Guess Who’s Been Drinking the Government Cottee’s?

In today’s Money Morning…nice to you, if you’re from the Commonwealth…who really picks the fruit that we hold so dear?…15% is better than 32.5%, but far worse than 0%…and more…

Before I get started, I’ve just been told that next week Port Phillip Publishing is going to blow wide open a huge story.

What story? To be honest, I have no idea.

A very close lid has been kept on the subject matter of Port Phillip Publishing’s first ever Special Investigation, released next week. They won’t even tell me what it’s about.

All I know is it sets out to solve a 41-year-old Australian mystery. And I know that I’m dying to find out what it’s all about.

I managed to get a hold of investigation host Vern Gowdie, and he said it, ‘could be the single biggest influencer of your carefully invested capital…your hold-in-your-hand cash…your privacy…and your core financial freedoms…’

I try not to let Vern scare me too much, but when he talks I listen.

Keep an eye out for what I’m told is our first feature-length documentary, out mid-next week.

Now back to today’s Money Morning

Living in the UK I get to speak to a lot of Brits. I’ll walk into a shop and during a bit of small-talk I typically get the question, ‘Where’s your accent from?’

Some people have the ambition to guess for themselves. I’ve had everything from Canadian, American, South African to, of course, Australian. People over here seem to love a foreigner…or at least one from the Commonwealth.

Or maybe it’s just because I’m buying something from their shop. Hmmm.

Either way, after the first question they typically follow with a statement. And that statement is often along the lines of, ‘I know ‘so and so’ who went out to Australia. They went out for a backpacking holiday, had a blast, loved the place.’

It’s amazing how many people in the UK have a friend, cousin, brother, sister, son, daughter, or friend of a cousin’s wife that went to Australia at some point.

Lots seem to backpack, too. Lots seem to go for a long time. Lots also seem to go with not all that much money, but somehow manage to live and travel in (expensive) Australia.

I wonder how they do it…

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Backpackers pick the fruit the fruit that goes to Cottee’s, I guess.

Do you remember that old 80s commercial for Cottee’s cordial? The lyrics read,

My Dad picks the fruit that goes to Cottee’s. To make the cordial. That I like best.’

It’s one of the most iconic Australian advertisements of all time. Even today, 30 years on, the jingle still resonates with Gen X, Y an even millennials. It’s a classic.

But if you actually watch the commercial, it’s clear it’s a fantasy land. There’s a bunch of kids marching around an orchard singing the song. Their Dad is up a ladder picking some fruit off a tree. Clearly he’s the Dad that ‘picks the fruit that goes to Cottee’s.’

This is a fantasy land because Dads don’t pick fruit that goes to Cottee’s. Backpackers do.

The real Cottee’s song should go,

‘My cousin’s wife’s friend went to Australia from England, to pick the fruit that goes to Cottee’s. To make the cordial. That people in Australia like best.’

But I guess that hasn’t got the same catchy tune to it.

Now I must add that I don’t know if backpackers actually pick the fruit or not that really does go to Cottee’s. But it’s a fair assumption that they might. I say this because the Australian fruit industry relies on backpackers to survive.

Tim Reid, Cherry Farmer from Tasmania said, ‘We would not be able to operate our business without [backpackers].’

Around 600,000 backpackers travel to Australia on working holiday visas each year. Many of them decided to take up jobs picking fruit or working as farm hands to pick up some extra travelling cash.

It’s a booming industry. Check it out for yourself. Just Google ‘backpacker jobs Australia’ and look at some of the sites. Most of these sites have jobs for picking fruit. Jobaroo.com even says, ‘the ultimate backpacker job is seasonal or harvest work.’

You can see the appeal. Beautiful locations around the country in rural and remote areas. Areas that give the ‘real’ Aussie experience for backpackers, and typically some good weather – which they’re not used to in the UK.

With so many backpackers coming into the country making money, the government decided they needed a backpackers tax. Originally the tax was going to be 32.5%. But that wasn’t going to ever fly with the Greens and Labour.

As it stands there’s now an agreement on a 15% backpacker tax. Of course this isn’t just for backpackers picking fruit. It’s for all backpackers. But whichever way you look at it, it’s the government trying to find another way to grab any bit of cash they can, while they can.

Many are claiming this as a win for the farmers. But I don’t see how. In fact, I think this tax will thwart those hundreds of thousands of backpackers. They’ll go somewhere else. And long term, it’s going to hurt the Aussie fruit industry, unless there’s some revolutionary change.

Just PC for immigration control

Somehow the government has convinced everyone that 15% tax is better than a 32.5% tax. But we’re quickly forgetting 15% is far worse than 0%.

According to the Daily Mail,

Farmers can now plan next year’s harvest with confidence that they will have a backpacker workforce there to help them harvest their fruit and harvest their crops,” said Fiona Simson, president of the National Farmers’ Federation, Australia’s leading farming group.’

Hang on a second, last time I checked backpackers didn’t pay any tax on earnings. As long as they earn less than $18,200 they fall under the tax-free threshold, just like any other low-income earner. The money they earn was the money they kept.

Not anymore. Maybe a 15% tax is better than 0% tax — for the government, that is.

The Age reports that Fiona Simson also said,

A very, very sensible common sense package that is going to benefit agriculture … and give backpackers the certainty that they need.’

I think she’s been drinking Turnbull’s Kool-Aid — or should I say Cottee’s?

Give backpackers certainty? Certainty you’re now going to pay tax? I can hear the backpackers around the world rejoice…

Make no mistake, this tax — any tax — will turn away backpackers from coming to Australia. In fact this tax is a veiled form of immigration control. They call it a tax. But that’s just a PC way of saying we want to close our borders.

While it’s only early days yet, I think I can hear the conversations I’ll be having around the UK,

‘I have a cousin who’s wife’s friend was going to go to Australia but she couldn’t afford it, so she went to Asia instead.’

And if the backpackers do look elsewhere, then the fruit industry is in real trouble. If they can’t operate their business without them, then what will they do? Fail?

There is a way out of it, though. It requires innovation and a little bit of robotics.

I’ll go into it a little more next weekend, as I explain why robotics and automation aren’t something to be afraid of. If we can embrace it, like the fruit industry should, then it can make everything a lot better off for everyone. Except the government.

Regards,
Sam


Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

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