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Select Committee on Australia's Food Processing Sector
Australia's food processing sector

FRANCIS, Mr Geoff, Principal Adviser, Competition and Consumer, Infrastructure, Competition and Consumer Division, Treasury

GARTON, Mr Phil, Senior Adviser, Macro Financial Linkages, Macroeconomic Policy Division, Treasury

McCREA, Ms Kathryn, Senior Adviser, Competition Policy Unit, Infrastructure, Competition and Consumer Division, Treasury

CHAIR: I welcome officers of the Treasury to the hearing. Thank you for making the time to come along. Privilege resolution No. 116 directs that an officer of a Commonwealth department shall not be asked to give opinions on matters of policy and should be given reasonable opportunity to refer questions asked to superior officers. Would you like to give a brief opening statement before we start?

Mr Francis : I will make a brief opening statement, if that is okay.

CHAIR: Sure.

Mr Francis : As this is Treasury's second appearance before the committee, I will keep our opening statement fairly short. The first thing I want to say is that the key points from our previous appearance remain. Treasury recognises that the current economic environment, including a strong exchange rate, is placing pressure on the food processing sector. That said, the changing environment also offers opportunities. There is a rising middle class in Asia and, with that, new markets are emerging. Consumer preferences at home may be changing as well. Typically, consumer preferences do change over time, and these trends provide opportunities for business. Those businesses that are flexible and innovative, we believe, are best placed to respond to change and indeed take advantage of opportunities as they emerge.

Turning to competition law, the various elements that make up Australia's competition law for the most part are longstanding and in line with international practice. Key objectives of our competition and consumer laws are to safeguard against anti-competitive, misleading and unconscionable conduct. This is in order to enhance the welfare of Australians. Competitive markets for the most part will deliver better outcomes for consumers and foster innovation and dynamism. That is, competitive markets underpin rising standards of living for Australians. That said, in Australia there are a number of markets that are oligopolistic—that is, with few key players and possibly several smaller players. This includes the food processing sector and the retail grocery sector. It is important, we believe, for the committee to distinguish between market concentration and market power. Market concentration alone is not necessarily an indicator of market power or of a competition problem. Further, the existence of market power does not necessarily mean there will be anticompetitive or unconscionable conduct.

Treasury is aware of anecdotes alleging practices and negotiating tactics in the grocery sector. This has given rise to whether what is alleged to be happening is prohibited by the Competition and Consumer Act. It is not clear to us whether these alleged practices are systemic in nature or a series of one-off incidents or necessarily whether there is a strong veracity to those claims. We are certainly aware that the ACCC has called for people to come forward with evidence of practices in the grocery sector that may breach the law. We understand there has been some response to this call. We consider the ACCC is well placed to assess any claims of anticompetitive or unconscionable conduct. Its processes should be allowed to run their course. If systemic problems are identified and a policy response is needed, we believe the policy should be well considered and should, wherever possible, minimise government or regulatory intervention in markets, so as to avoid undue market distortions. Thank you.

Senator XENOPHON: Could I just go to this issue of the two-speed economy that we hear a lot about. Some economists use the term 'dutch disease' to refer to the relationship between the increase in exportation of natural resources and a decline in the manufacturing sector. Could you give an overview of how the Netherlands and other countries have experienced a natural resources based two-speed economy in a managed policy setting? In other words, what are the challenges with a two-speed economy, particularly in respect of manufacturing and the fact that the dollar was below parity this morning. Hopefully, it still is. But these are huge structural challenges because the concern is that, once the mining boom is over, we will not have much of a manufacturing sector left in this country.

Mr Garton : I can attempt to answer that. The case of the Netherlands where the dutch disease was coined stemmed from a natural gas boom in the fifties and sixties, which we looked at in the budget statement No. 4 of two years ago. But I think the real concern about dutch disease is that if something happens to the terms of trade, say, commodity prices fall again, the manufacturing sector is not going to grow back again.

Senator XENOPHON: Because you have lost that capacity?

Mr Garton : Yes. According to the analysis in that statement, it looked as though the manufacturing sector did actually bounce back later on in the Netherlands. In a sense, the Dutch did not actually suffer from the dutch disease, as people describe it. I am not aware of what the Netherlands might have done to address the problem at that stage. Amongst more recent resource economies that have had a big rise in commodity prices, the example that is probably most prominent is Norway where the terms of trade rose just as much as in Australia, because of higher oil and gas prices. Norway put in place a sovereign wealth fund arrangement. This was documented in a speech that I was involved in with Dr David Gruen, back on 23 February. We analysed the situation in Norway and how it compared to Australia.

Senator XENOPHON: I am sure it is on the record somewhere, but can you provide that? Can you just give us the reference to that? We will find it. It would be on the website, wouldn't it?

Mr Garton : Yes. It is titled 'The role of sovereign wealth funds in managing resource booms: a comparison of Australia and Norway'.

Senator XENOPHON: Thank you. We will get it.

