Food sector seeks increased budget aid

Australia’s $133bn food and grocery sector is pushing for Scott Morrison’s manufacturing strategy to be overhauled.

Australian Food and Grocery Council chief executive Tanya Barden says the current structure of the manufacturing strategy did not ‘go far enough’. Picture: Nikki Short

Australia’s $133bn food and grocery sector is pushing for Scott Morrison’s manufacturing strategy to be overhauled, raising concerns about grant funding and the need for targeted incentives to ­reverse the “long trend of off­shoring”.

The nation’s largest manufacturing sector, which helped contain Covid-19 supply chain pressures and supports more than 270,000 jobs, is one of six critical areas identified in the federal government’s Modern Manufacturing Strategy.

Australian Food and Grocery Council chief executive Tanya Barden said the current structure of the manufacturing strategy did not “go far enough”, with the AFGC’s budget submission urging Josh Frydenberg to increase the level of manufacturing co-investment grants.

“The food and grocery sector is disappointed with the level of grant funding to date. We are calling for targeted incentives that take into account the diversity and intense competitiveness of Australian food and grocery manufacturing,” Ms Barden said.

The AFGC budget submission said the manufacturing strategy was struggling to “stimulate scale in investment” across the sector.

“The pace and scale of fund distribution has been slower and at much lower levels than anticipated,” the submission said.

“The latest data tells us that the sector’s capital investment expenditure is under $3bn per annum and that it needs to grow to about $7.5bn per annum to keep the sector resilient and competitive. To date, government has granted only $33m through one element of the Modern Manufacturing Strategy which will only support a tiny fraction of what is needed.”

The Australian Industry Group in its pre-budget submission pressed the government to commit to assisting businesses struggling through future waves of Covid-19, and that tax breaks and incentives introduced in the pandemic should be maintained.

The national employers association argued that the experience of trying to live with Omicron had “demonstrated that even in the absence of lockdowns and despite widespread vaccination, severe interruptions to commercial activity, including from labour availability and supply chain disruptions, can be associated with Covid outbreaks”.

Ahead of a further outbreak through winter, Ai Group’s submission said the commonwealth “should be ready to offer targeted support to severely affected households and businesses as new disruptions materialise”.

“We recognise this could add to levels of public sector debt that are already high in comparison to Australia’s earlier experience. However, we also refer to the role of earlier support in the strength of rebounds to date and the benefits this has for a faster recovery of tax revenues.”

With the US congress considering a Made in America initiative, including tax cuts for companies bringing supply chains from overseas back to the US, the AFGC said Australia had a “significant onshoring opportunity”.

Food and grocery companies want the government to consider “concessional tax incentives to firms looking to invest, create jobs and onshore advanced manufacturing capability to Australia”, making it easier for businesses to invest by eliminating domestic barriers.

Ms Barden said the sector held up strong during the pandemic but Australian manufacturing needed to “evolve”.

The Ai Group also made the case for tax reform, saying current settings were “too highly dependent on taxation of income in general and in particular on returns required to attract investment”.