Senate Rural and Regional Affairs and Transport Legislation Committee, , 1:15:31 to 1:24:24
Officials explain the factors driving up export costs, including inflation, volume demands, and the complexity of importing country requirements.
Topics: Export cost recovery, Trade policy, Government IT systems
Speakers: Speaker 5, Tina Hutcherson, Speaker 3, Speaker 19, Ms. Tina Hutcherson
>> Thanks to the C. >> Thank you. Um just noting just going back to the more a general approach here. Um there's I've got some there's a table here that shows that um the costs of export arrangements have increased by 60 million between 2020 and 2025. It's an average growth rate of 8% per year. Why is that why has there been such a large increase in costs?
>> So there has been um a couple of key drivers of costs into the cost recovery arrangement. And I would point out Senator at the at the same time the department has had a significant number of programs underway in conjunction with industry designed and delivered in in conjunction with industry to remove cost from the arrange from the um cost base which have successfully done that. At the same time there's a range of um external issues that are driving pressure and cost into the system. Um so the three main drivers of that are inflationary pressures uh increasing volumes and demands for export services um and the increasing complexity of importing country requirements which means for every export the effort that goes into ensuring that it is available that market remains available um costs more to the department to deliver. So there are three those three key drivers that have driven cost into the
arrangement. Let's just drill down on those three. Inflation, fair enough. It's certainly not running at 8%, but okay. Um uh um so some element of that. The second one, you said volumes, but don't you charge on a volume basis? >> We ab we absolutely do. Um we >> get you get higher revenue as the
volumes increase. >> Correct. But if the the price point is out of step with the cost of delivering the service, if you get more of them,
you get more >> a big gap. But this is not the gap. I quoted to you the increase in the cost base >> has gone up by 60 million. It's not the gap that I'm talking about. >> How could that how could a volume if if anything >> you'd think more greater volume should lead to lower average costs because
>> well greater greater volumes means more business. So we have um and we've we've heard it reported well we've read it um reported the increase in uh red meat exports for example. So physically more shifts, physically more staff required to to provide services. Um the the amount of demand for the government services goes up which costs more money um and drives into the cost base.
>> And then the last one, what was the last
one you mentioned? >> So the increasing complexity of importing country requirements.
>> This is this a bit of a concern to me though that we're effectively and I've raised this before. We're effectively weaponizing the non-tariff barriers of other countries into a uh a monetary tariff on our own industry. So, so another country decides to implement effectively non-tariff barriers, make their system more complex, a bunch of MRLs or whatever, all this rubbish. And then, okay, that imposes costs on us to comply with their new requirements. We go along as the Australian government and transfer those costs to the industry which effectively helps that other country with its objective, right? The objective of these non-tariff barriers is to exclude Australian exports to their market. And by transferring the cost onto our businesses, we're effectively putting not just a non-tariff barrier and actually tariff, an actual tariff uh that our exporters face.
>> Senator, I understand the point you're making, but trade is a two-way street. So I think I think we have to be aware that in addition to cost recovering we are also working to remove those barriers through other parts of mish but
trade is also is being weaponized around the world right trade has been weaponized these countries have an objective to exclude Australian products from their nation their own domestic business and we're helping them achieve that objective >> we also require things >> by imposing an extra cost on our own
producers >> so we also require things certification similar to what we provide I'm not saying everybody's is perfect. I I do understand it's an imperfect environment, >> but but Australia also protects its biocurity through the imposition of measures and we do require external external powers to uh to apply uh a range of different uh requirements on goods coming into Australia as well. So, I'm not I'm just saying it's not it's not as simple as as you've sort of described. I think it's a much more complex environment where there are
trade-offs all over the place. Well, I think it's it's about time we do reconsider this full cost recovery objective because that was probably made in a very different world. Uh, and things have changed a lot on trade and I don't think it's fit for purpose uh what we're trying to do and I don't think it's practical. You I don't think you're going to double your fees to these industries or be a political judgment made at some point um in the future. So, it's not realistic this budget. Um um uh okay. Um cuz I suppose another thing, why don't we just if other countries do this, why don't we just put a tariff on their goods coming to our country and fund it that way,
>> right? >> I think we're getting into territory probably in the in the proper realm of
the trade department rather than our own producers pay if they want to act like this. >> Um that seems to me like a lot better idea. Um okay. Um, so I note that there is actually an a I might save that for the outcome cuz it's not really a a um So how much of the cost base gone up due to inflation? You that $60 million, how much of that is
due to inflation? >> Uh roughly, Senator, it's about a third, a third, a third. So >> uh I've got figures of an increase of 61.1 million between 2020 20 and 2025. uh increasing complexity of importing country requirements and expanded regulatory functions 21.8 million increasing wage and supply costs 21.2 2 million increasing export volume and demand for export services 19.7 million
so it's about a third a third a third >> yeah okay thank you um all right well might be a good rationale to to reduce some of these costs um um the uh I note the fact sheet here says that and I quote um projected reductions to the department's cost base due to digital and regulatory maybe I'm missing a word there but digital and regulatory were not fully realized. Um, is that true? And why weren't they
fully realized? >> So, at the at the point of um uh looking at stepping back to uh um full cost recovery. uh and so at a point in time there was investment made for uh a change to uh our uh digital systems. Uh at the same time um the then government was looking at um returning to full cost recovery and investment has been made over um a number of years that has resulted in um improvements and delivered improvements to the the digital operating uh environment of the department. It included at the time an estimation of what uh impact that might have on the cost base. Um but that wasn't wasn't realized in the way that it was um anticipated at the beginning of that
process. >> Does this link with the steps program? >> Uh it's a different program, Senator. >> Okay. So what why how much were the costs meant to be
reduced? >> I will need to go back and have a look at that.
>> Right. Okay. Um
>> having said that there has been significant benefits derived from the system. The the difficult thing about um delivering systems and delivering um uh benefits is that it doesn't necessarily um deliver a change to the cost base of the department even if it delivers benefit into the system. So for example um if you get access to a certificate more quickly, you've got less waiting time. um things can happen more quickly but it doesn't necessarily drop the cost um that it costs the department to provide that service. Um so certainly the program has delivered benefits and met its benefit targets but it hasn't translated into a reduced cost space uh in the way originally anticipated.