, Lenore

Henderson, Emma
Hendicott, Amy

Holmes, Amanda
Holmes, Tracey

Jensen, Venissa
Jensz, Michelle

Kerr, Linda
Kerwell, Cherrie

Henley, Arlene
Henley, Dru

Holt, Olivia
Holy, Dominique

Jesudhason, Ramona
Jewell, Jacqui

Kevans, Sophia
King, Azucena

Henri, Lee

Hope, Kianna

John-Newton, Sarah

King, Jacqui

Henson, Rebecca
Hernandez, Mike

Hopkinson, David
Horne, Patricia

Johns, Samantha
Johns, Steve

Kingsford-Smith, Nina
Kirby, Annabella(continued next page)594

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Kirk, Lynn

Ledden, Adam

Lupton, BenjaminMartin, Theresa

Kitching, Lyn
Kitschle, Mick

Lee, Prudence
Leeson, Amanda

Lyall, Leonie
Lynch, Cindy

Martinovici, Andre
Martins, Elisabeth

Kittel, Lindy
Klein, John

Legg, Dallas
Leighton, Kim

Lynch, Courtney
Lynch, Dianne

Martins, Roz
Mason, Corrina

Klein, Luke

Leite, Fernanda

Lyons, Cynthia

Mason, Helen

Knight, Christine

Leitinger, Jane

Ma, HelenMason, Kim

Knights, Rhonda

Lemin, Tara

Maakassa, Sally

Mason, Kristy

Koeppel, Barbara
Kovic, Jenni

Leslie, Jean
Lesmond, Sue

Macdonald, Katherine
Mackenzie, Corinne

Masson, Anita
Masters, Sorell

Krause, Doug

Lesmond, Susan

MaClennan, Lynette

Materi, Sandra

Kucharska, Alex

Levine, Lisa

Macmillan, Brigitta

Mather, Nic

Kuiper, Ailsa
Kull, Peeter

Lew, Nina
Lewis, Anne

Mahoney, John
Malcolm, Phil

Matheson, Jodie
Matthews, Bradley

Kuruppu, Achini
L, Cindy
Labo, Kay

Lincoln, Julie
Linforth-Barker, Christina
Lipold, Teja

Malloch, Daniela
Malloy, Gayle
Maltby, Lisa

Matthews, Dana
Matthews, Denise
Matthews, Janet

Lal, Cyndy
Lam, RebekahLamb, A
Lamb, Mark

Lipski, Terree
Littleton, Eliza
Ljusic, Dostana
Lloyd, Kathryn

Malter, Ben
Manovski, Zlatko
Mansfield, Jill
Marchant, Robyn

Max, Gregory
Mayes, Leoni
Mays, Brendan
McBurnie, Lisa

Lambert, MichaelLandsberg, Lara
Lane, Susan

Lockwood, Amanda
Logan, T
Loh, Nicole

Mardiyants, Kristina
Margetts, Lisa
Mari-Dale, Melissa

McCaffrey, Seamas
McCarthy, Margaret
McCarthy, Sue

Lange, Piotr
Langer, Caroline
Langton, Veena

Long, Dallas
Long, Trish
Long, Ursula

Marie, Tressa
Markiewicz, Christy
Markley, Chyena

McCartney, Kyle
McCormick, Melody
McCotter, Ruth

Larkins, Donna

Lorang, Margaret

Markwell, Holly

McCoy, Kelly

Larkins, Samantha
Larson, Amelita

Lord, Heather
Lorrain Audley, Cathryn

Marlow, Kerryn
Marris, Reisha

McCuaig, Fiona
McDonagh, Maureen

Lasker, Katherine

Lorrigan, Bridgett

Marsanic, Tihomir

McDonald, Carol

Lauder, Sally
Laudrum, MarkLoughton, Dorothy
Lovering, Louise

Marshall, Jessica
Marshall, Sarah

McDonnell, Kevin
McDonough, Brenda

Laudrum, Terry
Laurence, Marguerite

Lovino, Teresa
Lovric, Maryan

Martens, Jasmine
Martens, Lena

McElligott, Robyn
McFarland, Justine

Laval, Tammy
Lawson, Ronald

Lowe, Edna
Lowe, Nikki

Marti, Kathleen
Martin, Amela

McFarland, Sylvie
McGee, Sarah

Le, Vi

Lucas, Carel

Martin, Samuel

Mcginley, Lucy

Lea, Cora
Leavy, Carrie

Luke, Jessica
Lukich, Dianne

Martin, Shelley
Martin, Sylvie

McGregor, Tracie
McIntosh, Kaylene(continued next page)

PUBLIC CONSULTATION

595

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

McIntyre, Glenda

Montoya, Percy

North, Lisa

Patterson, Catherine

McKay, Andrea
McKay, Ingrid

Moore, Leonie
Moore, Pauline

Notaras, K
Nuzum, Affie

Paulissen, Trish
Pavey, Brenna

Mckechnie, Tanya
McKenzie, Susan

Moore, Susanna
Moran, Linda

O’Brien, LucyO’Callaghan, Casey

Pavincich, Anna
Payne, Karen

McKeown, Maxwell

Moran, Sue

O’Carroll, Nadia

Pearce, Sara

McLaughlin, Trevor

Morgan, Starla

O’Driscoll, Maeve

Pearson, Simon

Mclean, Debi

Morris, Peter

O’Gorman, Tracy

Pepper, Marie

Mclean, Deborah
McMartin, Kyle

Morrison, Katrina
Morton, M

O’Keefe, LucyO’Leary, Jan

Perera, Ravin
Perera-Schulz, Dharani

McMurray, Patricia

Moss, Anita

O’Neill, Amanda

Perkins, Denise

McNally, Kyale

Moss, Deirdre

O’Neill, Tee

Perkins, Margy

McPharlin, Danielle
McVeigh, Christine

Mullen, Tim
Mullins, Colleen

O’Reilly-Briggs, KarenO’Sullivan, Brenda

Perks, Caroline
Perks, Mark

Medway, Judy
Meffan, Liv
Meikle, Renee

Mulo, Michelle
Mulrooney, Vyonne
Munday, Jill

O’Toole, Dawn
Obern, Paul
Olive, Alicia

Perne, John
Persen, Maree
Peura, Anita

Meischke, Roger
Menkarska, Anetta
Mentis, Katrina
Mercanti, Susanne

Murphy, Paul
Murphy, Tamara
Murray, LaurenMusa, Nora

Ollerenshaw, Helen
Onrust, Judith
Ornafa, Jolanta
Orr, Marilyn

Pfitzer, Karen
Phelan, Grainne
Phelps, Wendy
Phillips, Sheila

Mercer, Cassie
Merifield, Bretta
Merriman, Kel

Mysakowec, Zenio
Neal, Jamie
Neal, Warwick

Ortega, Vivienne
Oseckas, Timothy
Oxley, Meron

Pickersgill, Katie
Pin, Marco
Pinfold, Andrew

Merz, Stephanie
Michael Ryan, Paul
Michielsen, Serena

Nebel, Antje
Neckebroeck, Anne-Marie
Nel, Melanie

P, Carolyn
Pacey, Malcolm
Paget, Siobhan

Pirvu, FlorianPlan, V
Plato, Kim

Mihajilo, Sanja

Neven, Tracy

Paine, Annette

Polo, Asta

Mihelic, Mandy
Miller, Caroline

Nevin, Jan
Newman, Debra

Palmer, Adrienne
Palmer, Diana

Poole, Daniel
Poole, Martha

Miller, Sue

Newnham, Christine

Palmer, Robert

Poole, Roslyn

Miller, Wendy
Miller-Gilich, Hayley

Nibock, Karla
Nichol, Susan

Pantle, Maree
Park, Cathy

Porcelli, Maureen
Poropat, Paula

Mirenda, David
Miskec, Robert

Nicholls, Donna
Nicolle, BerniceParker, Barry
Parker, Judith

Porret, Martine
Potter, Joanne

Miskec, Robyn
Mitchell, Elizabeth

Nielsen, Kate
Nigh, Justin

Pask, Deborah
Paterson, Chris

Potter, Kim
Potter, RachelMody, Jack

Nodlex, Alison

Paterson, Joanne

Pound, Sally

Moeller, Robert
Money, Catherine

Nolan, Alexandra
Norris, Geraldine

Paterson, Krista
Paterson, Norma

Povey, Kirsten
Powell, Melissa(continued next page)596

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Prasad, Noel

Robinson, Brenda

Scalon, Janis

Simon, Tam

Priest, Pamela
Prince, Karole

Robinson, TonyRoden, Kara

Scanu, Louella
Schacht, Timothy

Simpson, Lorma
Simpson, Toni

Pugh, Kylie
Purdom, John

Rodriguex, Carolina
Roetman, Louise

Scheer, Robert
Schloffer, Judith Lee

Sinclair, Natalie
Singh, Jasdev

Quinlan, Louise

Roex-Hatijiema, Heleen

Schmidthall, Adela

Sircar, Sanjay

Quinn, Trish

Roggiero, Geri

Schofield, Sue

Sizer-Robertson, Layla

Radnor, Fran

Rohov, Gloria

Schou-Hansen, Bodil

Skiba, Zofia

Raine, Belle
Ramos, Paul

Roll, Ron
Rose, Maggie

Scott, Danielle
Scott, David J

Skinner, Rowena
Skovbo, Geert

Randhawa, San

Rose, Paula

Scott, Karen

Skubevska, Tracy

Rawling, Lisa

Rose, Ruth

Scott, Katrina

Sloan, Chris

Rawlings, Susan
Raymond, Chris

Ross, Kim
Rowan, Stephanie

Scott, Marion
Scott, Rebecca

Smit, Robyn
Smith, Bruce

Reading, Kay
Ready, Mel
Ream, Sokunthea

Rowe, Rob
Rowlinson, Ben
Rowntree, Trevor

Searles, Frances
Seetharam, Grama
Sellers, Kim

Smith, Celia
Smith, Chloe
Smith, Ken

Reay, Debby
Recio, Edna
Redden, M
Redmond, Kim

Rudan, Jacqueline
Rugari, Emma
Ruggeri, Catherine
Ruiz, Fleur

Selmes, Christine
Settree, Joe
Shakespeare, Lisa
Shannon, Lara

Smith, Lauren
Smith, Marg
Smith, Tash
Solomon, Stacey

Redwood, Jill
Regal, David
Reich, Caroline

Rushton, Louise
Russell, Penny
Ruuska, Renee

Sharma, Devesh
Sharma-Wing, Kamala
Sharpe, Belinda

Solyom, Hilton
Somerville, Toby
Soutter, Sammie

Reichstein, Elizabeth Ryan, Deborah
Reid, Julia
Ryan, Lisa
Reidy, Natalie
Sagar, Colin

