This election budget was fairly predictable for the agriculture sector, not surprisingly most of the farm specific commitments are eastern state centric, which is expected with the drought and flood plus a Federal Election just around the corner and so many marginal seats in regional New South Wales, Queensland and Victoria.
Ignoring the billions in tax cuts that will never get through the senate unscathed, what we really welcome, is the reduction in the company tax brackets. This reduced tax rate is probably the most important commitment to the majority of Western Australian growers than any other line item.
To remind you, the company tax rate has been cut from 27.5% in 2019/20 to 26% in 2020/21 and 25% in 2021/2022; a nice round figure we can all remember. But let’s not forget our major grain competitors are still pocketing more post-harvest cash than we are with the United States at 21%, Canada at 18% and the rapidly expanding Ukrainian farmers also at 18%; we have a long way to go.
Unfortunately with Shorten’s determination to tax and spend his way into the pockets and votes of the average punter, this is probably the end of the company tax cuts for at least a couple of terms of government if not a lot longer.
The Government missed out on squaring the books by just $4 billion this financial year (half the value of the WA wheat crop) which was a huge lost political opportunity as they cannot really say they hit the black. Remember Swan and his four years of promised surpluses. Promises are cheap.
In fact the promised surplus of $7.1 billion next year will never survive the Senate or the building housing crisis, but we are highly supportive of a balanced budget as that takes pressure off future interest rates which is key for farmers seeking to expand their businesses.
The Government’s love of drought and flood assistance was unfortunately its biggest single agriculture ticket item, with $1.8 billion allocated for farmers and farming communities. No doubt this is helpful for badly impacted farmers in the eastern states however the vast majority of WA farmers will never see a cent during our drought years (just ask the Great Southern Farmers). The overwhelming view is Australian farmers should expect to be self-funded and self-reliant to get them through dry years. One rule for all farmers east or west should be the norm.
This sort of money should instead be spread around all of Australia’s farming regions to benefit not just those with the least equity but help every one of the 70,000 farm businesses become more efficient and profitable. $1.8 billion for more mobile phone towers would level the playing field and I suspect buy a lot of votes.
$6 billion for concessional loans for those affected by drought, $3.9 billion for a future drought fund, $3.3 billion for those affected by flood and another $3.9 billion for the creation of an emergency response fund; when did millions become billions? It just rolled off the Treasurer’s tongue, except it is all debt money that sits on the national books. We all pay for it in the end, both the interest and the bad loans.
These billions into drought related loans and funds (twice the size of the entire WA wheat crop) seem a step backward into the past of old school government hand holding. With low interest rates and modern capital markets, farm businesses (that are viable) should be able to be self-funding. The real problem is not the need for a Government bank but to keep our banks busy lending to farm businesses.
One of the biggest challenges is the fact that the Royal Commission into Banking has done as much damage as it has done good, as it has shut off capital to small business. This is a serious concern as the Federal Government is not in a position to replace private farm finance and the sooner it backs off the banks and encourages them to open up their loan books to farmers the better. All roads lead to lower taxes on banks so they make bigger profits and can afford to take bigger risks. Bank bashing does not pay for farmers as eventually you will all pay in tighter security requirements and higher interest rates.
Moving on, we welcome the increased spending on regional road and telecommunications infrastructure. The $70 million for our 4300 km of key regional roads is 7% of what’s needed but it’s a start. We will be looking at the State Government to step up when its budget comes down, as it really is their responsibility to upgrade and maintain our secondary freight network road networks. In reality we need $100 million a year to go into these roads for the next decade, so we will be pushing the State Government to take its eyes off metro net and think country net. This is the State Government’s core responsibility.
The Government’s commitment of $160 million for two extra rounds of the Mobile Blackspots Program is a welcomed initiative. We all like and need more towers in the bush. Again for Western Australia, our share works out at about $20 million, which is about 30 towers. We probably need another 300 across the Wheatbelt and South West to really nail it, plus fast track an upgrade to 5G. Another $200 million is needed, but again, it’s a start. The State government needs to match the work done by the previous government and keep putting at least $25 million a year into the program. Again the Minister for Primary Industries and Regional Development budget will be carefully scrutinised to see if it can keep up with the past Royalties for Regions funding of towers without raiding the Department’s budget – the old Peter and Paul trick.
In summary WAFarmers is pleased with the result of last night’s budget and hope that any gains for the agriculture sector can survive past the looming Federal Election and the horrors of the Senate. But I expect the election will be upon us before the hard stuff hits the cross benches for the inevitable horse-trading time. End result is the budget game is likely to get kicked down the road until after the Federal Election and most likely until Shorten and Bowen hit us all with their mini budget, no doubt claiming they need to fix up the budget black hole that they will suddenly discover.