20/02/2016 Talking Business


20/02/2016

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split on the decision. Those are the headlines, we will

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have more at the top of the hour. Now, Talking Business.

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It has always been at the heart of Australia's economy.

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Ever since this country was founded more than 200 years ago,

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Australians have been getting rich from it.

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Either through farming, or by digging out what lies

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But now, as demand for some of what Australia produces slows

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down, what does this country do next?

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Welcome to Talking Business, I am Karishma Vaswani,

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This is a massive country - the world's sixth largest,

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in fact - and I will be travelling through some parts of it to find out

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how Australians are faring in the face of a global economic

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First stop, mining country, where my colleague, Jon Donnison,

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has been finding out for himself what happens to a community

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Ground Zero for Australia's coal industry.

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The state has some of the world's largest coal reserves,

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and was at the heart of the country's mining boom.

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It is a boom which maybe yet hasn't gone bust,

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but which these days is certainly providing a lot less bang

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Coal continues to be pulled out of the ground here in Queensland

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But such has been the fall in the price of the product,

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that many of the big mines are struggling to turn a profit.

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And that hit mining communities like Moranbah hard.

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Nearly everyone here is connected to the coal industry.

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But wages have been cut, and jobs have been lost.

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I am not quite sure where boom and bust originated from,

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but it certainly cemented into the mining industry,

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We do need to work towards sustainability

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And Moranbah has definitely not seen that.

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These houses don't look too flash, but during the boom,

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when miners were flush with cash, this small non-descript town

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remarkably had some of the most expensive real estate

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But in the last few years, many people have left,

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and property prices have dropped by as much as 70%.

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The town is starting to struggle now because of that impact on the bottom

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line, so you don't have the general money to spend around the town.

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I am always concerned about my family and the community's

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future, hoping it will come back, you will see a flattening

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and a potential increase in demand, but there is all that worry.

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Australia's coal reserves are not going to run out any time soon.

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As you have seen, the resources sector is really taking a beating

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from the end of the mining boom here, but agriculture has always

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been an important part of Australia's economy.

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I am at the third largest meat processing plant in the country,

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and people here are betting on the growing fortunes

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This isn't just any old job, it is a lifeline for Scott.

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He spent 14 years of his life here, before leaving this job

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When oil prices were high, his salary doubled.

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But just before Christmas he lost that job, because oil prices

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In the oil and gas industry I was promised a chance of moving up

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and progressing in the company further, and then that went bust,

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The way the company is going here now, I can see it is going to be

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going very well in the future, so I am happy to have a job.

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As Asia's middle classes get richer, more of them want what Australia

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Australian beef exports to China hit a record of $655 million last year,

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There is more than 50,000 head of cattle in this feed lot alone,

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and almost half of the meat produced here ends up on plates across Asia.

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These cows, for example, are destined for supermarkets

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But it is China, farmers here tell me, where they have seen

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the biggest demand in increase of orders and inquiries over

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But it is not all blue skies and sunny days just yet.

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Australia's beef sales are only worth about a third of the value

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of what coal and iron ore bring to the economy.

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The Government says betting on beef is a long-term strategy.

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Some three billion people in the coming decade will be

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You have got rapid rates of urbanisation and continued

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That will lead to a greater demand for services like education

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services, tourism services, health services.

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It will lead to a greater demand for high quality agricultural

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products, which Australia is very well-known for,

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as well as higher calorie agricultural products, like beef.

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Supplying Asia's middle classes with high quality agricultural

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products is how Anne Storey sees her business going,

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Australia, and businesses like ourselves particularly,

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need to target carefully what part of the Asian market segment

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we are trying to serve, because our cost base is high,

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but we are prepared to put that effort and that work in delivering

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a consistently high quality product to the customer every time

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Australia is hitching its fortunes to Asia yet again.

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First, coal and iron, now lettuce and beef.

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But Asia is slowing down, and that could hurt farms

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I am standing in front of Parliament House,

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where the men and women who run this country sit down to tackle some

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of the challenges facing its economy.