Shaw, Robert
Shead, Merril
Shearn, AshleighSpencer, Kathy
Spillane, Brenda
Spiroski, Kate

Reynolds, Annette

Sakellis, Sophia

Shearn, Jessica

Splatt, Drew

Rhoden, ClareRice, Nigel

Salerno, Antonietta
Samp, Cecelia

Shearn, Kimberley
Shearn, Robert

Spooner, Mark
Spring, Julie

Richards, Michael

Samuel, Gerry

Shearn, Tracey

Squires, Simone

Riddle, Kylee
Ridolfi, Kristine

Sanderson, Luba
Santomingo, Patricia

Sheikh, Shahzad
Shepherd, Annabel

Stampfli, Michelle
Stan, Talila

Ringgaard, Line
Ristevski, Sonja

Santoro, Loredana
Santos, Orlita

Shering, Virginia
Shingles, BernadetteStarbuck, Sandie
Steel, Jo-Anne

Rivkin, Jordan
Roberts, Anne

Santrucek, Vanessa
Sardelis, Helen

Shliselberg, Aviva
Siano, Nizza

Stefanidis, Helen
Stein, Russell

Roberts, Ilona

Sargent, Richard

Siaw, Esthew

Stephens, Helen

Roberts, Jennifer
Robertson, Jessica

Saunders, Robin
Scaife, Kirsty

Siebel, Jackie
Simeonova-Hopkins, Lyubka

Stephens, Lyndall
Stephenson, Sally(continued next page)

PUBLIC CONSULTATION

597

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Stetner, Nell

Thiele, Mari

Varga, Patricia

Welsh, Kyrrie

Stevenson, Leah
Stewart, Darren

Thomas, Patrick
Thompson, Dekotah

Vasilikakis, Moska
Veverka, Charlene

Welsh, Lara
Welsh, Terence

Stewart, Jan
Stewart, Jennifer

Thompson, LoriThomson, Bruce

Vilas, Vic
Vincent, Kate

Wheatley, Gillian
Whiley, Carlos

Stewart, RogerThomson, Christine

Vincent, Terri

Whitbread, Bijou

Stewart, Sasha

Thomson, Pip

Vinyl, Venus

Whitbread, Marilyn

Stockdill, Stephanie

Timothy, Maria

Vizard, Diana

White, Anna

Stones, Sheila
Straney, Johanna

Timpano, Luigi
Tims, Tracey

Vlahos, Pam
Wads, Elizabeth

White, Glenda
White, Karen

Strano, Timothy

Tobin, Meryl

Wahl, NavaWhite, Veronica

Streiff, MeghanTod, Diana

Wakeman, Kellan

Whitemore, Paul

Strodl, Sue
Subramanian, Palaniappan

Tomaszewski, Melissa
Tomkins, Diana

Wales, Debbie
Walker, Debra

Wichgers, Julie
Wijsman, Suzanne

Suffredini, Linda
Sullivan, Carol
Sullivan, Rachel

Topolnjak, SueToppenberg, Jilly
Torrance, Angela

Walker, Julie
Wallis, Hayley
Walsh, Catherine

Wilcox, Julian
Williams, Freddie
Williams, Jocelyn

Summerton, Niki
Surpless, Edward
Susskind, Anne
Sussman, RachelToy, Deb
Tremain, Charlotte
Trengove, Jane
Trkulja, Snezana

Walsh, David
Walters, Corie
Walton, Kate
Wanmar, Susan

Williams, Robyn
Williams, Rodney
Williams, Wendy
Williamson, Carlie

Suthern, Kerryn
Swiss, Sue
Sydenham, Karen

Tsacalos, Katerina
Tsoulia, Joanna
Turner, Paul

Wanmer, Susan
Wannell, Norma
Ward, Caroline

Williamson, Rachel
Willis, Barbara
Willson, Matt

Sykes, Frank
Symes, Jean
Tabart, Melissa

Turner, Tricia
Twemlow, Brooke
Tyler, Mitchell

Waring, Suzanne
Warrender, Blaze
Watson, Ian

Wilson, Anne
Wilson, Elaine
Wilson, RobertTampalini, Alisha

Udawela, Ishara

Watson, Lisa

Winslow, Kimberley

Tanner, Mark
Tarrant, Kay

Ustrnul, Rachel
Valastro, Maria

Watson, Madison
Watson, Tahlia

Wisch, Anita
Witt, Alice

Tate, Tara

Valentine, Alison

Watt, Carol

Wong, Ada

Tatton, Julie
Taylor, Ellie

Valentine, Sarahvan der Kaay, Darrin

Watterson, Linda
Watts, Matthew

Wong, Houston
Wood, Allan

Taylor, Lybnn
Taylor, Lynne

van der Kaay, Suzi
van der Kley, Kim

Weatherall, Yasmine
Webb, Ann

Wood, Becky
Wood, John

Taylor, Narelle
Taylor, Sharyn

van der Poel, Renee
van der Wielen, Cynthia

Webb, Karl
Webster, Bernadette

Wood, Matthew
Woodberry, Des

Tee, Richardvan der Wolk, Tanie

Weir, I

Woodberry, Julie

Tennent, Amanda
Thambiratnam, Sherita

van Leeuwen, Henk
van Tol, Maud

Weiss, George
Wells, Margaret

Woodbury, Susan
Wooldridge, Kellie(continued next page)

598

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.2(continued)

Submitter Name

Submitter Name

Submitter Name

Submitter Name

Woolley, Sharron

Wright, Sally

Yardi, Teresa

Zeman, Belinda

Wray, Belinda
Wren, Pamela

Wright, Wendy
Wyatt, Christopher

Yeaman, Vicki
Young, Ann

Zib, Martina
Zin Wong, Wai

Wrench, Jessica
Wright, Elizabeth

Wyers, Cathryn
Wyeth, Heidi

Young, Lisa
Young, Mikaela

Zusak, Mika
Zuvela, Conchetta

Wright, Gordon

Y, Misa

Yuncken, Rebecca

Zylmans, Suzanne

Wright, Natalie

Yan, EdmondYusuf, Natasha

PUBLIC CONSULTATION

599

Table A.3

Numbered brief submissions

Participant

Submission number

Participant

Submission number

Albrecht, Jane
Anderson, Mal

1
2

Bretherton, Emily
Brewer, Anna

41
42

Anderson, Melissa

3

Bridgman, Claire43, 44

Andrews, Peter & Karen

4

Brittliff, Rachel

45

Anrep, Cheree
Anthony, Ann

5
6

Broadbent, Deborah
Bronte, Joanne

46
47

Antoine, Sue
Archer, Paul

7
8

Brown, David
Brown, GRAEME

48
49

Arena, Carmel

9Buchanan, Sienadune

50

Armstrong, Mike

10

Buckley, Robert

51

Ashworth, Linda
Atkinson, Margaret
Avenell, Kerry

11
12
13

Buckman, James
Bull-Collins, Sheryl
Burton, Nicole

52
53
54

Baker, Pamela
Barnes, Angela
Barnes, Stephen

14
15
16

Buttrose, Gayle
Calleia, Carole
Cannon, Ian

55
56
57

Bateson, Glenda
Barron, Elizabeth
Bavich, Maddison

17
18
19

Cansdell, Lesley
Caputo, Renee
Carolane, Sue

58
59
60

Bavich, Trish
Bell, Brian
Bell, Jennifer

20
21
22

Cavallaro, Margaret
Cavallaro, Michael
Chaiwan, Sahaphap

61
62
63

Bennett, Eliza

23

Chakos, Sue

64

Benson, Denise
Bethune, Shirley
Bignell, Nicola

24
25
26

Chambers, Fran
Chan, SonyaCheah, Kim

65
66
67

Bignell, Sharyn
Bilik, Michaela

27
28

Chynoweth, Jodie
Clark, Elizabeth

68
69

Blatchford, Trevor

29

Clark, Maddison

70

Boettcher, Denise

30

Clarke, Sharon

71

Bond, Graham
Bonner, David

31
32

Coggin, Melanie
Coleman, Robyn

72
73

Booth, Anne

33

Collins, Karen

74

Bourke, Elizabeth
Bourke, Lyndell

34
35

Coman, Jenny
Connelly, Elizabeth

75
76

Bowen, Amy

36

Connolly, Fiona

77

Boyle, Odette37

Conroy, Lorraine

78

Bozicevic, Julie
Bradbury, Susan

38
39

Cooke, Robert
Cooper, Carolyn

7980

Bradley, Irina

40

Cooper, Sylvia

81(continued next page)

600

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.3(continued)

Participant

Submission number

Participant

Submission number

Copeland, Julie
Corbett, Desley82
83

Faerch, Niels
Famlonga, Julia

122
123

Cosmas, Dallas

84

Farquharson, Margaret

124

Coutts, Jaymie

85

Field, Terri

125

Coward, Judith
Crabbe, Mariea

86
87

Fiorita, Rocco
Fleming, Sue

126
127

Creelman, Leslie
Croft, Beryl

88
89

Flisar, Ales
Foley, Ann

128
129

Crump, Acacia

90

Forbes, Louise

130

Dallwitz, Eileen

91

Ford, Patricia

131

Dalton, Rebecca
Dantas, Magda
Dartnell, Victoria

92
93
94

Foster, Jay
Fox, Phill
Fraser Phd., Barbara J.

