Senate Rural and Regional Affairs and Transport Legislation Committee, , 57:55 to 1:15:31
Discussion on the transition back to full cost recovery for live animal exports and the projected impact on industry fees over four years.
Topics: Export cost recovery, Live animal exports, Exports
Speakers: Speaker 5, Tina Hutcherson, Speaker 3, Speaker 19, Matthew Gson, Mr. Matthew Gson, Ms. Tina Hutcherson, Speaker 18, Speaker 2, Speaker 8
organization as well. >> Okay. All right. Um moving back to my uh wanted to go to the item in my securing the future of agricultural trade. Uh it says here the government will provide $147.5 million over 4 years. Uh so is is this to uh continue the bio security uh uh functions of the department without having to increase cost recovery
charges. I >> I think we're talking about the export certification uh arrangements by
security. >> Yep. Is that that
>> that's correct? Yes.
>> So this sort of fills a gap so to speak.
>> Uh well the supplementation has been provided um to support uh uh the department as it provides those services to industry in the past few years. Um and yes that decision relates to the ongoing transition arrangements in
place. >> So there's 44 million over four years for live animal exports. Is that right?
>> So I'm going to ask um I mean we can deal with this more fully in outcome one. Senator, I know you're talking about a budget item, but if if you want to dig into the entirety of the the cost recovery um arrangements, I suggest outcome one might be a good place to do it, and we'll make sure Mr. Gon and others are still here to participate in any technical elements, but if you want to just talk about the measure itself, obviously um uh people can answer those questions here up to you as to how you
want to proceed. >> Well, I suppose uh I'll try and keep my questions in this section about the finances. Uh so the theundred Well, let's take live animal exports as an example. The 44 million over four years, does that mean over these next four years there's no need for increasing charges uh for live animal exports?
>> Uh Senator, the um cost recovery arrangement will gradually step up back to full cost recovery over a number of years. Um so there will be an increase
in prices. >> Okay. So how much what's the uh allocation of that 44.3 over the next
four years? that is stepped out in the cost recovery the consultation cost recovery implementation statement um which my colleague has for hand.
Uh thanks Senator. Uh that's uh Mr. Alistister Campbell uh trade and international division from DAP that's fully set out in the uh draft cost recovery implementation statement live animal exports 2627 that was released in late January. Um and it steps out the uh the return to full cost recovery uh for the live animal export arrangement. Uh in terms of the split by year, um we have um full finances of the actual arrangement included in the CRI uh included in the draft quiz. Um and so the portion cost funded through uh appropriation in 2627. um 75% of the gap is funded through appropriation and going to 50% going to 25% in 2829. Um but in terms of the $44.4 million split, I'll have to um in terms of the dollar value of that, I'll have to uh get get back to you on that
one. >> So you don't have that split up by financial year. That's what I'm keen on for the 44.
So the um it's expected to increase uh I've got the percentage increases over the um over the forward years >> I think Mr. or
>> you wanting because given this is a government measure surely you've got this in some table somewhere
>> yeah okay Mr. Senator, I can give you a breakdown of the 44.3 million. So in the the the current year uh.3 of a million um in 26 27.6 million in 2728 17.5 million and then 8.8 in 28-29 reducing to 5.2 million in 2930 and the 5.2 if I read the line in my info that's going to be ongoing. Uh, so the 5.2 senator in 2627 is 1.8 million and 3.4 in 2728.
Sorry, I missed that. I'm I'm referring to page 196 of my EFO and for this measure it says 44.3 million over 4 years from 2526 and in brackets it says and 5.2 million per year ongoing. So is that so I'm reading that to sort of suggest is the government suggesting I know >> it doesn't necessarily have budgeted amounts beyond the four years but is is the decision of government that 5.2
million will keep going sorry Senator um so there was a um you are correct in $5.2 million ongoing um there is also $5.2 million in receipts hence
interpretation of your question. >> Okay right um so if they're getting 17.6 6 million um next financial year I think and that reduces down to 5.2 million. Does that mean that the fees have to increase on an annual basis by $12 million for live exports? That's the gap is that am I reading that
right? Uh Senator, the gap between what is appropriated in terms of the 17 sorry 17.5 in 2728 and there is an increase of $3.4 million in additional revenue or receipts through cost recovery. So the the difference being uh 14.1. Okay.
