Bush Matters Op-Ed – “Free market free-fall”

13 June 2014

There is a secret club that speak only in hushed tones within the hallowed walls of Federal Parliament.

Fearful of being ‘outed’ by our coalition colleagues, we have considered creating a secret handshake, a secret password and a secret code of ethics.

I am speaking about those members of the coalition that do not blindly salute the flag of the ‘free markets.’

We are certainly no strangers to this debate. The pros and cons of economic rationalism have been debated for several decades.

However, while in its ideal, it refers to the reduction of government intervention in the economy in favour of enabling ‘market forces’ to organise economic activity, the reality has seen the biggest players get bigger at the expense of the remaining supply chain.

While it may be uncomfortable territory across the political divide, it is a fundamental dispute that must be debated in the push for a strong agriculture sector that is positioned to capitalise on the burgeoning overseas opportunities.

In recent weeks, some commentators have argued that stances taken by The Nationals, especially in regards to selling state assets and collective models of ownership, is hypocritical and wrong footed.

But to suggest that ‘market forces’ should simply be allowed to dictate the trajectory of rural industry and, with it, public policy, ultimately becomes a disservice to people across the agriculture sector.

More than a decade of deregulation across several agriculture sectors has not resulted in the monetary gains at the farm gate level that were promised.

Instead, it has emboldened many multinational corporations to stifle competition and, with it, any criticisms of their unbalanced and unprecedented market power.

It has enabled large, multi-national corporate gorillas to break free of their zoo cages, tip over the pie van and climb up the flagpole.

Whether it is rural representative groups or the Australian Competition and Consumer Commission or multiple Senate Inquiries – there are many trying to clean up the aftermath from the gorilla’s ongoing rampage, but no one is ever going to convince it to get back in its cage.

Philosophically, a free market can only exist when there is freedom of choice, transparency of transaction and the existence of true forces of supply and demand.

Proponents of free market policy in agriculture simply like to go to bed and not think about what is happening so that when they wake up in the morning, it is done.

The winner is the last man standing. Disregard that there was no transparency, no choice and no freedom.

Can anyone seriously claim that Queensland dairy farmers currently enjoy an open, transparent and most importantly, free market – one indeed with freedom of choice?

Dairy farmers wanting to provide their fresh product to the general marketplace realistically only have one choice – they can supply their milk to (mostly) foreign owned processors that will most likely place the cartons on the shelves of either Coles or Woolworth.

There is no transparency, there is no freedom of choice and there is certainly no tension of market demand.

If farmers challenge or protest the price they receive, the supermarkets can always just truck milk from the southern states into Queensland.

Currently Queensland Nationals are vocally opposing Wilmar Sugar’s proposal to remove itself – and 60 per cent of Australia’s sugar – from the century-old national marketing system.

Due to deregulation, Wilmar can claim its participation with Queensland Sugar Limited (QSL) is only voluntary.

Wilmar does not need to concern itself with the impacts its decision will have on the family cane farms that do not supply its mills.

Wilmar does not need to concern itself with the long term viability of the Australian sugar industry.

Of course, business should be encouraged to make its own decisions and profit should be both the focus and the reward for sound management. Government should always work to encouraging this situation.

But when the collective fortunes of any industry are so intrinsically linked as is the case with agriculture, businesses also have an ethical responsibility to ensure viability across the supply chain.

Our rural industries are facing the challenge of maintaining competitive advantage and driving productivity gains within rapidly expanding and changing global markets and operating conditions.

Australia’s future productivity and prosperity is closely tied to our ability to maintain our position as a world leader in the management and production of our sustainable resources, especially across the agriculture and mining sector.

The dual imperative of raising productivity and workforce participation is fundamentally changing the required skills and knowledge required for the agriculture industry.

If industry is to achieve these imperatives, workers will require new skills and deeper knowledge, including higher level technical and innovation skills.

This requires money – at a time of falling profits at the farm gate.

Australian farmers are price-takers. This means their futures are often tied to the whims of the supply chain oligarchs that deregulation has spawned.

The market does not always get the balance right. Responsible policy debate should recognise this and adapt accordingly.

If that means critics will accuse me of being an agrarian socialist, then I suppose it is a flag that I will proudly salute.