132
133
134

Dassanayake, Anusha
Dassanayake, Rasika
Davies, Shelley

95
96
97

Fraser, Todd
Frigo, Gianni
Fung, Cat

135
136
137

Daws, Fiona
De Valliere, Ann Michelle
Deacon, Andrew

98
99
100

Galanti, Max
Gamon, Shelley
Gay, Sheryl

138
139
140

Deguchi, Junko
Dengate, Tracey
Devine, Gillian

101
102
103

Gerber, Perry
Gibberd, Alison
Gibson-Smith, Liza

141
142
143

Diss, Michelle

104

Gibson, Johanna

144

Dolden, Helen
Douglas, Joanne
Douglass, Anne

105
106
107

Gill, Inderpreet
Gillis, Robin
Gits, Terri

145
146
147

Doyle, Aidan
Drake, Amanda

108
109

Glasby, Elaine
Glaum, Frederick

148
149

Dresser, Quentin

110

Goff, Jennifer

150

Du Preez, Tanya

111

Golding, Ken

151

Duigan, Virginia
Dunstan, Karen

112
113

Golding, Virginia
Gonapinuwala, Chris

152
153

Earnshaw, Patricia

114

Gordon-Lee, Amanda

154

Eastman, Eileen
Eberle Riedl, Regina

115
116

Gossell, Elizabeth
Gough, Lorraine

155
156

Edwards, Anne

117

Govito, Stacey

157

Ellims, Sandra

118

Grant, Jo

158

Ellis, Rhonda
Ellis, Ross

119
120

Gray, Bianca
Gray, Chris

159
160

Evenson, Marilyn

121

Gray, Kristie

161(continued next page)

PUBLIC CONSULTATION

601

Table A.3(continued)

Participant

Submission number

Participant

Submission number

Green, Carole
Green, Rhonda

162
163

Johnston, Michelle
Jones, Melissa

204
205

Greenwood, Jennifer

164

Jonson, Lauren

206

Gregg, Viqi

165

Kakos, Joanne

207

Grinter, Cherie
Grose, Kevin

166
167

Kasepuu, Jan
Kavanagh, Bill

208
209

Groves, D
Gruessing, Lynda

168
169

Kazas, Nicoletta
Kazis, Anita

210
211

Haarsma, Vanessa

170

Kee, Brenda

212

Haggie, Esme

171

Keelan, Natalie

213

Hamilton, Dawn
Hamilton, Margaret-Ann
Hamilton, Phillip

172
173
174

Kelly, Michelle
Kenyon-David, Dominic
Khoury, Rhonda

214
215
216

Handolias, Despina
Harding, Rebecca
Hayler, Marigold

175
176
177

Knight, Christine
Kohler, William Lee
Kowald, Daniel

217
218
219

Haynes, Taryn
Haywood, Nicola
Hedges, Louise

178, 179
180
181

Krahn, Uli
Kulka, Susan
Kwasner, Martin

220
221
222

Hedley, Carol
Helali, Sepi
Herring, Tim

182, 183
184
185

Lal, Nikilesh
Langford, Jennifer
Lanyon, Vic

223
224
225

Hicks, Tracey

186

Lawson, Jeannie

226

Hierzer, Glenys
Higginson, Roger
Hill, Ginger

187
188
189

Leder, Peggy
Lee, Chien Ju
Lee, Jrsse

227
228
229

Hoffman, Val
Hogg, Jenny

190
191

Letho, Cara
Liebergreen, Christina

230
231

Holmes, Glen

192

Lilley, Evie

232

Homer, Steve193

Litchfield, Sue

233

Hutley, KevinHynes, Granklin

194
195

Longva, Trisha
Loughton, Dorothy

234
235

Itzstein, Penelope

196

Lowe, Charles

236

Jackson, Maureen
Jackson, Reece

197
198

Luc, Dianne
Lucas, Nicholas

237
238

Jackson, Rosie

199

Luitingh, Gail

239

Jacobs, Kelly

200

Lupton, Benjamin

240

Jacques, Karen
Jeffries, Catherine

201
202

Luxford, Jeanette
Mainiero, Joanne

241
242

Johansen, Nicole

203

Manos, Helen243(continued next page)602

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.3(continued)

Participant

Submission number

Participant

Submission number

Mantellato, Ray
Marquette, Jill

244
245

Murray, Phil
Nair, Shoba

284
285

Mason, Helen246

Nathanielsz, Jeni

286

Martin, Jade

247

Neller, Karen

287

Martinec, Kvetoslava
Massey, Jennifer

248
249

Neller, Kaye
Nelson, Kerry

288
289

Masters, Christopher
Mattocks, Julie

250
251

Newton, Jeanette
Nilsen, Angela

290
291

Maybury, Chris

252

Nilsson, Birgitta

292

Mccallum, Iain

253

Nitschke, Kasey

293

Mccormack, Daria
Mcdonald, Patrick
Mcdonald, Tracey

254
255
256

Nixon, Emily
Nolan, Nicole
Norman, Josephine

294
295
296

Mcdonnell, Rosemary
Mcdonnell, Rosie
Mcgregor, Jordan

257
258
259

Norris, Christine
O'brien, Sarah
Oelrichs, Claire

297
298
299

Mckay, Jennifer
Mckenzie, Fiona
Mcmahon, Jan

260
261
262

Olding, Roz
Oliver, Jodie
Onrust, Judith

300
301
302

Mcnamara, Pat
Meecham, Jemma
Meldrum, Barbara

263
264
265

Orsos, Annetjie
Owen, Shirley
Palmer Cordingley, Magda

303
304
305

Meli, Suzanne

266

Pankhurst, Linda

306

Mensinga, Dean
Metcalfe, Jennette
Millanta, Dane

267
268
269

Paras, OLGA
Parsons, Alexandra
Parsons, Sita

307
308, 309
310

Miller, Lee
Miller, Vivienne

270
271

Pasqua, John
Paybe, Shree311, 312
313

Mirovics, Silva

272

Pearce, Briony

314

Mitchell, Annette

273

Peat, Nora

315

Mizan, Ash
Money, Catherine

274
275

Perkins, Geraldine
Peters, Annette

316
317

Montoya, Diane

276

Petherick, Vick

318

Morgan, Sonja
Morris, Jim

277
278

Pettifer, Dimity
Phillips, Adam

319
320

Morrison, Sue

279

Photios, Solon

321

Morton, Jules

280

Plano, Bart

322

Muffet, Deborah
Murphy, Sandy

281
282

Plano, Corinne
Plato, Laurent

323
324

Murray, Cristy

283

Plover, Sandra

325(continued next page)

PUBLIC CONSULTATION

603

Table A.3(continued)

Participant

Submission number

Participant

Submission number

Poole, Aneta
Poros, Aleksandra

326
327

Sharp, Leslee
Sheens, Robert

366
367

Porter, Ray

328

Sheldrake, Beverley

368

Press, Kerry

329

Sheppard, Ainsley369

Price, Lynn
Prince, Elizabeth

330
331

Shinn, Sharon
Shotwell, Andi

370
371

Prince, Libby
Quinn, Clare

332
333

Simpson, Ross
Slater, Hayley

372
373

Radisich, Jacqueline

334

Slight, Julie

374

Raffelt, Patricia

335

Smith, Jane375

Rainbird, Carol
Rajasekharuni, Ravi
Rangan, Merilyn

336
337
338

Smith, Victoria
Snell, Graham
Sobey, Vicky

376
377
378

Rayner, Selwyn
Reed, Sandra
Rhodes, Stephen

339
340
341

Southern, Tara
Stack, Josephine
Steiner, Ulrich

379
380
381

Ring, Charlie
Rippin, Phay
Ristitisch, Donna

342
343
344

Sternfeld, George
Stevens, Allison
Stewart, Darren

382
383
384

Roberts, Dana
Roberts, James
Roberts, Michael

345
346
347

Stewart, Tracey
Stickler, Jayne
Stobbe, Eve

385
386
387

Robinson, Narelle

348

Stokeld, Elisabeth

388

Rohann, Kate
Ross, Barbara
Rowe, Penny

349
350
351

Svaton, Jakub
Swift, Jacqueline
Szwec, Jordan

389
390
391

Rudgley, Joan
Russell, Rupert

352
353

Tapp, Barrie
Taylor, Lenore

392
393

Ryan, Deborah354

Tennant, Irina

394

Rzic, Marina

355

Theaker, Nigel

395

Sagarzazu, Maria
Sahin, Erdinc

356
357

Thompson, Amanda
Thompson, Paul & Victoria

396
397

Sanders, Emma

358

Thornton, Liz

398

Sands, Briony
Sargent, Sue

359
360

Tolnay De Hagymassy, Ezequiel
Torenbeek, Patricia

399
400

Sarjeant, Marie-Louise

361

Tuivailala, Christine

401

Schleen, Ursula

362

Tull, Nicola

402

Schneider, Vanessa
Schwark, Theresa

363
364

Turner, Susan
Urquhart, Cheryl

403
404

Seater, Jo-Anne

365

Vasilevskis, Heidi

405(continued next page)604

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.3(continued)

Participant

Submission number

Participant

Submission number

Vliek, Tracy
Wallace, Kim

406
407

Williams, Caroline
Williams, Marilyn

427
428

Wallace, SCOTT

408

Willis, Samantha

429

Walters, GRAEME

409

Wilson, James430

Warne, Victoria
Warren, Kerrie

410
411

Wilson, Vivien
Wilson, Yvonne

431
432

Warrender, Pamela
Watson, Lyn

412
413

Winter, Karsten
Withington, Nicole

433
434

Watts, Martin

414

Wodzak, Mango

435

Waycott, Susan

415

Wong, George

436

Wessling, Graham
Westerman, Bill
Weston, Ronnie

416
417
418

Wood, Caroline
Wood, Jordan
Woodford, Dion

437
438
439

Whitby, MarkWhite, Charlotte
White, Dorothy

419
420
421

Wright, Vern
Wyatt, Gail
Wynne, Mike

440
441
442

White, Necia
White, Susan
Whitehead, David

422
423
424

Yamashita, Misa
Zagar, Jennifer
Zahnow, Tanya

443
444
445

Whiteman, Wendy
Whiteoak, David

425
426

Zarew, Stephanie

446

PUBLIC CONSULTATION

605

Table A.4

VisitsParticipant
New South Wales
Accord Group
Australian Chicken Meat Federation (ACMF)
Australian Farm Institute
Australian Lot Feeders' Association (ALFA)
Choice Australia
Dubbo City Council
Environmental Defenders Office NSW (NSW EDO)
Fletcher, Roger
Gaeta, Guy
LiveCorp
McClymont, DanielMeat and Livestock Australia (MLA)
Munro, Scott
Murray Irrigation
NestleNSW Department of Planning & Environment
NSW Department of Primary Industries - Western Lands Office
NSW Department of Primary Industries
NSW Farmers Association
NSW Irrigators’ Council
NSW Local Land Services, Central WestNSW Roads and Maritime Services
Pasqual, Trish
Reynolds, Bruce
West, Peter
Victoria
Animal Welfare Science Centre - University of Melbourne
Animals Australia
Australian Charities and Not-for-profit Commission (ACNC)
Australian Dairy Farmers
Citrus Australia
Cooke, Dr John
Dairy Australia
Gene Ethics
Graeme, PhilipHarmer, Ronda and Harmer, Allan
Lambert, Annette
Madge Australia
Mansell, Anne
Mildura Development Corporation
Mildura Fruit Company(continued next page)

