Australian farmers often battle the perception that agriculture is highly subsidised - but nothing could be further from the truth.
The Organisation for Economic Co-operation and Development (OECD) recently released its Agricultural Monitoring and Evaluation report, assessing subsidy levels across 52 countries.
The report found that Australia’s ‘Producer Support Estimate’ (an estimate of public money which flows to primary producers – not necessarily as cash) was one of the lowest in the OECD, at 1.4 per cent of GDP, marginally behind New Zealand.
By contrast, producers in Iceland, Norway or Switzerland receive more than 50 per cent of their farm income as government support measures. The average support level is around 20 per cent.
The study found that Australia made no payments for commodity production, which is how other OECD countries calculate and pay producers. The largest component of our subsidies (42 per cent) is channelled into programs to help manage seasonal variability.
In most developed countries, farmers can access insurance schemes that protect them against climate and weather-related losses. These schemes are subsidised, or even totally funded, by governments.
Given our variable climate, it is surprising to learn that it is almost impossible for most farmers in Australia to get that sort of insurance. Instead, the government has established concessional loan schemes and we also have programs like Farm Management Deposits.
Let’s unpack this information a bit further.
Our best estimate is that, overall, it is 30 per cent more expensive to farm in Tasmania than anywhere else in Australia; and another 30 per cent more expensive to farm on mainland Australia than in New Zealand.
In 2014 the average Australian farmer received US$1360 per annum in government assistance. American farmers received US$30,170, US$106,975 in the EU, and US$165,591 in China.
Wage rates provide a good basis for comparison of input costs. In 2014, the average hourly rate for a farmhand in Australia was US$16.88 for a 38-hour week. The equivalent New Zealand farm worker was on US$11.18 per hour for a 40-hour week; in America, US$7.25; in the UK, US$10.02; and in China, US$1.19.
Furthermore, there are no tariffs or quotas on most food products imported into Australia. The equivalent tariff rates are 5 per cent into the US; 18 per cent into the EU; and 20 per cent into China. The recent free trade agreement with South Korea saw high out-of-quota tariffs of 269 and 513 per cent eliminated over 15 years.
There is no doubt that our farmers are amongst the most efficient in the world. On a level playing field, they can compete with anyone. There is no level playing field – and the elastic is stretched to breaking point.