Australian Food and Grocery Council Leaders Forum
30 October 2013
[Check against delivery]
Thank you for your welcome, I’m delighted to be here with my colleague Bruce Billson, the Minister for Small Business, representing the Australian Government. My colleague, the Minister for Industry, Ian Macfarlane, has been unable to attend today as he is in Asia pursuing new opportunities for other areas of the Industry portfolio and has asked me to convey his apologies.
I’m sure you appreciate just how vast the breadth of the new Industry portfolio is, bringing together logical economic elements. The new portfolio combines manufacturing with resources and energy, and science with skills, bringing together major economic inputs. To be blunt, we are facing some challenges, particularly in manufacturing, and in getting new investment in the resources and energy arena. So Ian Macfarlane is knocking on doors in Asia, but I know he agrees with me that this Australian Food and Grocery Council Industry Leaders Forum is a great opportunity for the government to build new partnerships with your industry.
As you will no doubt be aware, in these first few weeks in Government, Ian has been very active talking and listening with stakeholders in a number of industries central to Australia’s prosperity. I am confident that today will mark the beginning of a long and fruitful, pun intended, relationship with you.
My colleague Bruce Billson has already seized some of the good statistics about the value of the food and grocery sector. Before I delve into stats, as Parliamentary Secretary for the portfolio, I want to echo his remarks about our determination to build an export competitive manufacturing sector.
The Australian Government views food manufacturing as a critically important part of the Australian economy, in 2012-13:
- it accounted for almost a quarter of total manufacturing employment;
- was the largest contributor to total Australian manufacturing value added;
- represented 1.5 per cent of Australia’s total gross domestic product;
- and generated approximately $19 billion in export revenue.
We are committed to working with you, the food and grocery manufacturers, to ensure that your industry continues to prosper. We know that Australia produces more food than we need to feed our 23 million people. In fact, we produce around twice what we eat, and we export the rest.
I want to reflect on how and in what form we export that surplus. But briefly, before I talk about that, food security is a looming global issue. Food security poses significant economic, political and social challenges. It’s been estimated that more than 800 million people face the uncertainty of not having enough to eat. The vast majority of these, almost 66 per cent, are in the Asia Pacific region. Notwithstanding the domestic debate about Australian food security, we are part of the global solution, not part of the problem.
The Asian consumer market is changing. In particular, the growing middle and affluent classes are increasingly demanding premium food products that are proven to be high quality and safe. Already our exports of processed food to China have doubled from around $500 million in 2007-08 to nearly $1 billion in 2011-12. As the affluent classes in China grow, so will the opportunities for Australian food manufacturers. Other markets like Japan and Korea rely on food imports; Japan imported processed food worth US$40 billion in 2011, and Korea, US$14 billion.
Although domestic food manufacturing faces many pressures, it also has the potential to access the unprecedented growth opportunities created by these new demands. By the same token, we can’t be complacent and assume that Asia’s economic development and our proximity to Asia will open the market doors. While Australia’s processed food exports to Asia continue to grow, our market share in exports of processed food has actually been slipping in nearly all Asian markets for the past five to seven years.
For example, our share of Korea’s processed food imports fell from 18 per cent in 2006 to 12 per cent last year, and our share of Indonesia’s processed food imports from 16 per cent to less than 8 per cent in the same period. So, do we have room for complacency? It would seem not. These numbers highlight just how fiercely competitive the market is. The high dollar is only one factor. Our competitors in the market place are also actively pursuing our market share.
These declining market shares underscore a need for us to strategically address key barriers to global competitiveness. Our competitors will be working to limit our ability to reach our full potential if we don’t address these barriers. In that context, the Prime Minister and the Minister for Trade and Investment have already signalled fast-tracking Free Trade Agreements with three of Australia’s largest food export markets – Korea, Japan and China – is a priority.
Australia has a strong global reputation for producing premium, clean and safe food. But industry and governments will need to work together to ensure we establish economic and regulatory settings that: keep business costs down; provide essential infrastructure; reduce regulatory burdens on business; and encourage international engagement.
Your recent Competitiveness and Sustainable Growth Report highlighted the fact Australia’s attraction as a base for food manufacturing is declining, due largely to rising domestic manufacturing costs and increased import competition. Notwithstanding this we do still have a strong food manufacturing base in place.
It’s important that we stop the slippage by getting the right settings in place so our competitive edge is never lost and our food business grows. We will work with you to alleviate the key barriers to growth so we can further unlock value in local food manufacturing. We want food businesses to confidently invest in new business growth opportunities with the expectation of good profits.
I suspect a small part of the battle is one of perception here at home. I’d be willing to bet London to a brick that when most people think about manufacturing in Australia, they are not thinking about food. They’re more inclined to think about cars or heavy industry, perhaps adding in defence manufacturing and probably, mining machinery.
The stats about employment in the sector say it all: food and grocery processing, not just the initial growing of food, is a huge part of Australian manufacturing. So we have a number of mighty tasks ahead of us, starting with turning around local perceptions, to turn around the fortunes of our manufacturing sector.
In that regard, I will speak broadly about key aspects of the Australian Government’s approach to industry policy.
Action Agendas
The Government believes that industry and private businesses are best placed to steer their own fortunes, rather than rely on Government for significant financial injections. Industry will have an active role in our Action Agendas policy.
Action Agendas will empower industries and their leaders to develop solutions to the challenges their sectors face. Importantly, Action Agendas will set out the reductions in red tape necessary to promote greater investment and jobs growth
The success of Action Agendas will depend on industry commitment and leadership, but Action Agendas are also a partnership between industry and Government. For its part the government will establish economic and regulatory settings that encourage businesses to grow. For industry’s part, we will expect the implementation of genuine industry-led actions to pursue growth opportunities, regardless of whether they are in Asia or domestically.