606

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.4(continued)

Participant
Victoria (continued)
Mildura Rural City Council
Millar, Dr. HughNatural Resource Management South
Safe Work Australia
Victorian Department of Environment, Land, Water and Planning (DELWP)
Victorian Department of Economic Development, Jobs, Transport and Resources (DEDJTR)
Victorian Department of Treasury and Finance (DTF)
Victorian Farmers Federation (VFF)
Victorian Red Tape Commissioner
Queensland
Acton, Jenny
Acton, Tory
AgForce Queensland
Atkins, Larry
Australian Cane Farmers Association (ACFA)
Australian Chicken Growers Council (ACGC)
Brosnan, Richard
Cotton Australia
Dunn, Matthew
Findlay, Melanie
Fitzroy Basin Association
Growcom
Kelly, Glen
Kime, Emma
Longworth, Prof. John
Norman, Kevin
National Heavy Vehicle Regulator (NHVR)
Nicholas, Ian
Palmer, RickQueensland Department of Agriculture and Fisheries
Queensland Department of Environment and Heritage Protection (EHP)
Queensland Department of Natural Resources and Mines (DNRM)
Queensland Department of the Premier and Cabinet
Queensland Department of Transport and Main Roads
Queensland Farmers Federation (QFF)
Queensland Productivity Commission
Smith, Ellen
Sunderland, Lee
Tropical Pines Pty Ltd(continued next page)

PUBLIC CONSULTATION

607

Table A.4(continued)

ParticipantSouth Australia
Agricultural Bureau of South Australia
Bio Security
Food South Australia
Primary Producers SA (PPSA)South Australian Department of Environment, Water and Natural Resources
Western Australia
Australian Industrial Hemp AlllianceFoodwatch WA
Network of Concerned Farmers
Pastoral Graziers Association of Western Australia (PGA)
WellardWestern Australian Department of Agriculture and Food
Western Australian Department of Lands
Western Australian Department of Premier and Cabinet
Western Australian Farmers Federation (WAFarmers)
Western Australian Pork Producers Association
Tasmania
Fruit Growers Tasmania Inc. (FGT)
Primary Employers Tasmania (PET)
Tasmanian Department of Primary Industries, Parks, Water and Environment (DPIPWE)
Tasmanian Department of State Growth (DSG)
Tasmanian Farmers & Graziers Association (TFGA)
Tasmanian Institute of Agriculture (TIA)
ACTAnimal Health Australia
Animal Medicines Australia
Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)
Australian Competition and Consumer Commission (ACCC)
Australian Livestock Exporters’ Council (ALEC)
Australian Pesticides and Veterinary Medicines Authority (APVMA)
Australian Tax Office
Byron, Neil
Craik, Wendy
CropLife Australia
CSIRO
Department of Agriculture and Water Resources (DAWR)
Department of Industry, Innovation and Science (DIIS)
Department of the Environment
Food Standards Australia New Zealand(continued next page)

608

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.4(continued)

Participant
ACT (continued)
Kerin, Hon John
Kompas, Prof. Tom
McNamara, Jason
Murray-Darling Basin Authority (MBDA)
National Farmers' Federation (NFF)
New Zealand High Commission
Office of Best Practice Regulation (OBPR)
Office of the Gene Technology Regulator (OGTR)
Office of the Chief Scientist
Safe Work Australia
Treasury
New ZealandAustralian High Commission, Wellington
Federated Farmers of New Zealand
Horticulture New ZealandLand Information New Zealand (LINZ)
Ministry for the Environment
Ministry of Business, Innovation and Employment (MBIE)
Ministry for Primary Industries, Beef and Lamb New Zealand
Ministry of Transport
Motu
New Zealand Productivity Commission
The Treasury, New ZealandWorksafe, New Zealand

PUBLIC CONSULTATION

609

Table A.5

Public hearings

Individual or organisation

Transcript Page Nos

Perth – 16 August 2016
Chris Tallentire MLA
Prof. Mike Jones

4-13
14-20

Pastoralists and Graziers Association of WA
Australian Industrial Hemp Alliance/Industrial Hemp WA Association

21-34
34-48

Foodwatch WA

48-60

Meg Wilson

60-70

WA Pork Producers Association

70-84

WAFarmers
Network of Concerned Farmers

85-101
102-113

Steve Chamarette

113-115

Doug Hall

115-118

Melbourne – 17 August 2016
Australian Industrial Hemp Alliance122-133

Jan Kendall
Australian Property Institute
Craiglee Vineyard

133-144
145-158
158-169

Animal Justice Party Victoria
Farmer Power
Croplife Australia
Gene Ethics

169-181181-198
199-201202-221

Madge Inc
Dr Nina McCormick

221-234
235

Wagga Wagga – 18 August 2016
RiceGrowers’ Association of Australia

239-262

Sydney – 19 August 2016
World Animal Protection
Cotton Australia

266-276276-291

GM Cropwatch

291-301

Animals Australia
Friends of the Earth

301-314315-336

Vegan Australia

336-346(Continued next page)

610

REGULATION OF AUSTRALIAN AGRICULTURE

Table A.5(continued)

Individual or organisation

Transcript Page Nos

Canberra — 22 August 2016
Australian Pork Limited
RSPCA Australia

351-364364-378

Office of the Gene Technology Regulator
Australian Veterinary Association

378-388389-401

National Farmers’ Federation

401-413

Croplife Australia

413-423

Paul Fitzgerald423-437

Tyran Jones
Prof. Jill Gready437-449449-464

Graingrowers Limited

464-479

Brisbane — 24 August 2016
Property Rights Australia
Wilma Sugar

482-495496-509

Australian Cane Farmers Association
Institute for Agriculture and Environment, University of Southern
Queensland
Queensland Canegrowers

510-525525-532

National Heavy Vehicle Regulator

545-557

Australian Food Sovereignty AllianceSandra Baxendel

572-580
581-591

Queensland Sugar Limited
Tully Sugar Limited
Queensland Regional NRM Group Collective

592-605605-611532-544

Townsville — 25 August 2016
Canegrowers Herbert River
Chris Canavan
Frances O’Callaghan

618-631631-637637-650

Jonathan Pavetto
Pioneer Canegrowers

651-662662-675

Canegrowers Burdekin
Cairns Regional Canegrowers

676-686686-695

Pioneer Growers
Andrew Rea
Limestone Association of Australia

695-697697-707707-717

Tom Callow
Canegrowers Innisfail717-720720-734(Continued next page)

PUBLIC CONSULTATION

611

Table A.5(continued)

Individual or organisation

Transcript Page Nos

Hobart — 30 August 2016
Macquarie Franklin738-749

Dr Dan Norton AO

749-759

Poppy Growers Tasmania Incorporated

759-777

Tasmanian Greens
Tasmanian Farmers and Graziers Association

777-793793-812

NRM South
Lindsay Bourke

813-820821-833

Tasmanian Red Meat Industry Council

833-841612

REGULATION OF AUSTRALIAN AGRICULTURE

B

A brief history of statutory marketingin Australian agriculture

The evolution of statutory marketing boards in Australia was comprehensively reviewed
by Watson and Parish (1982) and Lloyd (1982), and later by the Industry Commission(IC 1991) and the Productivity Commission (Gropp, Hallam and Manion 2000). The firststatutory marketing arrangements were imposed on sugar in 1902 and dried fruit in 1904 tocompensate for the mandated use of costly European labour. Most statutory marketingboards in Australia evolved following World War I to raise and stabilise prices and farmincomes, protect producers from the market power of traders and compensate farmers fortariffs on inputs (Lloyd 1982; Watson and Parish 1982). Legislation enabling statutory
marketing boards was first passed in Queensland in 1922, New South Wales in 1927,
Victoria in 1935 and Tasmania in 1945, with the other states legislating on acommodity-by-commodity basis.
By 1939, most agricultural industries in Australia were protected by some form of statutory
marketing (Lloyd 1982). In 1982 Australia had 11 marketing boards operating underCommonwealth legislation and more than 50 operating under state legislation (Watson andParish 1982) (table B.1).
Statutory marketing is a package of inter-related regulations that compel farmers to sell toa single marketing agent, protect industries from international competition, and set
domestic prices above export parity (Watson and Parish 1982). A degree of complexity
made them costly to administer with the burden of these administrative costs being met bytaxpayers and consumers. A raft of supporting legislation was required to establish andmaintain statutory marketing boards including:•

procedures for setting up marketing boards•

tariffs, quotas and other restrictions on trade to protect marketing boards frominternational competition•

legislation to protect marketing boards from legal challenges•

exemptions for marketing boards from trade practices and consumer protection
legislation•

subsidised finance for marketing boards (Watson and Parish 1982).

