I’ve been thinking a lot lately about how people and businesses make investment decisions.
As individuals, when we are considering buying a certain stock, a particular house, tractor or car, we will only complete the deal once we are confident the environment is right to make the commitment. That relates to price, reliability, reputation, resale value, etc. Businesses use the same general criteria in making their investment decisions.
One of the key factors taken into consideration in any investment decision has to be that of sovereign risk. The meaning of this term has changed a bit over time. These days, we take it to mean the risk of governments changing the rules midstream and undermining the basis on which decisions have been made.
This is an increasingly significant issue in Tasmania. Agriculture is faced with an ever-growing and increasingly impenetrable mass of red and green tape. At the same time, the government keeps shifting the goal posts. To identify just a few examples think forestry, chemical usage, animal welfare, environmental issues ... the list goes on and on.
Our job at the TFGA is to hold the government accountable when it considers or makes changes that it will impact on farmers and agriculture. And we work hard at doing that consistently and credibly.
Our latest effort is the submission we have made to the Tasmanian government as part of the consultation for next year’s Budget. I won’t go into detail about the things we have outlined in that submission—other than to say that many of the issues discussed in the document are not new. You can read the report on our website
I seem to have been saying ad nauseam this week (in connection with the forestry legislation) that the TFGA wants to be part of the solution, not part of the problem; that we have constructive ideas; the glass is half-full, etc, etc. We absolutely believe that there can be a great future for agriculture in this state. And, of course, we fully appreciate all the great things the government has delivered or helped to deliver in our sector, not the least being the new irrigation era.
In that spirit, we have said to the government that we want to work with them to create an even more innovative, competitive and sustainable agriculture industry. We know we have the backing of farmers in taking that approach. Our own research towards the Agriculture 2025 vision tells us that farmers, processors, retailers and consumers have a positive view of our future; that we can prosper, we can lead the economy with the appropriate regime of government support, regulation and deregulation, environmental policies and public and private infrastructure.
This is really interesting. Our economic output has grown every year. When you take into account basic multiplier factors, the farm-dependent economy contributes almost a quarter of gross state product, $5.5 billion. That is huge, much higher than other states.
The government talks a lot about investor confidence. However, they seem only to be focussed on external investors and not at all concerned about our homegrown ones. Every day, Tasmanian farmers are putting their money where their mouths are and investing in their businesses. This has a flow on effect right across Tasmania; when farmers are doing well, they spread that wealth widely.
If you take investment in the irrigation schemes as an example, our farmers will be putting in something like a half a billion dollars to distribute their water across their properties once it has been “delivered” to the boundary. That is on top of the money they will already be paying for that delivery. In the case of the first tranche of schemes, that comes to $90 million. For the second, $54 million.
It is a case of business confidence makes for investor confidence, which makes for more investment - regardless of where the investment comes from. Homegrown investment brings additional benefits though, in that there is a greater likelihood it will be ‘sticky’ and generally a greater flow on in local communities.
So the take-home message of our budget submission to the government is let’s do it together, create a sound climate in Tasmania for all investors and we can show the world what we are capable of doing.