We are committed to working with Australian manufacturers to make our manufacturing globally competitive and a source of jobs growth and higher real wages.
Regulatory Reform
Regulatory reform, as Bruce has already said, is essential to meeting the government’s target of cutting red and green tape by $1 billion a year annually. We know that removing as much of the regulatory burden as possible returns time, focus and resources for business to invest in their business.
I understand the Australian Food and Grocery Council engaged Deloitte Access Economics to work with food and grocery manufacturers to identify regulatory reforms for their sector, and to estimate the economic impacts of those reforms. We are very interested in this work because it will give us a head start.
We are particularly interested in government regulation that can be delivered more efficiently, harmonised or even repealed altogether, as the government wants businesses to focus more of their time on new markets and new products, not compliance and increasing costs.
Similarly, industry can play a role by reducing its own industry-imposed regulatory burdens. I understand AFGC has surveyed its members to identify overlap in industry-led Quality Assurance (QA) schemes. If there are opportunities to reduce industry-imposed QA burdens, then I hope AFGC will be able to work with its constituency to achieve greater cooperation and mutual recognition of audits between food and grocery supply chain participants.
Regulatory reform is just one part of what we see is appropriate for Action Agendas. The Government will have further announcements on Action Agendas in due course.
Improving Linkages
The Government supports initiatives that improve linkages between businesses and research organisations. I expect that there will be strong synergies between these initiatives and Action Agendas.
The Government supports these linkages because we understand they will help Australia to become more globally competitive in areas of future economic potential. Obviously, the food industry is one of those sectors. And in that context, we recognise that many businesses and other organisations in the Australian food sector have invested significantly in the establishment of the food precinct, through the creation of Food Innovation Australia Limited.
Clearly the sector values Food Innovation Australia Limited. Already much work has been done establishing a strategic vision for the sector and developing a practical plan to help it to realise its potential. I know that your council has made a substantial contribution to Food Innovation Australia’s leadership.
I particularly acknowledge the contribution Mr Geoffery Annison has made to Food Innovation Australia Limited as a board member. I can say too, that the Government is taking a considered approach to the program’s overall design and is considering possible options to progress the initiative.
We look forward to involving Food Innovation Australia Limited as we commence this process and appreciate your support and patience during the transition period.
Anti-Dumping
I want to talk about some other areas that I feel will interest you, as you know, this is a Government which strongly supports genuine free and fair trade and an open and dynamic market economy. An effective trade remedies regime is integral to a robust international trading system. It will also be critical to our broader plan to boost the competitiveness of Australian businesses.
I’m not talking about protectionism, but about creating and maintaining a level playing field for our businesses.
As a part of sending a clear message that we mean business in combatting unfair dumping, we are moving responsibility for anti-dumping matters to the Industry portfolio. The Anti-Dumping Commission will benefit from the considerable industry knowledge and experience that exists across the portfolio.
We know that Australia already has a robust and transparent regime to combat dumping and that it complies with our obligations under World Trade Organization agreements.
However, we also know that there is room to further improve the efficiency and effectiveness of Australia’s anti-dumping and countervailing system.
That is what we plan to do.
Manufacturing Transition Grants Program
At this point, I want to say, in the immortal, but slightly distorted words of Mark Twain, that reports of the death of Australian manufacturing are greatly exaggerated, however Australian manufacturing is undergoing a transition phase, from ‘heavy’ or capital-intensive assembly-type work to niche industries.
These niche industries are built around the innate cleverness and creativity of Australians and rely on intellectual capital to create competitive advantage. We recognise that this transition is well advanced and is driven by forces that are predominantly outside Australia’s control. Niche industries present wonderful avenues for local communities to ensure a diversity of economic activity in their areas.
The government wants to ensure that Australia embraces the exciting opportunities of the future so we are not left behind still stubbornly holding onto the manufacturing of yesteryear. We know that Australian businesses must adapt to global conditions in order to remain competitive. Therefore our policies are designed around encouraging the development of high-value added, competitive manufacturing industries.
They are the industries that have strong growth prospects and are able to capitalise on our competitive strengths.
I spoke to the Managing Director of a successful Australian food firm doing business in Asia. He captured the concept simply, saying that his company’s export strategy was built on always doing the smart, value-add, premium foods that Asia simply can’t do for itself. He coupled this with saying that the company had its eye on the ball and also worked to continuously stay one step ahead of his competitors in Asia.
The Government doesn’t expect industries and communities to do this alone.
To help in the process of adaptation and change right across industries, we are proposing to make $50 million available to businesses and communities over two years to assist with the transition and adaptation process. The new Manufacturing Transition Grant Program will assist communities and businesses transition to new and expanding manufacturing sectors.
There is quite a bit of work to do before the program commences but I expect funding will be available from next July.
Conclusion
Before I close I want to reiterate, that the Australian Government is well and truly aware of the importance of the food and grocery sector, as an integral part of the wider manufacturing sector. We know food and grocery manufacturing is often at the heart of regional economies across Australia and also of the small business sector, itself a major economic force. We also recognise that the food manufacturing sector has enormous potential for value adding and employment creation.
My take out message for you as a sector then, is: to look to new processes; to look to the opportunities and to work together towards turning around the decline in some markets of our exported processed food market share.
The opportunities are there to create value for Australians by exporting less raw food and looking to add value before food leaves our shores. We’re right behind you as you explore how to make this happen.
Tony Abbott said it very well in his election night speech: I declare that Australia is under new management and Australia is once more open for business.
Media contacts: Mr Baldwin's office 02 6277 4200