STATUTORY MARKETING

613

Table B.1

Statutory marketing authorities by commodity and state
1980

Cwlth
Wool
Meat/lamb

NSW

•
•

Fish
Dairy/milk

•

Vic

•
•

•

•

•

•
•
•
•
•

•
•
•
•
•

•

•
•

•

•

ButterCheeseEggs
Honey
Wheat/grains•••

BarleyOats
Maize
Sorghum
Rice
Sugar
Tobacco•CottonPeanuts•

Oilseeds

Qld••

GingerCanned/soft fruit••

Bananas
CitrusLemonsWine/grapes
Dried fruit••

Ryegrass

•
•
•
•
•

Tas

•
•

•

•

•

•

•

•

•

•

•

•
•

•

Fresh fruit
Apples and pears

WA

•
•
•
•
•
•
•

Potatoes
Navy beans

SA

•

•

•

•

•

•

•

Source: Vinning (1980).

Statutory marketing boards were usually established after a referendum of producers, andperformed the basic processing and trading functions of cooperatives (Watson andParish 1982). These included consolidating production from multiple farms throughout theyear into supply chains providing consistent quantities and quality to realise economies ofscale in processing. Pooling production also enabled statutory marketing boards to average
prices and stabilise farm incomes.
614

REGULATION OF AUSTRALIAN AGRICULTURE

Stabilising prices and incomes were key objectives of statutory marketing boards partly asa result of production risk arising from Australia’s variable climate, and partly as a
response to the volatility of export markets. The volatility of export markets was
exacerbated by the then fixed exchange rate policies (Atkin et al. 2014; IC 1991). A supply
response to booming agricultural prices towards the end of World War I led to dramatic
falls in export prices in the mid–1920s. Concerns that this experience would be repeatedfollowing World War II formed the basis of arguments put forward to expand statutory
marketing (Lloyd 1982). These concerns were realised during the Korean War when asurge in demand for wool in the United States coincided with a drought-induced drop in
sheep numbers (Atkin et al. 2014) and the selling off of a wool stockpile that had
accumulated during World War II (Richardson 2001). The consequent spike in wool prices
and a fixed exchange rate sent Australia’s terms of trade to their highest level to date, withsignificant impacts throughout the economy (Atkin et al. 2014).
Statutory marketing boards were originally seen as providing a public good service toremote and isolated agricultural producers. Remoteness, isolation and lack of marketing
expertise were seen as placing farmers at a significant disadvantage in negotiating sales(Sapiro 1923). Large numbers of diverse and widely distributed producers tended to work
against the voluntary formation of marketing cooperatives in many of Australia’s
agricultural industries (Lewis 1961). This was addressed by compelling producer
participation in these cooperatives by law, such that they became known as ‘compulsory
cooperatives’ (Watson and Parish 1982).
A feature of Australia’s statutory marketing boards was that their activities went beyond
the basic functions of cooperative marketing. In industries where conditions wereconducive, tariff protection and import controls were used to divide domestic andinternational markets, and raise prices in domestic markets where demand was lessresponsive to price (Watson and Parish 1982). These measures added the protective effectof raising prices to the insurance effect of income pooling and the equalisation effect of
average pricing. Internationally, this overall package of statutory marketing activities
became known as ‘orderly’ marketing (Sapiro 1923). The Tariff Board was set up to advise
the government on the level of assistance that should be provided to industry(Emmery 1999). The Tariff Board later became the Industry Assistance Commission(1974), the Industry Commission (1989) and the Productivity Commission (1998).
Later schemes including those for wheat and wool used government funds to guarantee aminimum export price. An argument used to sustain statutory marketing boards for theseand other commodities was an ability to generate price premia by acting as monopolies ininternational markets (Gropp, Hallam and Manion 2000). Such arguments had little merit,
as Australia was rarely a price maker in international markets.

STATUTORY MARKETING

615

Economic impacts of statutory marketing
The distortionary effects of statutory marketing by misallocating resources have long beenrecognised. According to Lewis (1967, p. 313) ‘price support and stabilisation policies
have consistently tended to transfer resources to industries in which Australia’scompetitive position is weakest’. To meet rural development goals such as increasing
employment, statutory marketing tended to favour intensive dairy and cropping industries
rather than the extensive industries for which Australia’s land resources provided a naturalcomparative advantage.
Rates of assistance varied considerably from little or no assistance for most broadacre
crops (excluding wheat) to substantial assistance for tobacco, milk production, eggs, citrus,
wine grapes and dried vine fruits (Gray, Oss-Emer and Sheng 2014; Lewis 1967). Thisencouraged resources to move from lightly assisted and more efficient industries tosupported industries based on the returns that could be earned from assistance schemes
rather than price signals in world markets (Gray, Oss-Emer and Sheng 2014; Wonder,
Beynon and Hunt 1995).
The attraction to growers of stable prices and incomes was offset by a loss of autonomy
over marketing and disincentives for innovation and entrepreneurship (Lewis 1961;
Watson and Parish 1982). Compulsory statutory marketing provided a disincentive forfarmers to seek new markets that would yield more than average returns (Gropp, Hallam
and Manion 2000). Averaging meant that the price received by farmers did not reflect theirindividual managerial skill or effort (Watson and Parish 1982), creating a disincentive toinnovate (PC 2000). Averaging and price support also undermined incentives for farmers
to find better ways of managing production and price risk (Gray, Oss-Emer andSheng 2014).
Attempts to stabilise commodity prices (and farm incomes) resulted in some perverse
effects with irreversible consequences for Australia’s agricultural industries. A floor pricescheme for wool introduced in 1973 initially appeared to help stabilise prices and incomes(Richardson 2001). However, during the 1980s the scheme shifted from a conservative
floor price to a reserve price scheme. Purchases by the Australian Wool Corporation tomaintain the reserve price and a significant decline in the global consumption of wool led
to the rapid accumulation of 4.7 million bales by the early 1990s, which were not sold off
until 2001 (ABS 2003). The subsequent collapse of world wool prices reduced the
profitability of wool farming, and resulted in Australian sheep numbers falling from
177 million in 1989 to less than 70 million in the early 2000s, fundamentally altering
Australia’s agricultural landscape (Nelson and Lawrance 2004).
The ability of marketing boards to raise domestic prices was limited by their control overproduction which, for example, could require marketing boards in several states to agree
on production quotas (Lewis 1967; Watson and Parish 1982). In industries that were
geographically concentrated, marketing boards could operate effectively as monopolies. In
more diffuse industries there was a degree of competition between boards in different
616

REGULATION OF AUSTRALIAN AGRICULTUREstates. As early as 1961, Lewis (1961, p. 2) observed that: ‘because of the large number ofwidely dispersed producers, voluntary organisation in the form of cooperative societies has
failed to achieve the necessary conditions for effective implementation of two-priceschemes’. Discriminatory pricing also meant that farmers received an average price thatwas higher than export prices, but lower than domestic prices. This created an incentive forindividual growers to sell directly to domestic consumers at the higher domestic price, astrategy that inevitably drove domestic prices down towards export parity (Lewis 1961;
Watson and Parish 1982).
Raising domestic prices to subsidise production increased the cost of food to consumers
and created inequity between consumers and producers. The Industry Commission (1991)
estimated that in 1988-89 statutory marketing arrangements for milk, sugar and rice raised
consumer prices by 0.3 per cent, and taxed user industries and consumers of food by about$550 million. This inequity could persist partly because the voice of consumers was diffuse
and less well organised than the concentrated and well organised voice of statutory
marketing boards (Watson and Parish 1982). Statutory marketing was also established inan era when there was ‘widespread acceptance of restrictionist economic philosophy anddistrust of free markets … ’ (Watson and Parish 1982, p. 328).
A more modern argument for maintaining statutory marketing boards as ‘single-desk’exporters was the potential for monopoly selling to achieve higher export prices. However,
the Commission (2000) found that maintaining a single desk exporter is not sufficient toguarantee monopoly power in export markets, due to competition from other exporters andan ability of consumers to substitute to other products. Higher export returns from theprovision of specialised marketing services do not require monopoly power to realise.
There were also always questions about whether statutory marketing boards could performthe storage and marketing functions as efficiently as private businesses (Watson andParish 1982). Pooling of transport and distribution costs encourages inefficient distribution
and production which incurs relatively high costs. A lack of competition and choice ofmarketer can promote inefficient practices such as over-servicing and cost-padding bystatutory marketing boards (Gropp, Hallam and Manion 2000).
Statutory marketing had a range of significant negative impacts on agricultural
productivity, including on:•

innovation — average pricing undermines incentives for farmers to seek new andhigher value markets•

risk management — income pooling and price support undermines incentives tomanage risk•

resource allocation — resources flowed from less protected to heavily protectedindustries.

•

effectiveness — statutory marketing boards had a limited ability to raise prices

STATUTORY MARKETING

617

•

cost of administration — statutory marketing boards were administratively complex toestablish and maintain•consumers — raising prices increases the cost of food to consumers•

inefficient marketing — statutory power undermines incentives for innovative andefficient marketing (Gray, Oss-Emer and Sheng 2014; PC 2000).

Deregulation of Australian agriculture
Over time changes in production, technology and patterns of demand can significantly alter
the structure of markets and reduce the need for regulation (Weimer and Vining 2015).
The economic and policy environment within which farm businesses operate has changed
dramatically over the last 30 years (Gray, Oss-Emer and Sheng 2014). The Australianeconomy has been transformed by a series of economic reforms that exposed Australianindustries to greater international and domestic competition. These reforms have increased
the flexibility and productivity of the economy by enabling resources to flow to theirhighest value uses, resulting in significant improvements in agricultural productivity.
From the 1970s onwards, economic conditions began to change significantly from those inwhich statutory marketing arrangements were conceived. Examples of some of theeconomic changes that affected agricultural marketing included:•

deregulation and international linking of financial markets which lowered the cost ofcapital•floating exchange rates which reduced price volatility•

lower levels of protection in general and on farm inputs•

improvements in the strength and coverage of trade practices legislation•

increased review and accountability of statutory business enterprises•

expansion of the agribusiness sector to fulfil roles previously performed by statutory
authorities•

increased education and skill in the rural sector•

development of communication technologies and networks (Gropp, Hallam andManion 2000; IC 1991).

