Thursday 4 February 2016

Cattle Prices

There has been much discussion in recent months about the improvement in cattle prices for Australian producers.  The price improvement in late 2015 has certainly been most welcome and reverses the trend of a number of years of very poor returns for cattle producers. 

It is interesting to consider how good the price rises have been.  The chart below shows cattle prices in nominal terms and also real or inflation adjusted terms.  The data shows a slight improvement in prices over time in nominal terms.  However, price rises have not kept up with the inflation rate, demonstrated by the steady decline in saleyard prices in real terms. 

Despite the recent price rises, cattle prices are still approximately 25% lower in real terms than those prevailing in 1980. 

Figure 1:  Average Australian Saleyard Price for Yearling, c/kg.  






Source:  ABARES, Commodity Statistical Bulletin 2015. 

Since 1994, average weekly earnings in Australia have risen by approximately 130% in nominal terms.  Cattle prices referred to in the chart above rose by only 30% in the twenty years between 1994 and 2014 in nominal terms.  The price rises in 2015 have meant that prices have risen by about 80% since 1994, still considerably less than wage rises. 

FURTHER READING
Australian Bureau of Statistics (2015)  6302.0 Average Weekly Earnings, Australia.

Saturday 23 January 2016

Red Tape

“Reducing red-tape” is a favourite election time commitment.  Usually soon after an election, reducing re tape becomes all too hard and the normal course of events is resumed.  That certainly seems to be the case with the State Government in Western Australia following the last election with promises to reduce red tape quickly forgotten.  At least the Federal Government has attempted to address the issue in some form with an annual day for repealing unnecessary regulation. 

An important question to address is why we end up with all this inappropriate regulation in the first place.  Bureaucrats have a tendency to regulate first and ask questions later – their first response is to regulate before considering what alternatives there might be.  The default position is regulation. 

A fundamental tenet of human behaviour is that rewarding good behaviour is a much more effective way of achieving a desired outcome than punishing bad behaviour.  In other words, the carrot is much more effective than the stick – a fact that appears lost on the bureaucracy. 

Now my own industry in Western Australia, cattle grazing in the rangelands, faces a significant increase in the regulatory burden imposed on pastoral businesses.  The Department of Lands in Western Australia has put forward its plans for legislative reforms in the rangelands.  The “reforms” proposed include: 
  • ·         Requirement to Comply with Land Management Laws.
  • ·         Rangelands Condition Management and Monitoring. 
  • ·         Lease Management Plan. 

On the face of it, these changes may seem reasonable but a closer consideration would suggest otherwise.  Pastoralists already have to comply with a myriad of Land Management Laws.  Introducing an entire suite of additional laws is unnecessary and will result in additional compliance costs.  Many pastoralists already monitor their piece of the rangelands, again meaning significant additional compliance costs. 

The Lease Management Plan component of the “reform” process appears to be the most onerous with reference being made to “….a number of regulatory mechanisms..”.  The “regulatory mechanisms” will be additional to those already in place.  The requirement for pastoralists to go beyond what is required in other sectors is unfair and will be inimical to the development of industry in the Rangelands. 

Businesses in Western Australia already face an intolerable regulatory burden.  Ultimately it is up to our elected representatives, our politicians, to stop these sorts of insidious regulations being put in place.  Once installed it is extremely difficult to repeal. 

FURTHER READING
Department of Lands (2015).  Legislative Reform in the Rangelands.  Fact Sheet – November 2015.  http://www.lands.wa.gov.au/Publications/Documents/Rangelands_Reform_fact_sheet.pdf