Article – Competitors gain ground in food fight

26 March 2014
Damon Kitney
The Australian

VISY executive chairman Anthony Pratt has warned that Australia has less than five years to capitalise on the opportunity to become a food bowl for Asia, as the nation continues to lose ground to more aggressive competitors.

In a speech to be delivered in Sydney today at The Australian’s second Global Food Forum, supported by packaging giant Visy, Mr Pratt also steps up a push for tax breaks to help the food industry, focusing on accelerated depreciation for new manufacturing investments.
The Australian Food and Grocery Council, which represents a $111 billion industry in food processing and manufacturing, revealed on Monday that Australia’s share of China’s food imports had more than halved to just 3.3 per cent over two decades.
It said Australia was losing ground to more aggressive competitors such as New Zealand and France, the latter more than tripling its share of the China food boom over the past 20 years through better marketing.
Brazil is also beating Australia in the Asian market through better infrastructure development, allowing the South American economy to be the leading tropical agriculture market.
“At most we have a five-year window to gear up. In feeding a hungry world there are other food powers eager to steal our lunch,” Mr Pratt will tell today’s forum.
“I believe we can gear up.”
After previously arguing that shifting from a “mining boom” to a “dining boom” required changes in competition laws to allow consolidation among rural companies and the suspension of payroll tax for food manufacturers, he singles out accelerated depreciation as urgently needed to drive innovation.
“Accelerated depreciation helps companies bring forward capital-intensive investments by reducing payback time. It’s not a hand out. Companies still have to pay the tax, but they simply get to defer it,” he says. “And food manufacturing is an ideal candidate for targeted accelerated depreciation because the food industry, our biggest industry, creates significant flow-on benefits.”
Former Coca-Cola Amatil chief executive Terry Davis has made similar calls, arguing such measures would help offset the high cost of labour in Australia and the effects of the high dollar.
The Coca-Cola Amatil-owned SPC Ardmona, Australia’s largest food processor and packaging company, earlier this year secured a $22 million lifeline from the Victorian government after the federal government rejected a request from the parent company for $25m of assistance.
Mr Pratt said introducing accelerated depreciation for food manufacturing would “play to the food industry’s greatest strength, which is Australia’s natural competitive advantage as a potential food superpower”.
“Ultimately, innovation depends on the people with advanced skills who have the ideas, and on the business risk-takers willing to back them,” he says. And he warns that Australia “needs to catch up” in this area, “particularly in the access to places in universities to study agricultural science”.
When in opposition, Trade Minister Andrew Robb said a call to allow accelerated depreciation for farmers to improve their returns was being considered.
But the government has been silent on the issue since coming to power last year. Instead, Mr Robb has focused on securing free trade agreements with China and Japan after earlier this year striking a landmark deal with South Korea.
Mr Pratt commends the Abbott government for moving rapidly on the new agreements.
“After nine long years of protracted negotiations it looks like China will also include an FTA by the year’s end and an FTA with Japan may come within months,” he says. But he stresses that “getting the FTAs done doesn’t guarantee increased food exports will flow automatically, or that Food Australia will make the most of this new market windfall”.
Seventy per cent of Visy’s customers are in food and drink, and an increase in food manufacture would increase demand for its packaging products. Visy is the key sponsor of today’s conference.
The conference includes a presentation from Coles managing director Ian McLeod and appearances from senior figures in the agricultural sector.
Courtesy of The Australian