Agriculture… the new boom industry!

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For many years now mining has been the darling of the Australian economy, pumping billions of dollars or mining royalties into the system, providing great returns on investment, and helping the balance of payments and 2021 certainly was no different. Despite the pandemic and recessions and slowing growth in Asian markets and the ever increasingly aggressive Chinese trade war, Aussie resources, particularly iron ore continued to outperform. However, things might just be starting to change……….

For many years now mining has been the darling of the Australian economy, pumping billions of dollars or mining royalties into the system, providing great returns on investment, and helping the balance of payments and 2021 certainly was no different.

Despite the pandemic and recessions and slowing growth in Asian markets and the ever increasingly aggressive Chinese trade war, Aussie resources, particularly iron ore continued to outperform.

However, things might just be starting to change

The Chinese government has continued to ramp up their rhetoric against Australia, but it seems this in not merely just rhetoric anymore.  This is evidenced by their preparedness to suffer through electricity blackouts and resorting to rationing energy to industry in order to avoid drawing on high quality Aussie coal, instead insisting on lower grade, less efficient supply from Indonesia, Kazakhstan, Russia and ramping up of their own domestic production.  This coupled with the growing construction crisis in China (by far the biggest Chinese consumer) as years of speculative investment and corruption begins to bring down such massive enterprises as Evergrande, is likely to result in significantly reduced demand for Australian ore in coming years.

So where does this leave the Aussie economy then??

Either dangerously exposed or with a once in a life-time opportunity to develop Australia into an agricultural powerhouse and the food-bowl of Asia, this however depending on the foresight, initiative, and willingness of our leadership.  Why? Let me explain.

Unlike mining, agriculture is a much more limited resource.  There is still vast areas of Australia, Africa, South America, and Eurasia that have not yet been fully explored or assessed for mineral resources.  Once again, we can see huge Chinese investment in developing new mining resources in Africa, particularly in the countries of Zambia, Tanzania, and Mozambique as well as Papua New Guinea, Chile, Peru etc. These investments are all encouraged by the Chinese government to reduce Chinese reliance on Australia and increase their influence in the resource rich nations.

To grow agriculture however is much more difficult, the vast majority of the world’s arable land is already developed so to continue to feed a growing human population is going to require increased efficiencies and yields from existing land as the alternative is deforestation and we do not want that.

This is where Australia can step in!!

The Chinese government may get away with keeping their population in the cold and dark from time to time, but they must keep the people fed. A hungry population is an angry population.  The need for food is almost insatiable and if they do not get it from Australia, they must get it somewhere else, opening up other markets.  The ever-increasing population and burgeoning middle class in India is another huge growth opportunity for Australian agriculture. So how do we meet the demand??

Just add water.

An old farmer once told me that Australia is like a packet of Betty Crocker cake mix, just add water and watch it rise.  This can be witnessed in the wetter than usual La Nina season of late 2021, record crops and good prices have restored many agricultural companies that have been battered by recent long-term droughts. Australia has vast tracts of extraordinarily rich farming land, barely utilized, just waiting the arrival of water which inevitably resulting in the desert blooming like a rose.

A common misconception is that Australia has a shortage of water, this is simply not the case.  It has a water distribution and storage problem. Vast amounts of water, particularly up North, are running off the edge of the continent and out to sea. When the floods come, water is forging down empty inland rivers leaving verdant green snakes of growth in their paths, only to dissipate leaving dusty and parched furrows awaiting the next flow of water for life to return.

When was the last time we built a decent dam on these water courses to store this bounty from heaven and regulate the outflow, reducing the severity of floods and minimizing the impact of droughts??

For many years various visionaries have floated the idea of damming northern rivers and turning them inland. All that must be done is the find a way to get the water across the Great Dividing Range and into the network of dry rivers heading inland to the center of the country, opening up vast opportunities for irrigated agriculture and untapped farming potential.

So why hasn’t it been done??

There are so many answers to this question.  Firstly there’s the critics that say it won’t work, then there’s the funds required (who pays for it), there is relatively few votes in the regional areas compared with the cities and short 3 year Federal terms tend to cause MP’s to focus on the short-term rather than the big picture, and of course

The biggest impediment, however, was made 121 years ago at the Federation. Although they got so much right, a big mistake the fathers of the Federation made was water rights to be retained by the State Governments, rather than the Federal Government. This has led to an impasse of parochially interested bodies blocking any serious attempt to develop an integrated water policy for the national good which is very sad.

Can it be done?

I am sure it could. If the Government could establish a bi-partisan water commission with a genuine intent to build this vital infrastructure, then such a plan could be accomplished by declaring it a matter of National Security, precisely the same way the Snowy Mountain scheme was able to be achieve in the 50’s. It has been done once, let’s do it again and secure Australia’s economic and national future.

 

-Ash Collins

Managing Director

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