Why Australia Should Be A Food Bowl Shona McPherson Australia is at a tipping point. For too long the ‘Lucky Country’ has ridden its resources boom, enjoying decades of economic expansion on the back of coal and iron ore mining. Blinded by this prosperity Australia has neglected to diversify its economy and now as the resources sector significantly slows, Australia rightly needs to adopt new economic strategies if she wants the good times to continue. The lack of diversification into other sectors to buoy its economy will affect Australia in similar ways to all commodity cycles, boom then bust. Reinvention is a must if Australia’s economy is to continue prosperously, and agriculture is the key to its new life. The economic recession of 2008 largely spared Australia due to a rise in demand for mineral commodities such as iron ore, gas and coal in China. The demand encouraged heavy investment by foreign traders in these commodities and drove prices up significantly, further benefiting the Australian economy. Since 2012, iron ore and coal has accounted for over 55% of the nation’s annual revenues, and 37% of its total exports. Yet a source of strength can always conversely be a source of extreme vulnerability. This is the case with Australia’s reliance on the export of mineral resources, which are completely vulnerable to the slowdown of business cycles in China and wider commodity markets. Australia has the world’s most expensive oil and gas workforce. Over the past 12 months AU$150 billion worth of mining and energy projects by both foreign and domestic companies have been shelved in the face of rising costs, declining productivity, increasing regulation and new taxes. With Australian workers earning double the global average and mining companies now facing a sharp drop in commodity prices, Australia is becoming increasingly unattractive to foreign investors, who opt instead to trade in places such as Brazil where labor and taxes are cheaper. Additionally, natural minerals are finite and experts estimate that given the current rate of production of natural resources, Australia could be out of coal in less than 40 years. Simply put, the mining boom cannot last forever. If Australia is to add value to its economy over the coming decades it must seek out new ways of productivity. It must redirect its fiscal efforts to other sectors, including agribusiness, gas, tourism, high technology manufacturing, and geothermal energy and wealth management. Of all of these sectors however, agriculture is where Australia holds a competitive advantage. With the worlds population set to grow by more than two billion people by 2030, food security is emerging as a major global issue. Global food demands are expected to rise 77% by 2050, with Asia being the primary growth region. International food production will need to rise 60 per cent by 2050 just to keep pace with the increase. Unprecedented challenges such as competition for water and land, climate change and food supplies being directed to other uses such as biofuels exist. As growing economies such as China experience prosperity and a growing middle class, food demands have changed. There has been an increasing demand for high quality produce specifically for ‘soft’ commodities such as meat, wheat, dairy and sugar. As one of the world’s biggest exporters of soft commodities, Australia is well placed to benefit should it make a push toward being a major supplier of the world food bowl. Many Australian farmers are already among the most efficient in the world and the country’s diverse geography, from the temperate fields of Tasmania to the tropical north, is ideal for producing a vast array of food. The concept of Australia becoming a food bowl has received significant criticism from key players in the Government like the Minister for Agriculture, Barnaby Joyce who calls the idea “ridiculous”. Joyce argues that instead of focusing on producing quantity we need to produce quality. Certainly it is absurd to assume that Australia could attempt to supply the entire International community with average food at average prices. For one, wages are too high to compete with markets such as the USA, Brazil and India where the cost of production is significantly lower. Presently Australia supplies 60 million out of 7.3 billion people with food. Nevertheless, it is possible Australia can to have a much bigger influence in food exports than it currently does, particularly among the premium Asian markets. Australia can indeed benefit from sharing its expertise in supplying breeding stock, technology and management systems required to develop Asian agricultural sectors. Australias global reputation for its expertise in agriculture and the high quality of its produce, is well recognised and yet currently it produces only 1% of the world’s agricultural exports. The attitude of its Minister for Agriculture possibly holds the key to this. Australia still has large tracts of unused or under-utilized areas in its northern regions. Some of this land could, with foreign and local investment in a new productive capacity and together with the appropriate application of technologies, produce more food for sale on world markets. To fully capitalize on this potential ‘dining boom’, Australia needs to double its food production in the next 40 years. According to studies by Deloitte at least AU$400 billion would need to be injected into the industry to improve transport, building new dams and to finance research into ways to maximize pastures, crop and livestock growth. A dramatic boost in competitiveness is also needed – as well as fast and agile innovation – accompanied by Government initiatives to diminish over-regulation in infrastructure, energy and labor. Food could be Australia’s next great export opportunity and whether it can term itself the worlds food bowl is irrelevant. What is important is that the nation needs to implement economic reforms now to reap the benefits of Asia’s future demand for food or the good times will be mere memories for the average Australian family.
Posted on: Wed, 10 Sep 2014 22:45:51 +0000
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