From the 1990s onwards, multiple government reviews analysed the continued
appropriateness, effectiveness and efficiency of statutory marketing arrangement(table B.2). This led to questions about whether the objectives of statutory marketingarrangements in terms of overcoming market failures remained valid, and whether otherpolicy options could achieve residual objectives at lower cost.
•618

It was increasingly recognised that insulation of agricultural markets via tradeprotection increases price volatility on world markets (Anderson 2014). Reductions in
REGULATION OF AUSTRALIAN AGRICULTURE

trade protection and industry assistance enabled farmers to respond more quickly tochanging market signals, enabling supply to respond to demand and greatly reducing
this source of price volatility. This was assisted by floating exchange rates that reduced
the impact of price changes in other sectors of the economy on agricultural prices.
Advances in transport and communication facilitated trade, enabling substitution
between sources that reduced price volatility.
•

The use of market power to raise domestic and export prices was increasingly
ineffective as improvements in transport and communication increased competition indomestic and global markets.

•

The consolidation of farms into larger commercial businesses and vertical integrationof agricultural markets led to more direct marketing channels in domestic markets
between farmers and retailers.

•

The development of communication technologies combined with increasing skills
levels and business orientation of commercial farms reduced the need for third party
knowledge brokers.

•

General reductions in tariffs and industry assistance removed the need forcountervailing protection, underpinned by improvements in antidumping legislation.

•

The use of market power to raise export prices was increasingly at odds with global
negotiations under the World Trade Organization to reduce tariff and non-tariff barriers
to trade.
Table B.2

Notable reviews of statutory marketing in Australia

Year

Author

Title

1990

Davis, L. (Chair)
Department of Primary
Industries and Energy

Review of the commonwealth primary industry statutory
marketing authorities: Report to the Minister for Primary
Industries and Energy

1991

Industry Commission

Statutory marketing arrangements for primary products

1998

Industry Commission

1999

Productivity Commission

2000

Productivity Commission

Microeconomic reforms in Australia: A compendium from the1970s to 1997
Impact of competition policy reforms on rural and regional
Australia
Single-desk marketing: Assessing the economic arguments

2005

Productivity Commission

Review of national competition policy reforms

2007

Productivity Commission

Annual review of regulatory burdens on business: Primarysector2010

Productivity Commission

Wheat export marketing arrangements

2013

ABARES

2014

ABARES

2015

OECD

Review of selected regulatory burdens on agriculture andforestry businesses
Australian agricultural productivity growth: Past reforms andfuture opportunities
Innovation, agricultural, productivity and sustainability inAustralia

Sources: Updated from Gropp, Hallam and Manion (2000); IC (1991) and PC (2010d).

STATUTORY MARKETING

619

The recent history of agricultural marketing reforms was summarised by Gray et al. (2014)(updated in table B.3). Gray et al. (2014) estimated that regulation-induced misallocationof resources reduced productivity growth in Australia’s broadacre agricultural industries by
4.1 per cent per year between 1977-78 and 1989-90. Subsequent market reforms generated
efficiency gains from the reallocation of resources that accounted for over a third(34.5 per cent per year) of productivity growth between 1989-90 and 1999–2000, andtwo-thirds (66.7 per cent per year) between 1999–2000 and 2009-10.
Table B.3

A summary of agricultural policy reform

DecadeCommodity Policy change

1970s

Wheat

Move from guaranteed to stabilised prices; provision for ‘grower to buyer’sales outside the pooling arrangements; home consumption price limited towheat for human consumption and determined by a formula to takeaccount of export prices

1980s

Dried vine
fruitsCitrusEnd of price stabilisation arrangements in 1980
Decade-long phase down of tariffs from 30 to 5 per cent, beginning in
1986; state marketing boards amalgamated, reducing geographicalbarriers to competition

Eggs

1990s

State-based production and pricing controls progressively withdrawn from
1989
Sugar
Domestic administered price arrangements and export controls terminatedby the Commonwealth in the late 1980s
Wheat
Domestic market deregulated in 1989; grower levy fund introduced toreplace the Commonwealth guarantee of Australian Wheat Board
borrowing
BarleyCompetition gradually introduced into domestic feed and malting barleymarketing in South Australia and Victoria from 1998
Dairy
Phased reductions in market support payments on export of dairy products
Dried vine Commonwealth price equalisation levy and statutory equalisation offruitsdomestic sales removed in the early 1990s, as was the industry’s
exemption from section 45 of the Trade Practices Act 1974 (Cwlth) (which
reduced the scope for collusive price discrimination)
Horticulture Underwriting scheme for apples and pears terminated in 1990
TobaccoLocal Leaf Content Scheme and the Tobacco Industry Stabilisation planceased in 1995; withdrawal of vesting powers in 1995
Sugar
Import tariffs and domestic price supports removed in mid 1997
Wheat
Australian Wheat Board converted from statutory authority to a
grower-owned company in 1999
Wool
Reserve Price Scheme ceased in 1991
(Continued next page)

620

REGULATION OF AUSTRALIAN AGRICULTURE

Table B.3(continued)

DecadeCommodity

Policy change

2000s

Dairy

State-based controls over sourcing and pricing of market milk ceased in
2000; 9-year Dairy Industry Adjustment Package (DIAP) concluded in 2009

BarleySouth Australian single-desk arrangements terminated in 2007; Western
Australian market deregulated in 2009 (allowing any number of licensedentities to export barley)

CanolaExports of canola and lupins deregulated in Western Australia in 2009
(traders no longer required to apply for licenses to export)

Sugar

Queensland Sugar Limited lost its compulsory acquisition powers in 2006
and lost exemption from the Trade Practices Act in 2009

Wheat

Bulk exports deregulated in 2008, meaning proposals to export bulk
wheat no longer needed approval from the single-desk seller (Australian
Wheat Board)Rice

NSW Rice Marketing Board retains powers to vest, process and market
all rice produced in NSW (about 99 per cent of Australian rice is producedin NSW)

Potatoes

Western Australian Potato Marketing Corporation controls the supply offresh table potatoes in that state

Wheat

From 1 October 2014, port access for the bulk wheat export industry wasregulated by a mandatory code of conduct administered by the AustralianCompetition and Consumer Commission
Queensland Parliament passes the Sugar Industry (Real Choice inMarketing) Amendment Bill 2015 which has potential to regulate theoptions that sugar millers have for marketing sugar internationally

2010s

Sugar

Source: Updated from Gray et al. (2014).

STATUTORY MARKETING

621

C

Case studies: the burden of regulation
on farm businesses

Purpose of the case studies
Defining and quantifying the cumulative burden of regulation on farm businesses is noteasy. To better understand the cumulative burden of regulation on farm businesses, theCommission conducted semi-structured interviews with three agricultural businesses
located in northern New South Wales and southern Queensland (box C.1). The purpose of
the interviews was to document and report on the day-to-day experiences of farmbusinesses complying with regulation.

Case study results
The case studies revealed that the burden of regulation is derived from three main sources.
•

The diversity of farming operations — businesses are affected by a diverse array ofregulation that can be time consuming to keep track of and comply with.

•

The timing of farming operations is critically dependent on weather events, andregulation that coincides inflexibly with major farming operations can be difficult tocomply with.

•

Regulations are often designed with the operation of other industries (likemanufacturing) and operating environments (such as urban areas) in mind, and this canmake regulations incompatible with the rural operating conditions of farm businesses.

CASE STUDIES

623

Box C.1

Case study method

Respondents
The sampling frame for the interviews was opportunistic, and was developed in collaboration
with Cotton Australia, GrowCom and the Queensland Farmers’ Federation. Participating farmbusinesses included two large cotton farming businesses near Moree in New South Wales andGoondiwindi in Queensland, and a large horticultural business in south east Queensland.
Two similar cotton farms in New South Wales and Queensland were selected to compare
differences in regulation between states. A horticultural business was chosen to provide anindustry contrast.

Format
The case studies were derived from semi-structured, key informant interviews (Bernard 2011).
Interviews were conducted face-to-face during visits with each business, and followed up withphone calls and emails to ensure that the narrative used to represent each example was
acceptable to the respondents. The main respondents at each farm were the owner/operators,
although other staff were called on to provide additional information.

Questions
General information about each farm business was collected to provide context and allow thereader to understand the perspective on regulatory compliance provided by each example. Theinterviews were conducted as conversations structured around the following questions:•

What major activities occur in each month throughout the year?

•

What types of regulation are associated with these activities?

•

What effort (in terms of time and cost) is involved in complying with regulations?

•

What would staff and resources be allocated to if not complying with regulations?

Prompts
Prompts were given to help define direct costs such as staff time, travel costs and equipment,
as well as tasks including form filling, emails, phone calls and meetings. Prompts were notinitially given regarding the types of regulation affecting farm businesses in order to identify theissues of most concern to the respondents. Relevant areas of regulation that may have been
overlooked by the respondents were introduced later in the interview as required.

Case studies
Narratives were constructed from detailed notes taken during the interviews, including direct
quotes, supplemented by recall. Each case study was validated, and in two cases edited, by the
respondents to ensure that the text accurately represented their narrative.
The topics covered by the case study narratives are summarised in table C.1, while elements ofthese case studies have been used throughout the report.

