Speech at the Northern Australia Food Futures Conference
12 April 2016
In 1968, a successful mining magnate, Clive Foyster, had a vision to develop farming in far north Queensland. He saw great potential at a property called Lakeland Downs – 80 kilometres southwest of Cooktown. A Japanese investor was found, a grain storage facility and wharf were constructed and a new town was established, growing to a size of 200 people. The Queensland Government even established a school.
I visited Lakeland Downs just the other week and the locals there described to me the frenetic activity of the time. Tree clearing would occur almost round the clock, and showing some commercial cunning, Clive bought the local pub too. So all the cheques he paid to dozer drivers during the day often ended coming back to him at the pub at night.
However, that cunning was not enough. By 1974, the dream was all over. The company went into liquidation. As many of you would be aware, many dreams for northern agriculture ended this way. There are many in this country who point to examples like Lakeland Downs and say: “See, it can’t be done”. Well I want to say this morning that I am not one of those people. I think it can be done, it has been done and it will be done again.
It is not all that surprising that in a country that venerates the incompetent and disastrous planning of Gallipoli, over Monash’s war-changing triumph at Hamel, that most Australians would be more familiar with the Ord than the Burdekin. I know about the Burdekin: my Mum was born and grew up there.
As Minister for Northern Australia now, I hear many more people mention to me the Ord and its history rather than the Burdekin and its success. The Burdekin is an immensely successful irrigation area of 70,000 hectares. It went to plan, and much of it was developed over the past 30 years following the construction of the Burdekin Falls Dam – one of the last large dams that we have built in this country.
Likewise here in the Territory there is an immensely successful irrigation industry with mangos, melons, bananas, asian vegetables, cut flowers and fodder all combining to contribute over $200 million to the northern economy every year, and employing around 2000 workers during a season.
The record of irrigation projects in the north is not one of failure. As recent CSIRO research makes clear, for almost every failure there has been a success. For every Lakeland Downs that does not go to plan, there is a Burdekin. For every Ord, there is an Emerald, and for every Humpty Doo there is a Katherine-Mataranka.
My sunny optimism does not mean that we should not learn the lessons of past failures. On the contrary, they are the most important things to investigate. Later on today, I will discuss a little more about those failures drawing on some excellent research by the CSIRO – and how the Australian Government’s agenda for developing the north accounts for these lessons.
But first I want to spend a little time on why agriculture is so important to the government’s plans to develop the north. We have an ambitious agenda to develop the north because we have an ambitious agenda to develop our economy. It makes sense that we seek to invest in those parts of our country that are still developing – like here in Darwin but right across our north.
Our Northern Australian agenda is not a welfare program – it is not a form of vertical fiscal equalisation – it is an investment in our north and investment in our country. We expect a return for the Commonwealth’s plans to invest more than $6 billion in the north – an economic return for our entire nation.
Northern Australia has many natural advantages and it already does a good job at making the most of those advantages. It accounts for 60 per cent of our rainfall and 40 per cent of our land mass. It is the part of our country that is closest to the fast growing Asian economies. Something we should all keep in mind, given that Beijing is closer to Berlin than it is to Brisbane. Darwin, of course, is closer to Jakarta than it is to Melbourne.
Already the north punches above its weight. Only 6 per cent of Australians live in the north but together they produce 11 per cent of our GDP. Each full time employee in Australia produces around $186,000 of economic output a year. In the north, each employee generates around $370,000 of economic output per year. It makes sense to reinvest in the parts of our country that are already making money for the country.
That is why we are investing more than $1.2 billion in the north: in roads, in dams and other infrastructure. Agriculture stands to be the biggest beneficiary of this investment with nearly $400 million specifically identified for investment in this sector – including $200 million for dams and other infrastructure, $100 million in beef roads to bring down the cost of transporting cattle, and $75 million in a Co-operative Research Centre that, in part, will focus on agriculture and food.
The agriculture sector also stands to benefit from the other $600 million the government plans to invest in northern roads and the $50 million we are investing to help unlock the economic potential of native title lands. The government is also establishing a $5 billion facility to provide concessional lending to other infrastructure, some of which will also benefit the agriculture sector.
It is appropriate that our northern agenda is so focused on agriculture because the experience of economic development, both here and overseas, shows that the development of a strong agriculture sector is often the “prime mover” to get other sectors going and develop a diversified economy. Developing the north is a problem of economic development and so we should look to the lessons of economic development here and overseas.
Just to the north of here, there has been a remarkable example of economic development over the past 50 years. When most of us think about that growth, we are most likely to think that their first steps were in textile mills and other forms of mass production.