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But first, a lighter look at some of those challenges,

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with the BBC's Colm O'Regan, who has been taking some lessons

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On this week's Talking Point, if Australia wants to concentrate

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more on farming, then they have come to the right man.

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I grew up on a farm - the land is in my bones,

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I look forward to coming back to my natural habitat.

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Now, unfortunately there wasn't really time for me to go back

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all the way to my natural habitat, so instead I have come to a city

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farm here at Airfield in Dundrum, in Dublin.

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It exists to give lungs to the landscape and to teach

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children that milk does not necessarily come from cartons.

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What better metaphor for an economy trying to rebalance towards a more

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agricultural means of earning money than a farm in the middle

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We have been down this agricultural road already ourselves,

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here in Ireland, there has been huge expansion in our farming industry.

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Huge targets for growth in output for our farms.

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There is a huge investment going on in agriculture businesses

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around the country, where we have seen upwards of about one billion

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euros being invested at industry level.

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One of the big drivers for that was the end

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You see, we can produce as much milk as we want.

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We decided we would grow our milk output by 50%.

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And I suppose we are beginning to see the fruits of that labour

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now, with the lifting of quotas in April last year.

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We are going to see about 300,000 extra cows being milked every year

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in Ireland over the next 10-15 years, which is is a massive

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in Ireland over the next 10-15 years, which is a massive

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increase on the output we are doing at the moment.

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Let us go and meet some milk producers.

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You see, in Ireland now we are in the middle of a milk boom.

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These Jersey cows behind me are in calf.

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We don't need Silicon Valley, we have Milking Valley.

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Ever since the recession back in 2008/9, agriculture,

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I suppose, has been the driver of the Irish economy since that

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Agriculture has been identified to have a great potential to drive

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As it stands, it counts for about 12% of our merchandise export.

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We export about 10 billion euros worth around the world,

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and that has grown significantly over the last six years,

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and there is a target there to grow that to about 19 billion euros

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So, what can we say about the future about Australia's rebalancing

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of its economy towards more friendly fellows like this?

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I think for agro-business today you cannot ignore China -

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after all, China has about 25% of the world's population,

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and they are consuming more and more of the products we produce,

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which are high quality premium end products.

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Of course cows, like any industry, need inputs.

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All I can say is I certainly would rather be here,

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Some Irish takeaways there for Australia from the BBC's

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If you want to catch more of his material,

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What is it going to have to do to keep diversifying its growth

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Joining me to answer some of those questions is Andrew Robb.

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Tell me, what is Australia's strategy going forward,

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now the mining boom is almost officially over?

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We have been blessed for the last 12 years with a very long mining boom.

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A lot of that has meant we have projects all over Australia

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I mean, literally $400 billion worth of infrastructure in the oil and gas

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That will deliver us returns for decades and decades to come.

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We are selling a lot of those products now.

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Sure, the price is down on them, but we are selling a hell of a lot

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more than we had five years ago in the market place,

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agricultural prices, the dollar is now 30% lower.

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A whole swag of free trade agreements that we have negotiated.

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Some which give us access that no-one else has got to places

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like China, and these things, as well as tourism and education,

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Services is the next horizon for Australia,

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We are in a region which is exploding and needing our service.

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We are in a region which is exploding and needing our services.

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We are a first world country in a region of emerging countries.

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We just happen to be there at the right time.

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For the first time, really, in the right place, as well.

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There is an ambition to become the food bowlof Asia,

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There is an ambition to become the food bowl of Asia,

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but Australia, my understanding is, only produces enough food to feed

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That is not enough to feed neighbouring Indonesia,

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If we pitch at the top 1 or 2%, and that is about all we could

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supply, the top 1 or 2% of all of these emerging markets,

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and even then we couldn't meet all that demand,

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but if we get to that premium end we get a premium price which allows

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us to invest heavily in innovation and remain competitive,

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keep the quality up, so if we are looking to position

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ourself, not just with agricultural products, but with our tourism

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products, education products, with health products,

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with many other services, if we pitch them at the very high

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end, which is a big demand for that, we have got great markets.

