Earlier this year, the Australian Meat Processor Corporation (AMPC) commissioned respected consultant economist Selwyn Heilbron to examine production costs for local meat processors.
With onshore processing being directly responsible for over 100,000 jobs and contributing tens of millions of dollars to our economy annually, the the Analysis of Regulatory and Related Costs in Red Meat Processing (also known as ‘Cost to Operate’ report) is an important initiative that provides a foundation from which we can work to defend and improve viability and ongoing strength of this key part of our industry. Without local processing, we’d not only see a damaging effect on the Red Meat industry in Australia, but our wider economy.
Given that 70% of product is exported from Australia, one particularly worrying finding was our weak position when compared to other large meat producing nations, with our processing costs found to be:
* 24% higher than producers in the USA
* 50% higher than Brazil
* A staggering 75% higher than Argentina.
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In real dollar terms, these costs are as much as $125/head higher than our overseas competitors.
The Cost to Operate report found that one of key contributing expense is offshore inspection fees, adding around $110 million in costs each year, or around $1 million annually per local processor. These inspection costs are not exclusive to Australian businesses, the difference is in government response in other countries. Both the US and Brazilian governments offer support to their processors, covering around 95% of these fees, whilst our Australian processors are currently fending for themselves.
On top of bearing the brunt of offshore fees, the report found Australian businesses have other cost disadvantages, including higher utility costs, additional local regulatory fees and increased labour costs. For instance, in Australia, regulation costs contribute over twice as much to overall processing costs than Brazil and America, and 1.89 times the equivalent in Argentina. Similarly, labour costs make up around 58% of total operating costs for Australian businesses, while it remains below 50% elsewhere. With the financial odds stacked against our local processors in so many ways, it’s plain to see that allowing operational costs to increase at their current rate only serves to make our ability to compete on a global stage becoming increasingly difficult.
So how to we fortify the position of Australian processors moving forward? Heilbron’s report provides several recommendations which, if undertaken, have the potential to provide financial relief in the order of $700 million annually, or 5.5%. including:
* Alternative energy incentives to reduce utility costs
* New approaches to flexible labor, including changes to the visa system
* A reduction in regulatory costs and stresses
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It’s our hope that several of these report findings and recommendations will help us enact change at a federal level to curb this continual increase in costs and support our local processors, just as they’ve supported our economy for decades.
We recommend having a read of the full report, available via the AMPC website
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