On Monday, Deloitte Access Economics released its “fantastic five” report on future growth industries that are expected to drive the post-mining economy in Australia. Included in this group was agribusiness, which is expected to flourish as Asia’s demand for high quality food increases over the decades ahead.
While prima facie Australia would appear well placed to supply food to Asia, a number of reports have emerged this week suggesting that Australia is being placed at a competitive disadvantage by a combination of decrepit infrastructure, excessive regulation, and declining productivity.
On Monday, The AFR published a report citing various growers complaints that the poor state of the nation’s rail freight infrastructure is making it difficult to transport goods to port for export, and raising their costs:
There are endless stories of trains taking up to nine hours to load or heading to port half empty because the tracks, mostly laid before the Federation, are not able to sustain the weight of the trains…
Instead of farmers getting rich from a food boom and spreading the benefits throughout the economy, growers are worried rising costs associated with decaying infrastructure will eat into thinning profit margins.
…infrastructure is an issue for most exporting nations but Australia has a high-cost supply chain and there is a real risk that benefits from being close to Asia from lower freight costs could soon erode.
Meanwhile, a report today in The AFR cites outgoing Coles managing director, Ian McLeod, who claims that Australia’s ability to export food is being hampered by excessive regulation, high costs, and low productivity:
Australia’s competitiveness had deteriorated in the last decade, threatening its ability to take advantage of growing demand for fresh and packaged food, especially in Asia.
Australian food manufacturing plants were struggling to maintain their competitiveness and were increasingly competing for capital with more efficient and lower cost countries such as New Zealand, he said…
Mr McLeod called on governments to reduce regulation and red tape and develop long term plans to encourage more investment in the food and agribusiness industry and boost food production.
Many of the issues highlighted above could easily be extended across other areas of the economy. Australia’s infrastructure deficit is huge, which is acting as constraint on productivity, meanwhile excessive red tape is a common complaint.
The fact is, Australia cannot assume that it will capitalise on the Asian food boom. We will have to compete vigorously against other food producing nations, such as New Zealand and Canada, which will require raising our productivity.