Mr Garton : The essence of the Norwegian system is that all the government's revenues from oil and gas go into a sovereign wealth fund. That fund is invested in foreign assets. The second part of it is that they have a fiscal policy rule. The rule says that, at least over the medium term, the budget deficit, excluding oil and gas, so excluding what goes into that fund, is restricted to the earnings rate on that fund. So the idea is that you preserve the capital from those revenues in the fund and just live off the earnings over time. Primarily this is designed to deal with the problem that Norway had of these reserves that are fairly limited. They are much more limited in their remaining lifespan than our reserves of coal and iron ore. So they knew they had some decades of very high revenue after which it was going to drop off quite sharply. So they put this in place to deal with the longer term fiscal challenges associated with that.

We do not have that problem to the same extent. Our coal and iron ore is much longer lived. The other difference is that our economy is much less dependent on coal and iron ore than is Norway's on oil and gas. For example, oil and gas is about 20 per cent of Norway's economy. Mining in Australia is about nine per cent of our economy.

Senator XENOPHON: I saw a prediction that one in two new jobs are going to come out of the mining sector in years to come.

Mr Garton : That was in Phil Lowe's speech yesterday, the Reserve Bank Deputy Governor. I think what he said was that half of the growth in jobs—

Senator XENOPHON: Is going to come from mining? Okay.

Mr Garton : Government revenues are actually more dependent and so, for Norway, about one-third of the government revenues come from oil and gas. For Australia, for the last year we have data for the comparable figure across Commonwealth and state governments was six per cent. So we are much less exposed to a possible fall in commodity prices than they are.

Senator XENOPHON: There is a challenge though, isn't there, in manufacturing that we could lose that manufacturing capacity? I have spoken to—I do not even want to identify them—a key manufacturing team. They say that we have lost the capacity to do some basic manufacturing and there is not anyone else who can do it now in the country. The start-up costs of getting all that plant and equipment back in and the tooling costs et cetera would just be prohibitive, so where do we go from there?

Mr Garton : The issue is how long lived the terms of trade will be. Obviously it is very uncertain, but Treasury's judgment has been that, because it is driven essentially by the process of China, India and these large developing countries catching up to developed world living standards, even though there will be some fluctuation over time, the longer term trend is more likely to be that commodity prices will be higher than they have been historically. Probably they will fall from current levels because there will be a supplier response over time, but the most likely outcome is that they will still be high, relative to historical standards.

Senator XENOPHON: I just want to ask two more questions in relation to this: The worldwide CEO of Heinz in June last year was Bill Johnson. He labelled Australia as the worst market for food processors because of the dominance of Coles and Woolworths and he said shoppers will be 'the biggest losers' from a decision to strip out branded products. Heinz, I think, is increasing the off-shoring of some of their operations or going to other overseas markets to do their manufacturing. To what extent does Treasury look at the dominance of Coles and Woolworths in so far as it will impact on the manufacturing sector when you have the CEO of one of the biggest food processors in the world saying, 'This is the worst place to do business; therefore, we are going to be better off packing up our bags and going somewhere else to do this'?

Mr Francis : I think question goes to the sort of operating environment the manufacturers work in vis-a-vis Coles and Woolworths. We are certainly aware that negotiations out there can be sort of tough. I guess the question is whether those negotiations or behaviour breach competition law or not. That is really a matter for the ACCC to look at.

Senator XENOPHON: It is also a question of how effective competition law here is, particularly in relation to predatory pricing and how hard it is to prove a case both for that and for unconscionability, isn't it?

Mr Francis : Yes, that is correct. The ACCC at the moment is involved in an investigation and that process should be allowed to run its course. There are a number of possible outcomes in relation to that. One could be that they believe that there is a significant case to be made, in which case they can take the matter to court. Alternatively, they may believe that there is nothing illegal going on but the behaviour may be problematic and that may in turn call for a policy response. So we are doing some thinking in that space. We are keeping our ears to the ground in terms of what is being said, what is being alleged and we are doing some thinking as to possible responses in that space. But I think that the first response should be to allow the ACCC investigation to run its course.

Senator XENOPHON: Sure, but just in terms of that thinking—and this is a field that Senator Edwards is very familiar with—the Winemakers Federation of Australia in their submission to this inquiry, if I can direct you to page 7 of their submission, talked about the effectiveness of the Competition and Consumer Act on the wine sector but it also made reference to France, Germany, the European Union generally: how there are laws there banning selling below cost; also having a more transparent system of invoicing or trading terms; and banning retrospective payments and extra service cost fees. They are things that we do not seem to have here in Australia. Is that something you have looked at in a policy setting? Ms McCrae, you are nodding. You may want to add to that. Is there an issue there? Are you looking at some of the innovations in Europe with respect to giving some equity or fairness to suppliers, farmers and food processors?

Mr Francis : We have done some preliminary work looking at some of the codes of practice that take place overseas. Our initial view is that it would be better for the industry to sort the matters out for themselves rather than having a government intervention. There is a possibility that codes of conduct or whatever could represent an improvement. But our initial position is that, provided the tough bargaining is serving the interests of the consumers at the end of the day, and that what is going on is not illegal, we do not think we would actually have a problem with it.

