Advisory firm Grant Thornton is calling for temporary tax incentives to help Australia's food processing sector to make inroads into Asia.
The company says tax breaks on the export earnings of food and beverage companies are needed to boost the sector’s competitiveness and attract much needed foreign investment and provide Australia entry to Asian markets.
Grant Thornton says Australia's food processing sector is under-invested in infrastructure and research and development, and both are needed to boost exports.
The company’s national head of food, beverage and agribusiness Tony Pititto told Fairfax Media that many of Australia's small to mid-sized food processors would fold in the next two to the three years as they battle shrinking margins as competition increases from supermarkets' private labels.
He said most Australian food and beverage companies want to double their exports to become 21.5 per cent of product sales in the next two years, and the federal government could play a greater role through applying tax incentives on export earnings such as a 10 per cent rebate.
''A lot of companies will exit the sector unless they have strong brands because they will get caught up in the private label production system which is all about volume,'' Pititto said. The margins are pretty small.''
The call follows an Agricultural Competitiveness White Paper submission from Rabobank that says Australia will not become the food bowl of Asia and should shift away from competing in highly commoditised global markets.
The specialist rural lender recommended that farmers instead continue their focus on developing high-value produce for export into targeted global markets.
“Australian producers have inherent strengths to leverage, most notably in the area of product integrity and traceability, which are valuable given the growing focus on food safety and supply chain visibility from consumers around the world and particularly in China,” Rabobank said.
“We need to recognise that Australia is not and is not likely to become the food bowl of Asia.”