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As long as we aim for the top end, we will be in very good shape.

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It is not an easy sell, frankly, to go from an economy that has been

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so dependent on land and resources to one that is more focussed

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on innovation and technology, but it is all part of

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Prime Minister Malcolm Turnbull's new plan.

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I am in Sydney now, behind me the financial pulse of this country.

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I am about to meet some key people in the pillars of this economy,

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Joining me to answer some of these questions, and have a discussion

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held the post of CEO at the New South Wales Minerals

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Council and the Australian Coal Association, and she was recently

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voted in the top five most influential women in

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Bill Ferris, recently appointed as the chairman of Innovation

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He is a 45-year-veteran of private equity in the region,

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and co-founded Australia's first ever venture capital firm in 1970.

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Last, but not least, Fiona Simpson, vice president

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of the National Farmers' Federation, and the past president

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of New South Wales's Farmers' Association and a farmer herself.

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There is a lot of talk about how the old Australian economy,

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the mining boom, that's dead, and that Australia needs to find

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a way to innovate and move forward in future, to stay

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Of course any economy and any sector within an economy needs to innovate,

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The mining sector is obviously in the doldrums at the moment.

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We have just come off an incredible supercycle,

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and that supercycle we have effectively seen happen around

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about every ten years, for as long as I can remember.

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In other words, where we are today is entirely predictable.

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A 60% slump in the price of commodities, that is entirely

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When you are coming off the highs we came off,

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but I think the main thing for people to focus on is that

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when you have a crisis in a particular sector,

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one of two things happens - you either have extinction

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or you have reinvention, and you know, our industry has been

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reinventing itself for many, many decades.

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It is why we are the most technologically advanced mining

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You are in charge of spearheading this innovation agenda in Australia.

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How much will that play into the old economy?

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How much does that have to contribute to that?

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I think the big issue for us, the excitement for Australia

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is that we are in a grand position to capitalise on the new technology,

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the new innovations going forward and commercialise a great deal more

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I don't think a lot of your viewers would really appreciate the fact

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that whether it is from penicillin or xerography, which led to Xerox,

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or the black box flight recorder or vaccines of all sorts,

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or more recently Wi-Fi, I could go on, all of these things

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We are an inventive people, what we haven't done too well

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at is commercialising our fair share of that.

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Fiona, I think this is an opportune time to bring you in.

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Would you say that the farming and agricultural sector has been

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neglected as a result, some of this focus we have had

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When you think about cycles, there are farmers who would say that.

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Whether it is just a natural cycle, whether it is not,

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that the Government, you know, and the community has been focussing

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on what has been an amazing boom for mining, so I think definitely,

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where we are at the moment is at a point where we are ready

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to grow, and we see amazing potential in front of us.

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We see opportunities and challenges that we haven't seen for many,

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many years in many generations in agriculture, but certainly

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we need now some policy settings in place, and we,

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as a industry, need to do some things to make sure that we actually

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get some of those gains out of the opportunities that

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There is a lot of talk about how can Australia become the food bowl,

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Isn't the reality Australia only produces food enough

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That is not enough to feed neighbouring Indonesia,

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Politicians in Australia have been talking about whether it's

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supermarket or whether it's delicatessen.

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When you consider we export 60% of what we produce in Australia,

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it offers some amazing opportunities for who we can actually feed,

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considering the growing populations in Asia,

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in China, in India, in Indonesia, and the change in demographics

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in those countries, so the exploding middle classes in Asia are wanting

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But does Australia risk making the same mistakes and focus on one

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country, one market to become the sort of saving grace

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for the economy, in the same way it did in mining?

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It is important to understand we are already 75-80%

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a services-based economy, and some of the new exciting,

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very high growth, very high growth opportunities for Australian

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innovation, in worldwide markets where we have been operating

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for yonks, over and apart and separate from the commodities

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trade, our rating worldwide in health and medical research

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We are nowhere in terms of the commercialisation

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of our own drug discoveries or work, because when you get

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to the clinical trials phase, you need about $10-20 million

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of venture capital per project to get into a phase one

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It gets licensed off too early or goes to people offshore,

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We are now going to do more of that ourselves.