624

REGULATION OF AUSTRALIAN AGRICULTURE

Table C.1

Summary of case studies

Cotton farm — Moree
Activity

Regulation/issue

ImpactPeak periods of farming operation Water licences

Stressful in peak periods

Submitting forms

Unreliable internet

Lost email, repeat form filling

Monitoring GM crops

GM licensing

Time consuming, aids agronomy

Trialling new crop varieties

Heavy-handed implementation‘Terrible waste’ – crop burnt

Moving farm machinery

Heavy vehicle registration

Forgone contracting work

Floodplain harvesting

Establishing water rights

Forgone investment

Activity

Regulation/issue

ImpactTrading water

Slow regulatory approval

Lower crop yields, profit

Building a bridge

Duplicate state regulation

Stress, unnecessary bureaucracy

Trucking cotton to gin

Larger loads permitted

Fewer trips, less trucks on road

Employing foreign workers

Opaque visa application process

Time wasted, delays

Adding to environmental flows

Narrow focus of regulators

Delays, lost ecological opportunity

Responding to market prices

Costly chemical registration

Missed market opportunities

Conserving soil moisture

Overly prescriptive regulation

Lost crop opportunities, low yields

Keeping staff safe at work

Risk shifted to employers

Reduced workforce, inefficient use
of machinery

Developing a new property

Native vegetation regulation

Lost investment opportunity

Cotton farm — Goondiwindi

Vegetables — south east Queensland
Activity

Regulation/issue

Moving farm machinery

Local knowledge is ignored

ImpactLabour hire companies

Increased farm costs, reduced
road safety
Illegitimate employment contracts Undercut legitimate employers

Keeping staff safe at work

Risk shifted to employers

Reduced workforce, inefficient use
of machinery

Purchasing water

Cost padding by utilities

Increased costs, reduced profit

Using more selective chemicals

Foreign testing not acceptedIndustry collaboration forgone

Reduced productivity andinternational competitivenessExporting to new markets

Costly export certification

Lost market opportunities

CASE STUDIES

625

The diversity of regulations that apply to farm businesses
The main reasons for the regulatory burden experienced by farm businesses are thequantity, diversity and complexity of regulations that apply to them. This diversity wasreflected in the types of regulation raised during the case study interviews, including thoserelating to the environment, water resources, biotechnology, transport and work health andsafety (table C.1).
The case study interviews confirmed that the quantity and diversity of regulation that
farmers have to deal with results in a lot of time spent keeping track of regulation andcomplying with it. The time and effort required to keep track of regulation is further
compounded when activities or issues are regulated by multiple agencies in many
jurisdictions, and when these regulations are subject to constant change (box 4.4).
The farm businesses that the Commission interviewed had dedicated farm managers tomanage the day-to-day farming operations when the owner/operator was dealing withregulatory compliance. In smaller farm businesses, an individual farmer may need to
manage farming activities and comply with regulation at the same time.

The timing of farming operations is often incompatible with regulatory timeframes
The case studies revealed that regulatory burden is not just a function of the time and effort
required to keep track of regulation and comply with it, it is also a function of when thetime and effort is required. All three case studies revealed that the timing of agriculturaloperations can be critical to productivity, and that there are tight windows of opportunity
set by markets and weather conditions during which farming operations have to becompleted for productivity and profitability goals to be met (box 4.3, box 7.2, box 7.3).
The flexibility needed to rapidly adapt farming operations to changes in market andseasonal conditions can be incompatible with the fixed deadlines that apply to regulatorycompliance. For example, the timing of sowing operations can determine the profitabilityof a crop and have a significant influence on the farm’s income. All three farm businesses
that the Commission spoke to said that this routinely places farmers in the difficult positionof choosing between regulatory compliance and higher profitability. Several of theexamples in the case studies show why otherwise apparently minor regulatory complianceactivities, such as reporting water use or getting a permit to move agricultural machinery,
can cause significant stress during peak periods of farming activity.

Conflicts between the goals of regulators and the goals of farm operators
All three farm businesses mentioned that regulatory agencies can have responsibility for a
specific type of regulation, and the goals or objectives of regulators can be largely
unrelated to the goals of farmers relating to productivity, profitability or sustainability(box 2.8, box 3.9).
626

REGULATION OF AUSTRALIAN AGRICULTURE

The farm businesses argued that there was a need for more participatory approaches toallow regulators to tailor compliance with regulation to local operating contexts.

Farming work styles may not match those needed to comply with regulation
The farm businesses also said one of the reasons why they feel burdened by regulation isthat the administrative nature of complying with regulation is very different to the nature ofnearly all other aspects of farm-based work (including working outdoors doing physicallydemanding tasks and operating heavy machinery).
Two of the farm businesses the Commission spoke to employed full time Chief Financial
Officers, both of whom were qualified accountants and played key roles in terms of
ensuring compliance with regulation. All three farm businesses employed office managers
who also played an important role complying with regulation. While larger farmbusinesses may be able to employ staff to deal with regulation, smaller farm businesses are
more likely to have to leave farm work to deal with regulatory issues.

Cultural differences between farm businesses and regulatory agencies
Farm-based work is also highly interpersonal, and often involves working closely withimmediate family members. The owner/operators of the three farm businesses that theCommission met with lead diverse teams, and rely on trust-based relationships with input
suppliers and marketing agents. Many farming transactions are also based on long standing
interpersonal relationships and take place face-to-face or over the phone. In contrast, thefarmer owner/operators described regulation as usually taking place through impersonal
paper or web-based transactions with institutions represented by individuals who
frequently change role. The owner/operators considered that this cultural disconnect added
to the effort involved in complying with regulation, and worked against building the trust,reciprocity and volunteerism that would make regulation more effective.
All three farm businesses provided the Commission with examples of where they
considered that better consultation could have resulted in improved outcomes for farmers,
the community and the regulator. The examples included the burning of a GM cotton crop,
opposition to the construction of a bridge, and registration of new chemicals in the cottonand horticulture industries.

Incompatible technologies increase the costs of complying with regulations
All three farm businesses said that the costs of corresponding with government (andcommercial institutions) were high. Many institutions have switched from surface mail toemail for correspondence based on the high speed internet services available in most urban
areas. However, unreliable internet services in rural areas have resulted in lost

CASE STUDIES

627

correspondence and staff spending large amounts of time re-entering data lost whenweb-based forms failed.

Regulations that are not compatible with the operating environments of farms
Regulations that apply to farm businesses may cover, or have been designed for, otherindustries. Examples include regulations affecting employment conditions, work healthand safety, roads and transport and planning and zoning (box 2.8, box 11.3).
The farm businesses told the Commission that attempts to standardise regulation can add tothe regulatory burden in agriculture if differences in operating conditions are notrecognised. For example, the horticultural business suggested that rules for operatingmachinery such as forklifts were often designed for operating conditions in warehouses.
One of the businesses illustrated this point by outlining how the application of these rules
to the use of forklifts for vegetable harvesting reduced productivity for seemingly little orno safety benefit.
Another theme was that regulation limiting the movement of large machinery does notadequately recognise the low risks involved in moving machinery between nearby farms.
All three farm businesses, commenting on changes to work health and safety standards,
said the standards were now almost impossible to meet. One owner/operator said this wasin part due to the ‘ramping up at any cost’ of work health and safety regulation during themining boom. All three farm businesses also considered potential work health and safety
claims to be a constant threat to the viability of their businesses (box 11.6).
The owner/operators also highlighted regulations that they acknowledged met importantsocietal goals but worked against international competitiveness — examples included
minimum wages rates and superannuation, and visa conditions placed on foreign workers.

628

REGULATION OF AUSTRALIAN AGRICULTURE

D

Analysis of rice price premiums

This appendix provides an analysis of price premiums for rice exported from Australia. It
updates and extends previous analysis by Deloitte Access Economics (2012), which
compared the unit value of Australian exports to the price of Californian rice exports. It
extends this analysis using price data from the Food and Agriculture Organization of theUnited Nations (FAO) to compare price premiums generated in different groups ofcountries (‘regions’) to which Australia exports rice.

Methodology
Comparison with California
Deloitte Access Economics (2012) compared the unit value of Australian rice exports tothe price of Californian rice exports for the years 2001-02 to 2010-11. The Commission
repeated this analysis for two time periods (1989-90 to 2012-13 and 2003-04 to 2012-13)
using price data published by ABARES (2015a).
The nominal prices of Australian and Californian rice exports were converted from
US dollars to Australian dollars using exchange rates published by ABARES (2015a), andconverted into real terms using the consumer price index (with 2011-12 as the base year)
from the same source.
Price premiums were calculated by subtracting the Californian price from the Australianprice, weighted by the volume of trade in each year across the two time periods. This
compensates for years (such as drought years) when price premiums can be large for a
volume of trade that is small.
As a form of sensitivity analysis, price premiums were also calculated after adjusting
prices to reflect packaging and transport differences. This adjustment was made because
the costs incurred in packaging and transporting Australian rice are not price premiums
that are available to be distributed to rice growers.
Australia exports rice mainly as branded and pre-packaged products, and its price is quoted
at the point of export. In contrast, California exports similar varieties of rice in bulk, andthe export price is quoted free-on-board at the mill rather than at the point of export. Thismeans that the published price data do not reflect the costs of packaging and transport tothe point of export.

RICE PRICE PREMIUMS629

It is difficult to estimate the value added by packaging and transporting rice to the point ofexport without detailed industry data, so an approximation was used for sensitivity
analysis. Spencer (2004) found that the value added by processing, packaging and transport
to the final price of rice was between 20 and 25 per cent. Exporting is only an intermediatestep in the value chain, so it is reasonable to assume that the value added by processing,packaging and transport is a higher proportion of unit export values than it is of the final
retail price. This would suggest using an estimate higher than the 20 to 25 per cent range.
However, the value added estimated by Spencer already includes processing as well as
packaging and transport to the point of sale. This suggests using an estimate lower than the
20 to 25 per cent range. Taking both of these factors into account, the Californian price
was conservatively adjusted upwards by 10 per cent to reflect the value added of packaging
and 5 per cent to reflect the value added by transport to the point of export.

Comparison by export region
According to NSW Trade & Investment (2012), a weakness with the type of analysis
conducted by Deloitte Access Economics is that it relies on global average data, rather than
individual country data. As SunRice is the only exporter of rice from Australia, theAustralian Bureau of Statistics maintains commercial confidentiality by not publishingexport volumes or values by country of destination.
Deloitte Access Economics (2012) cited unpublished SunRice data which suggested that
there was a 20 per cent price premium for the Middle East and New Zealand markets.
The FAO publishes volume and value data for rice exported from Australia and imported
into 123 countries between 1986 and 2013 (FAO 2016a). The Commission used this datafrom 1989 onward to estimate price premiums from 25 Middle East and North African(MENA) nations accounting for around 30 per cent of Australia’s exports, and for New
Zealand which accounts for about 10 per cent of exports (figure D.1). The trade weighted
price for the MENA region mainly reflects Australian exports to Israel, Saudi Arabia,
Jordan and Turkey, and to a lesser extent exports to Kuwait, the United Arab Emirates andSyria. The analysis was repeated for two time periods, the 24 years from 1989-90 to
2012-13, and the 10 years from 2003-04 to 2012-13.
As above, a trade-weighted import price was calculated by dividing the value of imports by
the volume of imports from Australia to each country, and weighting the resulting ‘unit
import value’ (average price of imports in each year) by the volume of imports to eachcountry in each year. Prices were converted from United States to Australian dollars using
exchanges rates published by ABARES (2015a) and converted into real terms with
2011-12 as the base year using the consumer price index from the same source.

