There’s been a lot of talk of late about the need for governments to stop propping up unviable businesses and industries.
The case in point has been the car industry. With every passing day, analysing that sector’s problems has become less a diagnosis and more a post-mortem. The biggest issue has been that few politicians have been willing to sign the death certificate. So we, the taxpayers, keep pouring good money after bad into something that is terminally broken – $12 billion over the last 10 years and more than $45,000 for each job every year in the case of General Motors.
Why did Australia have to have a car industry if it was uncompetitive and uneconomic? New Zealand has never had any qualms about not having its own cars, so why should we? And cars are far cheaper in NZ.
So why has this never been questioned before now? It’s a feel-good factor, I think. Sort of like saying we keep producing Vegemite and Hill’s Hoist washing lines, so hadn’t we better keep rolling out Holdens? And who else are we going to barrack for at Bathurst?
In reality, we have been propping up an inefficient industry by paying the wages bill at a company we don’t own to produce cars that Australians clearly do not want.
It doesn’t make sense, does it?
At the same time as we have been pouring money into the car industry, we have seen thousands of Australians losing their jobs in food manufacturing, with knock-on effects into the farming community. Somehow, though, until recently that hasn’t generated the same national outcry as the demise of Australian-born Holdens, Ford and Toyotas. That has turned around a little over recent weeks, with the situation that has arisen in Shepparton with the announcement of the closure of the SPC-Ardmona cannery.
The immediate reaction then was to look for a government bailout, even though the federal government made it clear the national purse was empty.
Interestingly, in this debate, the economic rationalists were quick out of the blocks to once again take a swipe at Australian family farmers. They have been drawing analogies between government subsidies for foreign-owned manufacturers in the car and food sectors and support payments to farmers during times of drought.
“Let them stand on their own two feet,” they say. “If they can’t compete in a global market, they need to toughen up or get out,” they say. “No public funds should go to support unviable and unsustainable farm businesses,” they say.
Let just unpack that a little – and run it through a fact checker.
Australian farmers receive next to nothing in subsidy payments. In fact, with New Zealand, our farmers get the lowest level of assistance in the world.
According to the OECD, only three per cent of an Australian farmer’s income is attributable to government assistance. The three major components of that subsidy are: matching dollars for industry funded R&D; assistance after natural disasters, and the diesel fuel rebate. The OECD average is 20 per cent, capped by Norway at 60 per cent.
The equivalent figure in Australia for cars and parts is 8.5 per cent; for textile clothing and footwear manufacturing 10.6 per cent; for wood and paper products manufacturing 4.7 per cent; and for metal products manufacturing 4.3 per cent.
Let’s make that a bit clearer. The OECD says that the average Australian farmer receives US$1,360 pa in government assistance. American farmers receive US$30,170 pa; US$106,975 in the EU; and US$165,591 in China.
The average hourly rate for a farmhand in Australia is US$16.88/hour for a 38 hour week. The equivalent NZ farm worker is on US$11.18/hour for a 40 hour week; in America, US$7.25; in the UK, US$10.02; and in China, US$1.19.
There are no tariffs or quotas on most food products into Australia. The equivalent tariff rates are 5 per cent into the US; 18 per cent into the EU; and 20 per cent into China. In the much-vaunted free trade agreement currently under negotiation with South Korea, the 304 per cent tariff on potatoes is to be immediately removed. Tariffs of 36 per cent on cheese and 89 per cent on butter will be eliminated over the next 13 to 20 years. Australian dairy exporters will also benefit from growing duty free quotas for cheese, butter and infant formula. The agreement will provide an increased duty-free quota for malt and malting barley and eliminate high out-of-quota tariffs of 269 and 513 per cent over 15 years. I kid you not.
Our farmers are on any measure amongst the most efficient in the world. On a level playing field, they can compete with anyone. So, until we see that level playing field, let’s stop this knee-jerk ill-informed criticism of Australian farmers. It doesn’t pass the fact-checker test.
