An amendment bill introduced into the Senate last week seeks to create an ‘Australian Reconstruction and Development Board’ under the umbrella of the Reserve Bank of Australia.
The bill has been introduced by independent Senator Nick Xenophon and Democratic Labor Party Senator John Madigan, and mirrors a similar bill introduced in the House of Representatives in June by Member for Kennedy and Katter Australia Party leader Bob Katter.
If passed the Reserve Bank Amendment Bill would create a specific entity tasked with “examining, reconstructing and improving the financial status of the Australian agricultural sector and its associated industries and infrastructures”.
Explanation papers attached to the Bill say that rural Australia is struggling under an insurmountable burden of debt, characterised by low farm income and lending practices of financial institutions in deregulated financial markets.
Debt in Gross Value Farm Production has increased from 32pc in 1980 to an historically high 135.4pc in 2012.
“With escalating debts, many farmers and producers are facing foreclosures. Forced sales are widening loan-to-value ratios, leading to a risk of ‘fire sales’, which could precipitate a raging financial contagion that may not be contained to rural and regional Australia,” the bill papers states.
The Senators say the Reserve Bank of Australia already has the necessary regulatory framework, powers and relevant duties legislatively assigned to be able to constitute the ARDB as a third Board within the Reserve Bank of Australia.
The bill says that Australia’s ability to produce its own food and to export food for the benefit of the broader economy is being diminished by adverse conditions beyond the farm-gate which have reduced farm incomes and imposed great strain on production systems.
“In such circumstances of uncertainty and risk to nationally important agricultural and associated industries, reconstruction is critical to re-establish a sound financial basis, and development funds to maintain and sustainably develop capabilities.
According to the bill the ADRB’s responsibilities would include:
- the ability to facilitate, and when necessary manage, rural adjustment and financial reconstruction activities;
- tailor funding and financial arrangements to meet identified needs of nationally-important industries operating in particularly uncertain or risky environments;
- researching and monitoring industries to provide advance warning of emerging problems and to initiate reconstruction, development or other activities as deemed necessary;
- Providing a means of identifying and resolving serious financial imbalances, sectoral stresses and development shortfalls that, if left unaddressed, might impair the prosperity and welfare of the people of Australia, the maintenance of full employment, or the stability of the currency of Australia.
A rural debt forum being held in Hughenden in northern Queensland this Wednesday will also seek to urge the Federal Government to support the establishment of an Australian Reconstruction and Development Board.
“This Board would be able to tailor funds and capital arrangements that enable the sustainability and development of ‘at-risk’ Australian agriculture and its associated industries and infrastructures,” said Queensland member for Mount Isa Robbie Katter, who has organised the forum.
“There are many ‘at-risk’ rural holdings at present, with poor markets, the squeeze from the Coles-Woolworths duopoly, and the crippling drought,” said Mr Katter.
Mr Xenophon said that in a sense, the proposed board would be similar to the Commonwealth Development Bank, which was established in 1960.
“Its aim was to provide loans to individuals and businesses in the primary and secondary industry sectors, where that support would lead to an increase in productivity and wasn't otherwise available to the applicants,” Senator Xenophon said.
“Rural and regional areas are, in many ways, the lifeblood of our country. Certainly, our farmers play an incredibly important role both in our economy and our national security. Without their produce, we are all at risk.
“If rural and regional communities do not receive the support they so desperately need, the impact on the rest of Australia will be significant, in both economic and cultural terms.
“It is time to overhaul our attitude in this area. Government grants and programs are no longer enough. Instead, we need to establish a body that has the power to make a real, long term difference, such as the board proposed in this bill.”
Terms of reference for agricultural white paper set for release
The political push for a rural reconstruction bank comes as Federal Agriculture minister Barnaby Joyce speaks out about the importance of improving farm-gate profits if Australia is to have a realstic chance of doubling its food production by 2050.
As he prepares to release the terms of reference for an agricultrual white paper to be released within 12 months, Mr Joyce told the Australian that he wants to see a review of the tax treatment of farm investments, saying that the banning of negative gearing of farms when off-farm income was more than $250,000 was a disincentive for urban money to flow in to the sector.
"In a minor way, that took away the impetus for doctors, solicitors and city capital to invest in rural Australia," Mr Joyce said. "I want that reviewed.
"For all the jokes that are made about Pitt Street farmers, you actually need them . . . you have to try and keep capital circulating throughout the economy."
More details on the terms of reference for the agricultural white paper are expected to be released today.
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