One of the low points for the current Queensland Government occurred in late 2015, when it failed to stop the Real Choice in Marketing legislation advanced by Katter’s Australian Party with support from the Opposition and Billy Gordon. This provided cane growers the extraordinary power to force foreign owned milling company Wilmar and other millers to market their sugar through Queensland Sugar Ltd. Prior to this legislation, Wilmar and several other millers had indicated they wished to seek alternative marketing arrangements to QSL (see the QSL website for background).

The Productivity Commission has just published a scathing assessment of the “back to the future” re-regulation of the Queensland sugar industry in its latest Trade and Assistance Review (see section 3.4 from p. 60). The PC considers that “large parts” of the Queensland sugar industry have a “dependency psyche”, a legacy of historic regulation they have a yearning to bring back.

As the PC identifies, the Real Choice in Marketing legislation raises the issue of sovereign risk and may deter future foreign investment in Australian agriculture. So it is fortunate that, following an agreement between Wilmar and QSL in May, there is now an industry consensus supporting a repeal of the controversial legislation. The PC observes that (p. 61):

Reregulation of Queensland sugar was a backward step and the Queensland government should ensure that they do, as indicated in their media release announcing the settlement of the dispute with Wilmar (Byrne 2017), repeal the Real Choice Act.

It certainly was a backward step, and one that raised the prospect of a revival of agrarian socialism. Thankfully that threat now appears to have receded.

But as the PC notes, there remains a deeper problem, and one which is largely a Commonwealth rather than a Queensland Government responsibility, the granting of charity status to QSL in 2015. This charity status means that it would be difficult for a private sector operator to compete with QSL, entrenching QSL’s position in the market. The PC rightly observes:

Notionally, QSL’s not-for-profit status means that it will offer services at a lower cost to users, but in general not-for-profit status simply allows an organisation to be less efficient than its for-profit competitors.

As a charity, QSL is eligible for a payroll tax exemption from the Queensland Treasury, estimated to be worth around $1 million per annum. This is regrettable, given the PC analysis suggests there is no legitimate case for QSL being a charity, and its charity status confers it an unfair competitive advantage. Clearly, the Australian Government should undertake a review of QSL’s status as a charity.

Another outstanding Trade & Assistance Review from the Productivity Commission