While the manufacturing sector played an important role in the growth of all these Asian economies, Joe Studwell, in his book How Asia Works, convincingly argues that it was the development of agriculture that was the first step for most countries. Developing agriculture provided what were poor Asian countries with the income and labor force growth that could then spur other industries like manufacturing. The initial growth of agriculture was generally spurred by successful land reform that gave property rights to family farmers, and reduced the power of local landlords or collectivist farms.
Joe Studwell argues that those countries that failed to deliver successful land reform, such as Malaysia, Thailand and the Philippines, have not been able to achieve as sustainable an economic performance compared to others that did. Studwell summed it up by quoting the development economist, Michael Lipton, who said that “If you wish to industrialise, prepare to develop agriculture.” Since developing the north is an economic development challenge, it is advice we should heed.
But, of course, Northern Australia is not starting out as a developing country like those in Asia 50 years ago, so we should look to the experience of developed economies too. Around 150 years ago, there was a great drive in the United States to develop its west. Like our north, water resources and agriculture were seen as a key way of doing that.
A backer of western agriculture at the time was John Powell, whose loss of an arm at the Battle of Shiloh didn’t stop him from leading the first expedition of the wild Colorado River and Grand Canyon in 1869.
In 1878, John Powell produced a report on western US agricultural opportunities titled The Report on the Arid Land of the Arid Region of the United States – and remember Powell supported the development of this self-described arid region!
He did disagree, however, with some of the common views of the time. Then, there was a view that the west could be developed according to a Jeffersonian ideal of small, independent, yeoman farmers without the need for government involvement that would dilute Americans’ well-known aptitude for individual enterprise. Powell disagreed. He became a champion for large government-funded dam projects as the only way to harness the wild rivers and irrigate the arid lands of the Colorado Basin.
Powell did not live to see his vision become a reality. Technological and political developments in the early 20th century, however, did result in an amazing manifestation of Powell’s dreams in the form of the then named Boulder Dam – later renamed the Hoover Dam. In opening the dam in 1936, President Roosevelt paraphrased Julius Caesar “I came, I saw and I was conquered”.
What are the lessons of this for us? Well, the CSIRO work I mentioned earlier has shown that successful irrigation projects in the north do often involve a substantial degree of government involvement – just like Powell’s vision for the western United States. As the authors of that CSIRO work state:
All four of the continuing large scale (> 10,000 ha) irrigation schemes (Ord, Burkekin, Emerald and Mareeba-Dimbulah) have received significant government investment, in the order of hundreds of millions of dollars each in core dam infrastructure alone, with a mixture of State and Australian Government funds supporting the construction of dams and associated channel infrastructure. This has leveraged significant private investment … With the exception of Katherine and Lakeland Downs, all of the private agricultural development schemes that had little or no direct government investment, particularly in infrastructure, have not persisted.
The government’s plans to invest $200 million in northern water infrastructure, and $500 million across the country, are well suited to respond to this finding.
But that is not the only finding from the CSIRO’s, in my view, path-breaking research. Now given that the head of that research Dr Andrew Ash is here at this conference, I won’t go through it in chapter and verse and steal all of his thunder.
But, in brief, in 2014 Dr Andrew Ash completed a detailed analysis of 13 agricultural developments in northern Australia, from the 1950s to the present.
The natural environment (climate, soils, pest and diseases) makes agriculture in northern Australia challenging, but in all the agricultural developments assessed by Dr Ash, these were not the primary reasons for a lack of success. Despite popular belief, Magpie Geese were not the primary reason for the failure of the Humpty Doo rice project.
The history of agriculture in Australia is a history of farming on poor soils in an unforgiving, and typically dry environment. Unrealistic expectations of achieving a reasonable return on investment in the first few years brought a number of developments to a premature end, and a lack of forethought in terms of supply chains and markets were also important. But overwhelmingly, management, planning and finances were assessed to be the most important factors in determining the ongoing viability of agricultural developments.
This is not to play down the challenges of developing agriculture in the north. The climate will always be a challenge, especially in the early years when a project’s need for cash flow can make a failed season disastrous. This is another reason for government involvement to help take on some of that risk in a greenfields investment – much like government does by investing in new roads and tunnels in major cities. Still the climate and soils of the north are now better understood and can be overcome as demonstrated by the successful irrigation schemes in the north.
Further, distance from supply chains and markets remains a key constraint and additional cost for northern developments. For broad-acre crops, distance to processing or handling facilities means that some new developments would have to be of sufficient scale to underwrite the construction of new facilities, although this of course increases risk. For higher value horticulture products, the distance from markets adds significantly to cost and can make some areas uncompetitive. In the Ord region, freight can make up over half of a crop’s value.
The potential of northern agriculture is significant. Estimates of the land that could be irrigated range from 8 million to 17 million hectares. Of course, nothing near that will be able to be irrigated, given a lack of water or markets. Still, the CSIRO has identified at least 120,000 hectares of significant potential in the north.