>> 14.1. Thank you. Cuz it's already started to go up. Okay. Um, how much is recovered from live animal the live animal export industry this financial year?
Uh, Senator in the live animal export arrangement. I currently have a cost a budgeted cost recovery revenue of 14.1
million. >> So it's going to double in the space of four years. >> Sorry. >> Is that right? >> So the fees to the industry will double
in four years. >> Uh Senator, if I can just um if I can just point you to the draft cost recovery implementation statement. Um so on page 21 of that um it shows that the revenue uh in 2526 and this is slightly different to Mr. Gson's number because this is um this is from the cost draft cost recovery implementation statement the revenue from the sector is 12.841 million uh rising to 2627 next financial year 14.6 6 million 2728 17.1 million 28 29 21.3 million 202930 21.9 million.
>> Yeah. So roughly doubling from this you got 12.8 growing to 21.9. >> Yeah. >> It's not far off doubling. I mean I already get a lot of complaints from the industry the fees are too high today. So is there I mean what work's being done that this is sustainable is this going to cause some producers or operators to get into financial difficulty increasing the fees by this
much? Senator, as part of the package, and again happy to go into it now or later in outcome one, for live animal export specifically, there is um an amount of um uh there there are plans within the budget allocation to work very closely with the industry over the coming two years um to look at the regulatory arrangement, make sure it's fit for purpose um and also deliver an updated cost recovery implementation statement for when live sheep phase out in 2028. So this this is um based on the assessment of the cost base today. Um but there is an intention and and a um an amount of uh budget allocated to work uh with the industry um to ensure that we have a fitforpurpose regulatory
arrangement. >> Just come back to my question. Has there been any modeling assessment calculations done on whether an increase in fees of this amount will impact the viability of agricultural businesses?
>> So the approach taken for cost recovery implementation statement senator is at is an assessment of the cost to the department of delivering the regulatory services required under the legislation and in line with importing country requirements. So that is what we have done um and that is what it costs the department to deliver those services um as outlined in the cost recovery implementation statement.
>> Okay. Just come back to my question process that >> it's yes or no. Has the government done an assessment of whether an increase or doubling almost of fees could impact the viability of farm businesses in this
country? the costs, the consultation process that is currently underway in part goes to that senator with the um opportunity open as we speak um for people participating in that industry to provide information about the impact that um the proposed costs will have on
their businesses. >> Right. So this is this is a draft
>> this is a draft consultation
cost recovery implementation. >> So is there any plans to do any economic modeling >> to actually assess. No, you you just that's another cost that the agricultural industry will have to
>> well it is sorry I might just jump in the the policy has been full cost recovery and there has been supplementation so the there hasn't been a policy change the policy is 100% uh full cost recovery we have not been recovering full costs over the past several years in fact quite a long time um and and this is an attempt to ensure we are able to move over a couple of years in a gradual way to full cost recovery which was the original intent intention of delivering these services. So we are doing this within an environment that this is not a policy change. This is a change to ensure we are fully cost recovering. Obviously industry is not going to welcome these sorts of moves. We totally understand that. Um and that's why we're talking to them quite carefully. Um Senator, we understand it's not welcome to be charged more for services, but the reality is this is what these services are costing. And the and the undertaking I can make as secretary is we do need to work to ensure we have a process in place to be as efficient as possible and we do need to be held to account to that. That is what the Chris process is all about every year. Um and and um you know we'll be giving that close attention. there is a phase in. So, we do have some more time to continue to drive efficiencies, hear from industry on what they'd like to to see us do, but I'm afraid the the move to 100% cost recovery is is a decision that has been made. Uh it's it's consistent with the existing policy, and now we're talking about the execution of that decision uh through the the cost recovery guidance that we've um put in the public domain at the moment. We do really welcome feedback on that and we hope to we hope to hear from industry about whether we've we've got the elements of the methodology right. Um what we can't really do is say we're not going to do
it. >> Um well the government could do that but yep we'll see. Um um so the um the the draft Chris does say that and on page 15 and I quote the increasing prices of export regulatory services would contribute to elevated input costs and affect viability of export businesses. So you yourselves do recognize that these increases could impact the viability of agricultural businesses.
