2023 will have continuing repercussions for the agribusiness sector from the challenges of labour shortages, high inflation and rising interest rates, writes Ross Paterson*.
Last year I described 2022 as a challenging year.
We had three main factors in play: rising costs and labour shortages, topped off by extreme weather events.
The most visual impact of labour shortages has been the tragic scenes of orchards of rotting fruit because there’s no one to pick it, but the shortage is being felt across all of agribusiness.
The extent of flooding across the eastern states has been phenomenal, with 40% of our prime farming land impacted. It remains to be seen what the full consequences of this will be (from food scarcity due to floods impacting planting, to rising prices).
Even in the west, with no floods, we had a wet start to harvest.
Despite all the challenges, ABARE is forecasting the value of agricultural production to hit $85 billion in 2022–23 and exports to top $72 billion – a testament to the strength and diversity of the sector.
2023 will also see an increased focus on making sure farms are safe workplaces.
It’s important to keep this front of mind and take it seriously.
WA had 14 farm fatalities in a year when new workplace health and safety laws were passed in state parliament.
In 2023 the industry will still be facing high costs, wage issues and staff shortages.
Businesses also need to plan well ahead of the June 30, 2023 cut-off for the extremely popular and long running instant asset write-off.
This popular initiative had made tax planning very easy for our farming and agri clients, so we are making them aware of the consequences of the program ending.
Before I described instant asset write-off as a ‘get out of jail free card’ by many in the agri sector because they can buy machinery and instantly wipe away tax issues.
But businesses should note that they also have the option to not apply for instant asset write-off in this current financial year, in order to keep some depreciation available to offset income in future years.
Labour shortage
Agribusiness will not be the only industry to benefit from a much-needed review of skilled immigration.
It’s cumbersome, slow and well overdue for a shakeup.
Skilled migration is a hard one for the agri sector as often it’s not a defined skillset that is required and it’s hard to tick an actual box to get this much-needed labour through the immigration system.
It is pleasing to see that the Albanese Government has established a new agricultural workforce working group to address skill shortages and gaps.
Also looking abroad, Australia’s thawing relationship with China will be one to watch.
It’s early days but a healthier relationship with China would be welcomed by many agricultural sectors, including the wine producers and barley growers.
Although, the fact that China put Australia in the deep freeze was a good wakeup call and made us look at other trade partners.
On the horizon, there is a real appetite in the agri sector to embrace carbon neutrality.
Beyond politics, I see immense goodwill within the sector to make this work, to reduce the carbon footprint.
There are huge opportunities in agri sustainability, and businesses will need to benchmark themselves for their carbon footprint and integrate carbon farming into their daily practices.
Following on from that benchmarking exercise, farmers who are looking to reduce their carbon footprint will need to decide if they would also like to ‘monetise’ the process by registering the carbon farming project and receiving an income stream from the sale of carbon credits.
The sale of carbon credits is the ‘carrot’ but there could also be a significant ‘stick’ for farmers who don’t reduce their carbon footprint.
Already we are seeing markets reviewing the green credentials of suppliers, so losing market access going forward is a very real risk.
Increased cost of capital is another risk as financial institutions ‘reward’ carbon neutral enterprises and ‘penalise’ carbon emitters with higher interest rates.’
*Ross Paterson is a partner and the national head of agribusiness at leading professional services firm RSM Australia. A Certified Practicing Accountant with a background in broadacre farming, he specialises in advising small to medium agribusinesses on a range of issues, including taxation, cash flow management, asset protection and business restructuring. Contact: ross.paterson@rsm.com.au
