The Americans know they can count on Australia in defence matters. But in agriculture, Australia is a big rival to the US.
Because of appalling political decisions from our state and federal governments and ignorance by our farmers, Americans know that soon they will have Australia on the ropes in big chunks of farm trade.
Trade Minister Andrew Robb may have a vision for northern development (see The one minister who has a vision for Australia, August 19), but Australian farmers are completely unprepared for what the Americans have in store for them.
Only a dramatic fall in the Australian dollar -- say to below US70c -- can save many of our farm exports in competition against the US.
To compete on the world stage in rural exports you need a number of key ingredients, but a key one is energy. Most fertilisers have a large energy component and diesel fuel is a big cost. Ironically, partly thanks to Australians, the US is emerging as a major low-cost energy producer.
BHP is a global expert in fracking to develop shale oil and gas and was an early player in the industry, which is transforming US energy. And our leading fertiliser company Incitec will harness that gas through a massive investment in a fertiliser plant in the US, which will enable US farmers to have a huge advantage over Australia. Australia also needs new low-cost fertiliser capacity here, but we can’t do it because of our irrational energy policies.
The looming plight of our farmers was really made clear in the last part of the KGB interview with Fortescue chief executive Nev Power, who is also a big farmer. Australia has exported all of the gas in the eastern states and, as a result, there will be big shortages and gas price rises for the residents of Sydney, Brisbane and Melbourne. But farmers will also be hit because you can’t invest in modern fertiliser plants when there is no gas.
Australia has plenty of shale, coal and natural gas that is not required for export, and here Nev Power has some simple solutions to transform the Australian energy situation. And those solutions are remarkably similar to those advocated by Dow chief Andrew Liveris (see Liveris: Australia should be a petrochemical power, August 19).
- Those with gas in central Australia and elsewhere must either develop it or lose it.
- Give farmers and landowners a share of the revenue, which gives them an incentive to promote fracking, which is vital for competitive gas supplies. At the moment farmers are leading the community opposition to fracking, even though they are the main sufferers. That game needs a circuit breaker. In the US, fracking has transformed the economics of many farmers.
- Make a free market for the local gas, which will encourage investment.
- Nev Power believes that such policies will also enable gas in Western Australia to make our mineral projects more economic.
- Dow wants to invest in new plants in Australia, if we get our gas policies and supplies right.
- The US knows that it now has the gas to reduce greenhouse emissions, so it has changed its carbon policy. The extreme Greens in Australia think the way to cut emissions is to lump a carbon tax on top of the looming huge gas price rises. The Americans have simply out thought us.
Even if we introduced the above policies today it would take at least half a decade for them to have any real impact.
Every day that goes by without clear action means that Australia will suffer longer down the track.