And, those figures only look at a small subset of areas at the north. They do not include the potential of the Mitchell, the Fitzroy (in Western Australia) and the Archer, Wenlock and Normanby catchments on Cape York. These additional catchments alone may have the potential to irrigate a further 200,000 hectares.
Together these increased areas under irrigation would represent a more than 15 per cent increase in the land under irrigation in Australia.
There are massive global opportunities for increased agricultural production. As many of you would be aware, by 2030, two-thirds of the world’s middle class will live in the Asia-Pacific region. Ongoing growth in global demand for food and fibre will deliver huge opportunities for Australia.
This is underlined by the stark numbers in the latest ABARES forecasts.
Growth in global food demand alone will require a 75 per cent increase in global food production by 2050 compared with 2007 levels.
Global cereals consumption is projected to increase by 62 per cent in 2050 compared with 2007, from US$381 billion to US$617 billion.
Global meat consumption is projected to increase by 106 per cent in 2050 compared with 2007, from US$496 billion to US$1024 billion.
Australia is very well placed to take advantage of this growing demand, not least because much of it will come from our regional neighbours and existing trading partners. It is also clear that this demand is not just about food volume. It reflects a growing international market for the kind of high-value produce and high-quality expertise at which Australia excels.
Northern Australia has a significant advantage in terms of its proximity, and in many ways, its cultural affiliation with Asia. We can’t take increased market share for granted – we need to work hard to earn our place as a valued supplier. We face fierce competition, and no other nation will work in our interests.
But I believe the policies of this government are putting Australia in the best place to take advantage of these opportunities.
The Government’s $4 billion Agricultural Competitiveness White Paper is the single biggest investment in the sector in a generation. Our focus in the White Paper has been to:
create a better business environment for farm businesses
build future infrastructure needs
strengthen our approach to drought and risk management
support access to the most advanced technologies and practices; and
access to premium markets.
Some of the specific measures we are taking include doubling the Rural R&D for profit program to $200 million and extending it to 2022. We have doubled the deposit limits for farm management deposits, allow banks to offer FMDs as farm business loan offset accounts, and re-established early access provisions in times of drought. We have also introduced accelerated tax depreciation measures for fencing, water infrastructure and fodder storage. The measures for accelerated depreciation for water infrastructure will be extremely important in the context of developing irrigation in the north.
As I said earlier, the government is investing significantly in water infrastructure in the north directly as well. We have already received 60 expressions of interest for investment in water infrastructure, including 23 applications in the north. We will announce the successful applications soon. We have also recently announced the start of CSIRO work to investigate the potential options for water development in the Mitchell River basin in Queensland, the Fitzroy River basin in Western Australia and Darwin’s water needs as well.
The CSIRO has also just completed work investigating the potential cost savings to the beef industry from investment in 60 potential “beef roads”. The Commonwealth Government has put $100 million towards this investment and we are now working with state governments to finalise their contributions and decide which projects deserve the first investment.
Legislation to establish the $5 billion Northern Australia Infrastructure Facility is in the Parliament at the moment. If successful, the facility will be able to draw down loans from 1 July this year. Of course, the day after that we might have an election as well!
Overall, it is a busy time for agriculture and investment in northern Australia but I want to return to where I started, to Lakeland Downs.
While Clive Foyster’s initial dream for Lakeland Downs did not succeed, the area is now home to many successful irrigators growing bananas, avocadoes, lap-lap and tea tree oil. At the previous conference, in 2014, you gave one of those irrigators, Peter Inderbitzen, a visionary award.
Peter runs a very successful and innovative, family-owned banana growing operation called Swiss Farms at Lakelands. I was in Lakeland only 2 weeks ago and I am pleased to say Peter continues to be a passionate and committed advocate for northern agriculture. He and his family have big plans for the Lakeland district and see potential for up to 15,000 hectares of irrigation, building on the 2-3,000 hectares there now.
The Lakeland Downs area, and other successful northern Australia irrigation ventures, demonstrate something else about successfully irrigating the north. Most of the successes have come from a combination of government investment and drive, and private, relatively small family-farming operations that can sustain the dream through tough times. The Burdekin, Mareeba, Lakelands and the Ord are all characterised by this.
Some have suggested that the days of family farming are over and the future is corporate farming. The experience of the past rejects that view. There will be a role for corporate investors but, as the experience at Lakelands demonstrates, often it is family farmers that have the persistence to see through the hard times. The future of irrigation in northern Australia will be a future for family farmers too. That is why it is great to see organisations like NT Farmers take such a keen interest in the future development opportunities in northern Australia.
However, there is a role for government to help spur the big investments in water storages and dams that are needed to kick-start the potential that is there for northern agriculture. This government is committed to these investments but we will also need many of you to join us in that task. In that regard, the work you are doing at this conference is very important and I wish you all the best over the next two days.