The Australia Institute, a national think tank, has this week produced a startling report looking at the impact of the mining boom on national farm income.
The research concluded that the effect of the high Australian dollar on agriculture has been horrific.
We have had a look at the figures and come up with an equally disturbing view of what it has meant for Tasmanian farmers.
First though, lets look the national picture through the eyes of The Australia Institute’s senior economist and author of the report, Matt Grudnoff.
He says that since the beginning of the mining boom in 2003-04, Australia’s rural sector has lost $61.5 billion in export income. This includes $18.9 billion in 2011-12 alone.
The mining industry has pushed up the Australian exchange rate and, in doing so, has cut the export earnings of trade-exposed parts of the economy. This is the reality of Australia’s two-speed economy.
Grudnoff says cotton growers, for instance, lost $1.3 billion in 2011-12; wheat growers $3 billion in that year and $8.3 billion over the full period of the boom; and the beef and veal industry $8.5 billion over the full period.
“The idea that any growth in the mining sector will serve to enhance Australia’s income is simply untrue,” Grudnoff says. “The macro economy is far more complex, with unintended consequences like the high Australian exchange rate negatively impacting on non-mining sectors – particularly, as has been shown here, the rural sector.”
He says agricultural producers have suffered a 47 per cent drop in export earnings since the boom began. The reason, of course, is that farmers are price-takers, not price-setters. Therefore, the high dollar devalues our exports and makes imports more competitive.
“The mining boom is great, if you work in the mining industry,” is one of the understatements of the year. Economies become unsustainable when they rely too heavily on a few industries – and we’ve already seen some of the implications of this imbalance playing out.
So what has this meant for Tasmanian farmers?
We have been hit hard on export income on red meat, dairy, wool and pharmaceutical products. Our best estimate is that annual losses in Tasmania due to the high Australian dollar across these sectors are at a minimum $200 million at the farm gate. At the same time, of course, we face consequent increased competition from imports made cheaper by the dollar; and 85 per cent of our output is subject to price and substitution pressures.
Australia now imports the equivalent of 80 per cent of Tasmania’s potato production, most of it from (or through) New Zealand. That alone results in a farm gate loss of $25 million. When valued-added, it is close to $70 million. The loss of McCain’s vegetable processing to New Zealand – a direct result of the high dollar – cost us $50 million a year, $120 million value-added.
Woodchips have been a valuable income earner for Tasmanian farmers over recent years. The currency impact is estimated to be around $150 million annually.
So, if you add all this together, we estimate (probably conservatively) that the impact of the er high $A on the Tasmanian farm sector has been not less than $430 million each year at the farm gate; and substantially more when you add the processing multipliers.
The message here is that the mining boom has not been a win-win for the Australian economy. Through the value of the Australian dollar, it has had a dramatic downside effect on the national rural sector – and that has been clearly reflected here.
Politicians need to remember that – and recognise the uneven impacts of the mining boom across the nation. This data shows that not only has Tasmania not seen any direct benefits from the mining boom; but we have actually suffered a real financial loss.
And, once again, Tasmanian farmers are bearing the brunt of this cost on behalf of all Tasmanians.
• Earlier on Tasmanian Times, Dr Buck Emberg: Mining, the Best and the Worst