630

REGULATION OF AUSTRALIAN AGRICULTURE

Figure D.1

Destination of Australian rice by regiona

100%

80%

Rest of world

60%

Middle East/North Africa
East Asia

40%

Pacific20%0%1986-1989

1990-99

2000-20092010-2013

a Average per decade or part-decade.
Data source: FAO (2016a)

The price of imports from Australia into each region was adjusted for the cost of insurance
and freight to estimate a free-on-board export price that could then be compared to theprice of Californian exports (available from 1989 onwards, and adjusted for transport andpackaging as above). The cost of containerised shipping for agricultural products to northand east Asia was reported by Shipping Australia Limited (2014) to be around A$30 a
tonne, which is similar to the cost of bulk grain exports estimated by Stretch et al. (2014).
A cost of A$40 a tonne was conservatively estimated for shipping from Australia to theMiddle East and North Africa, and A$15 a tonne to New Zealand.
To compare the price of Australian imports to New Zealand, the price of Californian rice
was increased by A$25 a tonne ($40-$15=$25) to reflect the additional cost of transporting
rice from California to New Zealand. This is consistent with the cost of transporting grainfrom California to Asia as estimated by Stretch et al. (2014). This transport cost advantage
is a form of price premium that should be available for distribution to Australian rice
growers, provided it is not dissipated in other markets.
Price premiums were calculated by subtracting the Californian price from the Australian
export price (calculated from the adjusted price of Australian imports into each region),
and weighted by the volume of trade in each year across the two time periods (again tocompensate for variability such as drought years when price premiums can be large but thevolume of trade small).

RICE PRICE PREMIUMS

631

Sensitivity analysis was conducted around the various adjustments made to compensate fordifferences in cost, freight and packaging.

Results
Comparison with California
The analysis comparing Australia’s aggregate export price to the price of Californian
exports shows a price detriment of -5.9 per cent for the period 1989-90 to 2012-13, and asmall premium of +1.2 per cent for the period 2003-04 to 2012-13 (table D.1). When the
Californian price is adjusted for packaging and transport, the analysis of table D.1 shows aprice detriment of -18.1 per cent for the period 1989-90 to 2012-13, and -12.0 per cent forthe period 2003-04 to 2012-13.

Comparison by export region
The results of the analysis by export region are presented in table D.2. For the 24 years
from 1989-90 to 2012-13, the trade-weighted price detriment of Australia’s rice exports toall 123 countries was -4.7 per cent, compared to -12.1 per cent for the MENA region and (aprice premium of) +25.3 per cent for New Zealand. For the 10 years from 2003-04 to
2012-13, the analysis suggests that premiums were close to zero for all countries (+0.8 percent) and the MENA region (+1.1 per cent), but strongly positive for New Zealand(+46.9 per cent).
Sensitivity analysis shows that estimates of price premiums are larger without adjusting forthe costs of insurance, freight and processing. Along with trade weighting the price data,
this may account for differences with past analyses.

Conclusion
The Commission’s preliminary analysis finds little or no evidence of a sustained andpositive price premium for Australian rice exports in world markets. Premiums received
for markets such as New Zealand appear to be offset by lower returns in other markets.

632

REGULATION OF AUSTRALIAN AGRICULTURE

Comparison of Australian and Californian export prices

Table D.1

Nominal

US$/$A

Nominal

US$/t

CPI

A$/t

Cala

Cal+b

89-90
90-91

358
355

411
408

91-92

396

92-93
93-94
94-95

Real

Price premium(Aus to Cal.)

A$/t (2011-12 prices)

A$/t

%

Ausc

Cal

Cal+

Aus

Cal

Cal+

0.77
0.79

440
452

465
451

534
519

55.7
58.6

790
771

834
770

959
886

-45
1

-5
0

456

0.77

402

515

592

59.7

674

862

991

-188

-22

395

454

0.70

448

562

646

60.3

743

931

1070

-188

-20

486
392

559
450

0.69
0.74

480
513

703
527

809
606

61.4
63.4

781
809

1144
832

1316
956

-364
-22

-32
-3

95-96

465

535

0.76

600

612

704

66.1

907

926

1065

-19

-2

96-97
97-98

432
413

497
474

0.78
0.68

567
565

552
605

635
696

67.0
67.0

846
844

824
904

948
1039

22
-60

3
-7

98-99
99-00
00-01

484
475
338

557
546
389

0.63
0.63
0.54

587
665
607

772
755
628

888
868
722

67.8
69.4
73.6

865
958
824

1138
1087
853

1309
1250
981

-273
-129
-29

-24
-12
-3

01-02

294

338

0.52

637

561

645

75.7

841

740

851

100

14

02-03
03-04
04-05

327
533
404

376
613
465

0.58
0.71
0.75

564
508
651

559
748
537

643
860
618

78.0
79.9
81.8

724
636
796

717
936
657

824
1077
756

7
-301
139

1
-32
21

05-06
06-07
07-08
08-09

484
538
694
1119

557
619
798
1286

0.75
0.79
0.90
0.75

767
787
692
779

648
685
774
1495

745
787
890
1719

84.4
86.9
89.8
92.6

909
905
770
841

767
788
861
1613

882
906
990
1855

142
118
-91
-772

18
15
-11
-48

09-10
10-11
11-12

791
796
764

910
916
879

0.88
0.99
1.03

1535
1799
1116

896
806
741

1031
927
852

94.8
97.7
100.0

1619
1840
1116

946
824
741

1087
948
852

674
1016
375

71
123
51

12-13
712
819
1.03
813
693
797 102.3
795
678
780
117
17
a Cal: Californian price; US no. 1 medium grain milled, bulk, free on board truck at Californian mill. Prior toAugust 2010 reported as sacked. b Cal+: California price increased by 15 per cent for value adding.
c Aus: Australian price; gross unit value of Australian exports. From 1988-89, calculated from marketing
year (April–March) total export values.

(continued next page)

RICE PRICE PREMIUMS

633

Table D.1(continued)

Price premium

Exports Trade weight(Aus to Cal+)
89-90 03-04
toto
12-13 12-13
A$/t

%

‘000t

89-90

-170

-18

311

90-91
91-92

-115
-317

-13
-32

321
423

92-93
93-94

-327
-535

-31
-41

94-95

-147

95-96

-158

96-97
97-98
98-99

Trade weighted pricepremium

Trade weighted pricepremium(Aus to Cal)

(Aus to Cal+)

89-90
to
12-13
A$/t

%

0.03

-1

0.03
0.04

0
-8

516
502

0.05
0.05

-15

548

-15

594

-102
-196
-444

-11
-19
-34

99-00
00-01
01-02

-292
-157
-11

02-03
03-04
04-05
05-06

03-04
to
12-13
A$/t

%

-0.2

-5

-0.6

0.0
-1.0

-4
-14

-0.4
-1.4

-10
-19

-1.1
-1.7

-18
-28

-1.6
-2.1

0.06

-1

-0.2

-8

-0.9

0.06

-1

-0.1

-10

-0.9

614
540
703

0.06
0.06
0.07

1
-3
-20

0.2
-0.4
-1.8

-7
-11
-32

-0.7
-1.1
-2.5

-23
-16
-1

607
710
661

0.06
0.07
0.07

-8
-2
7

-0.7
-0.3
0.9

-18
-12
-1

-1.5
-1.2
-0.1

-101
-441

-12
-41

704
287

0.07
0.03

0.15

0
-9

0.1
-1.0

-46

-4.9

-7
-13

40
27

5
3

151
69

0.02
0.01

0.08
0.04

2
1

0.3
0.1

11
5

1.7
0.7

06-07
-1
07-08 -221
08-09 -1014

0
-22
-55

103
414
191

0.01
0.04
0.02

0.06
0.22
0.10

1
-4
-15

0.2
-0.5
-0.9

6
-20
-79

09-10

532

49

45

0.00

0.02

3

0.3

10-11
11-12

892
263

94
31

21
91

0.00
0.01

0.01
0.05

2
4

0.3
0.5

12-13

15

2

501

0.05

0.27

6

1.00

1.00

-75

Total

A$/t

89-90
to
12-13

%

A$/t

%

-0.9
-1.2

-68

-6.3

1
0

0.1
0.0

3
1

0.4
0.1

0.8
-2.3
-4.9

0
-9
-20

0.0
-1.0
-1.1

0
-49
-103

0.0
-4.9
-5.6

16

1.7

2

0.2

13

1.2

11
18

1.4
2.5

2
3

0.2
0.3

10
13

1.0
1.5

0.9

31

4.6

1

0.1

4

0.5

-5.9

-45

1.2

-209 -18.1

Sources: ABARES (2015a), analysis follows Deloitte Access Economics (2012).

634

REGULATION OF AUSTRALIAN AGRICULTURE

03-04
to
12-13

-176 -12.0

Table D.2
MarketPrice premiums for Australian rice exports
Percentage ofAustralian exports

Insurance
and freight

Packagingand transport

1989-90
2003-04
to 2012-13 to 2012-13
%

100

100

1989-90
to 2012-13

2003-04
to 2012-13

A$/t

A$/t

A$/t

%

A$/t

%

30

15

-52

-4.7

3

0.8

Low
High

20
40

10
20

2
1.4
-107 -10.9

57
-51

7.0
-5.5

No adjustment
MENA(25 countries)

0

0

112

164 19.4

Baseline
Low

40
30

15
10

-120 -12.1-66 -5.9

3
53

High
No adjustment
New Zealand

50
0

20
0

-173 -18.3
50
7.7-48 -5.2
164 21.1

15
10
20
0

15
10
20
0

193
242
144
339

379
425
332
518

World
(123 countries)
Baseline%

Premium relative
to Californian price

26.9

6.8

13.7

36.2
1.1
7.3

10.2

Baseline
Low
High
No adjustment

25.3
30.9
19.7
42.1

46.9
52.5
41.3
63.8

Source: Productivity Commission analysis.

RICE PRICE PREMIUMS

635

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