Regulatory reform to ease the compliance costs faced by Australia’s food and grocery sector is becoming increasingly urgent as the financial squeeze tightens on many food and grocery processing and manufacturing companies.
In an environment where input costs are rising on everything from commodities, to labour, to energy and retail price deflation continues to cut margins, the competitiveness of the sector is under increasing pressure.
At the same time, the food and grocery sector has huge potential for growth into Asia in the future if competitiveness can be maintained and enhanced.
Government at all levels has an important role to play in an area that is under its direct control – the regulatory burden.
Certainly any additional regulation or impost that increases costs runs the risk of driving more production and jobs offshore. And any regulation that impedes innovation carries the longer term risk of stifling the potential of Australian industry to capture growing market opportunities at home and abroad.
Australia has an enviable record on food safety and biosecurity that needs to be safeguarded and maintained. But the goal set 10 years ago of moving towards uniform food regulations across Australia and New Zealand, streamlined standard setting and reduced compliance costs has not been achieved.
Instead Australia’s food regulation system is increasingly prone to duplication and confused responsibilities and goals between state and federal governments, and between consumer law and food standards.
We have seen states implement new standards without national agreement and labelling regulation split between consumer law and the food standards.
Of great concern is the trend towards food regulation being seen as a policy tool to achieve public health outcomes, without a rigorous evidence-based approach or a thorough dispassionate examination of the costs and benefits.
Each time labelling regulations change it can cost tens of thousands of dollars per product, adding up to tens of millions of dollars across the sector, often for little or no public benefit. Excessive or overly-bureaucratic health regulations also present a significant disincentive to innovation by restraining the ability of companies to respond effectively to changing consumer preference, or advances in nutritional sciences.
Priorities for regulatory reform in the food processing and manufacturing sector should include:
- A recommitment to harmonisation of food standards across all Australian states and territories and New Zealand;
- An urgent review of the mandatory reporting system introduced in 2010, which has added significant costs to industry with little or no improvement in food safety;
- Clarification that standards and labelling relating to food composition and safety are administered by FSANZ and all other consumer related labelling requirements should be in consumer law;
- Requirements that any food regulation aimed at achieving preventive health outcomes be subject to a rigorous cost benefit analysis and be evidence based;
- Recognition that food regulation is not particularly well suited to addressing lifestyle associated risk-factors for non-communicable diseases.
The food and grocery manufacturing and processing sector employs more than 300,000 Australians directly and is the nation’s largest manufacturing sector.
Some food and grocery manufacturing operations are already moving offshore because of the challenges faced by industry across the supply chain, especially labour costs and pressure on industry from extremely competitive imports taking advantage of the high exchange rate from the Australian dollar.
A significant switch in food processing offshore may ultimately impact on the nation’s food security and the level of confidence Australian consumers have in their food supply.
It is imperative that regulatory reform in this sector be re-energised to deliver real results that improve the competitiveness and sustainability of the food and grocery manufacturing industry.