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I think it is really important, the flexibility in capital

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investment in regional Australia at the moment.

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Our infrastructure is - a lot of it is sadly decayed

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and lacking, and that means we are not competitive when it comes

:18:40.:18:43.

to other countries we might be competing with.

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We haven't got, and Government at the moment hasn't got the money

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to inject into that rail infrastructure,

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We need to make sure that we have a system in place

:18:50.:18:54.

How can we make sure it goes to where it is needed?

:18:55.:19:06.

If I look at the mineral sector, during the boom, the iron ore supply

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chain, which was primarily on the west coast,

:19:12.:19:13.

was entirely privately owned - but that doesn't mean

:19:14.:19:15.

anything in particular, except that the whole process

:19:16.:19:17.

was orientated to how you maximise exports on the east coast.

:19:18.:19:20.

On the other hand, you had multiple players owning the railway cars,

:19:21.:19:23.

the tracks, the roads, the tunnels, the boats, the port,

:19:24.:19:39.

The supply chain was completely fragmented, and that meant that

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while we were able to take advantage of high prices,

:19:43.:19:45.

we lost market share to competitive countries like Indonesia,

:19:46.:19:47.

in certain of our commodities, that infrastructure,

:19:48.:19:48.

the hard infrastructure, and the notion that the infrastructure

:19:49.:19:50.

must be co-ordinated as a supply chain, and the soft infrastructure -

:19:51.:19:57.

the schools, you know, the hospitals, and all the other

:19:58.:20:01.

services, those things have to be put in place.

:20:02.:20:04.

This is where government vision is so critically important.

:20:05.:20:08.

It is not the Government's going to pay for that,

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but it is going to make it possible by incentives and other things

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for private industry to build it and deliver it.

:20:17.:20:18.

Finally, how much of an impact do you feel that the ongoing global

:20:19.:20:23.

financial environment will have on Australia's fortune?

:20:24.:20:25.

The resources from the mining boom is what helped us financially,

:20:26.:20:38.

to get through the global financial crisis and other ebbs

:20:39.:20:41.

and flows in the economy, but I think as we digitalise

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more of our business, whether that is -

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even if that is attached to a real, a real business, making something

:20:46.:20:48.

or extracting something, that will allow greater flexibility

:20:49.:20:51.

and ability to adapt to, you know, what is pretty

:20:52.:20:54.

We have come through lots of crises and as an economy, surprised

:20:55.:21:07.

the world about now 25, 26 years of unbroken growth.

:21:08.:21:09.

Jury is still out somewhat, but I am convinced that one of the,

:21:10.:21:15.

one of the great virtues will be this sense of what is possible,

:21:16.:21:18.

a sense of innovation, a sense of can do

:21:19.:21:20.

It's the first time ever we have had a cabinet committee of innovation

:21:21.:21:26.

and science under the Prime Minister.

:21:27.:21:27.

That is a big signal, a big message to every sector.

:21:28.:21:30.

Always it is going to have some effect, but for agriculture

:21:31.:21:41.

at the moment, we were wanting trade agreements, we have a whole raft

:21:42.:21:44.

of good trade agreements now, providing a level playing field

:21:45.:21:47.

At the moment, that is what we have got.

:21:48.:21:52.

Everything is right at the moment for agriculture

:21:53.:21:58.

So despite the global economy, I think we are ready to show

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who we are and to really grow in Australia.

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We are looking forward to that growth.

:22:08.:22:09.

Thank you very much, ladies and gentleman,

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It has been a real pleasure speaking to you about some of the issues.

:22:12.:22:16.

That is it for this edition of Talking Business here in Sydney,

:22:17.:22:19.

I am Karishma Vaswani, join us for the next

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Lic is fairly evenly split on the decision.

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Those are the it a weekend of huge variety, most

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of us seeing rain at some stage, otherwise really mixed fortune, it

:22:47.:22:51.

hinges on a weather front. Let me show you, this great big snake of

:22:52.:22:54.

cloud extending out of the

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