Headlines
Regionalisation Agenda launched
On Tuesday at the National Press Club, the NFF launched its Regionalisation Agenda. The Agenda's key asks include a commitment by government to 20 place-based developments and for regional Australia to be a standing priority of National Cabinet.
Capital drought could put $100b goal at risk
AgriFutures'Capital requirements of Australia’s agriculture, fisheries and forestry sector report revealed the sector will need to find an additional $8.7 billion in new investment this decade. The NFF is calling for reform to address the identified barriers to investment in agriculture.
Agriculture continues to supercharge nation's economy: ABARES
The farm sector remains a standout performer and contributor to Australia’s economy, according to ABARES' most recent Insights report noting the gross value of agriculture, fisheries and forestry production reached $67 billion in 2019/20.
The bush yet again the poor cousin in latest high priority infrastructure list
Disappointingly, Infrastructure Australia's 2021 High Priority Projects’ list does not include one regional project. The NFF says action is needed to match the Government's positive messaging on regional development.
Briefing
Now is the time to invest in agriculture
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Capital – the debt and equity used to purchase and upgrade assets – drives productivity improvements. It allows farm businesses to invest in machinery, software, land and countless other assets which drive down input costs and increase output levels.
To put it very simply, the industry’s growth depends on it being able to increase its capital stock. Of course, this growth depends on other factors, like access to high-value export markets and low transport costs, but adequate capital is the most fundamental.
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To put this into perspective, the current annual amount is just $1.2 billion. It shows that radical action is needed for the industry to meet its goal.
The industry’s debt is at its limit – having increased 88 per cent in the past 20 years – and the lion’s share of any new capital must therefore be in the form of equity finance.
Luckily, the AgriFuture's report makes a number of original and perceptive recommendations as to how the sector could attract new sources of equity to help fill the current investment shortfall.
Like much good policy work, there is a role for both industry and government to help the industry get its house in order. The first step is data. Access to quality, timely information and industry performance benchmarks to a standard required by institutional investors has been cited as a key barrier to investment in the sector.
ABARES and the Australian Bureau of Statistics are well placed to make the necessary reforms here.
Certain business practices, inadvertently, deter investors. For example, the focus on production at the enterprise scale, versus the creation of asset value. The lack of succession plans is also a major issue.
To put the matter simply, a farm business geared towards continuously growing its value with arrangements in place for seamless intergenerational transfer will have a much easier time attracting investment.
The emergence of natural capital markets also has the potential to open up new pools of capital for the sector. The Australian Government’s Agriculture Stewardship Package is currently working to achieve this very goal by creating a market that investors can confidently use to meet sustainable development goals and improve environmental outcomes.
It is no exaggeration to say that the industry is facing a capital drought - now is the time to start preparing.
Quote of the week:
"COVID-19 has been an absolute disruptive force,
the NFF’s Regionalisation Agenda urges government and
industry to work together to capitalise on the disruption
and ensure the bush can deliver for all Australians:
economically, socially and culturally."
-NFF CEO Tony Mahar