>> Yes, Senator, we do. And and obviously margins are thin in some of these industries. We understand um this will be a matter for businesses to determine whether or not the margins are sufficient to continue to participate in exports. Um the I do note the industry is not doing well a range of industries are not doing too badly at the moment with record $84 billion uh exports. So um we are conscious that um we are imposing a cost that hasn't been there or has been supplemented by government for the last few years. We are very conscious of that. But um you know these are matters for businesses to determine and and obviously if there's something in the methodology that we can take into account that will uh ease the burden um we're very willing to hear and and willing to consider that in the context of the consultation process underway.
>> Well I would have thought the government would be interested to know exactly what the risks is here but it seems like there's a turning of a blind eye to this. Um why hasn't has the minister asked you to do some work on well exactly after read presumably the minister read that Chris and after reading that sentence the has the minister said hey how many businesses are we talking about here have you got an estimate? >> No senator I >> that hasn't happened. >> Well I'll defer to the team on the specifics. >> Okay. No there's been no questions asked about exactly how many businesses we're talking about that might be unviable. Um
there are about um 4,700 businesses that paid into export arrangements in the 2425 financial year. Um and that's a a mix of businesses, registered establishments, export licenses, approved arrangements. Um of those 47% are in major cities, 24% in inner regional areas and 23% in outer regional areas. So there's a broad range
of businesses that >> I'll just hand over to Senator Colbec. Just wanted to put on the record to the NFF has also said uh confirming what you've said in your own Chris that they're quoted as saying that these changes and I quote may hurt the competitiveness of agricultural exports and producers. Uh this is a very serious issue that doesn't seem to be taken seriously enough. Chair Senator Colbeck
has some questions. >> I don't think that's the case. Senator
>> Kennel
have talked through the process that they're going through which is a very thorough one. They haven't even looked at the >> principle the the the principle of cost recovery is one that my understanding that uh the previous government that you were a part of had committed to as well. You didn't go about implementing implementing it but that is what uh the government uh intend on doing uh by the
financial year. >> Okay. Sorry chair Senator Colbeck. So,
so are there any markets that have been assessed as part of this process that would become unviable, might become unviable? >> So, Senator, the >> because this is this is a cost in the supply chain and any cost in the supply chain that blows things out potentially makes that supply chain unviable.
>> So, the the the framing for cost recovery is that it is longstanding government policy to cost fully cost recover for the cost of delivering the
services. 2008 when Tony Burke took away
the 40% rebate for exporters. >> So the um the uh department undertakes an assessment of the cost base. So the cost of delivering the services the certification and assurance.
>> I understand that. I listen I listen to all that evidence. I'm interested to know whether it has in in the assessments that have been done whether it looks at whether any markets that we're currently exporting into might become unviable because of the costs of accessing the market. That's what I'm interested to know. So I'm interested to know its impact on our trade because that if if there's product that's being produced for an export market that's no longer viable, it then has to be disposed of somewhere or sold somewhere and either in another market or into the
>> and that's exactly the point of consultation, Senator. So at the moment the um the cost recovery implementation statements have been released. They were released on the 29th of January. um they are available um currently uh for people to look through people who are sending to particular markets understanding the impact on their business and provide exactly that information as part of the consultation process um for
consideration. So but but so the government in development Chris didn't do any
assessment of that >> the department assessed the costs of delivering the services which is what we are required to do um and we are held to a um a requirement for that to be the um minimum cost um for delivering those services. The cost recovery framework requires us to do that um and provide um uh that information and the implication that that has on the cost recovery implementation statement. Uh and that is what is in the current currently in the public domain for assessment.