Senator XENOPHON: Finally, did any alarm bells go off after the milk price wars that started on Australia Day 2011 instigated by Coles? Woolworths matched Coles with their one dollar per litre milk offer. The then CEO, Mike Luscombe, said, 'This is unsustainable'? He was as blunt as that. If it is unsustainable it means the long-term consequence of that. We have heard evidence in another inquiry from Lion—formerly National Foods—that we could have as few as 1,000 outlets providing fresh milk in the country. To what extent does Treasury look at that? You look at the short-term gain to consumers, but is there a concern about the long-term impact when you have the CEO of the biggest supermarket chain in the country saying that it is not sustainable?

Mr Francis : We are not in a position to evaluate the veracity of the claims of Michael Luscombe one way or the other.

Senator XENOPHON: I think you have, haven't you? I think you have in so far as you have said that this is a benefit to consumers and that is the primary driver. You see a benefit to consumers and you do not really worry about it after that.

Mr Francis : The retail industry does go through cycles of vigorous competition and it can go through periods where competition is not as intense, but, as I said, we are not in a position to evaluate the claims of Michael Luscombe that that is unsustainable. I guess we would take with a grain of salt the comments that a CEO may make about the behaviour of another company with whom they are competing.

Senator XENOPHON: So as long as the consumers are getting prices now you do not look at the long-term impact.

Mr Francis : We would be concerned if there was behaviour that was in breach of the law. We would be concerned if there was behaviour that we saw as problematic from the point of view of the way that the existing laws work.

Senator XENOPHON: Do you take with a grain of salt the evidence of Lion at the hearing of the dairy inquiry of the economics committee on 6 October last year in Melbourne? They said that it is putting such a squeeze on margins that it is likely that fresh milk could become almost a niche product for some parts of the country, because it will not be viable to deliver fresh milk in significant parts of Australia. Is that something that you would take with a grain of salt or would you look at that?

Mr Francis : We do not have the basis on which to evaluate claims that fresh milk is going to disappear from the shelves. In our work we tend to look at how vigorously the supermarkets are competing and whether they are actually serving the interests of consumers. I presume that if there were a strong demand—

Senator XENOPHON: In the short or long term? To what extent do you look at the long-term benefit in addition to the short-term benefit to consumers? If there were a structural imbalance that could end up forcing up prices in the longer term by squeezing out players.

Mr Francis : We are doing some thinking about whether that is a possibility. We have not uncovered much evidence from overseas. The overseas experience does not necessarily provide much of a guide, but I do not think there is much evidence that you can have that type of hollowing out where vigorous price competition would ultimately lead to higher prices for consumers in the long run. From what we can see, the retailers are competing hard to serve the interests of consumers. Serving the interests of consumers is really how they make their money, and it is difficult to see them in a situation where they would be able to sustain higher than necessary prices for a long time, because it would raise opportunities for other businesses to come in.

Senator EDWARDS: I will continue Senator Xenophon's line. You say that you do not do any work in that. The high Australian dollar is putting pressure on fruit processors on this country as their imports are putting pressure on them. There have been the closure of a number of plants such as the Heinz tomato sauce factory. The Murray-Goulburn Cooperative put off 300 workers last Friday. The sector is saying that it is screaming. Last December in your evidence you stated that the government should not employ protectionist policies to compensate for the high dollar or other economic pressures on the food-processing sector. That is fair, is it?

Mr Francis : I think we would stand by that statement.

Senator EDWARDS: But you then went on to give $225 million to the motor vehicle industry for the same reasons.

Mr Francis : I think you are asking me to comment on a government policy decision.

Senator EDWARDS: You did though, didn't you? Treasury sent $225 million, bundled it with $50 million South Australian money, and rendered $275 million in total to the car industry. That is what happened. It is your Treasury.

Mr Francis : I think the matter is a record of government decision that you are inviting me to—

CHAIR: It is a government policy decision.

Mr Francis : Yes.

Senator EDWARDS: That is what happened, but your evidence says that protectionist policies to compensate for the high dollar or other economic pressures on the food-processing sector are off the table. It is somewhat ironic. I do not expect you to comment and I will not ask you to comment. It would not be fair, because it is obviously a government policy. Would the Treasury consider the merits of a short-term industry support package if it was clear that the industry was struggling through exceptional circumstances but offered good long-term prospects and benefits to the economy?

Mr Francis : If that scenario were to develop we would consider it in the normal way—the way in which all policy evaluation is normally done—through a government process.

CHAIR: So it would take a government to say to you, 'If we were to go down this track, could you model its effects and then give us some advice as to the advisability or otherwise of the decision that we might or might not make'?

Mr Francis : It is standard practice for us to provide advice on government policy proposals, including government policy proposals that might involve short-term assistance packages. There have been a number of short-term assistance packages over the years and for lots of different industries, particularly in the agricultural sector. I think there have been a number of sugar packages and there are probably countless other packages that have occurred over time. It would be standard practice for us to offer the government advice on that.

CHAIR: Okay. One of the concerns that have been expressed to us—and I think I am correctly interpreting what you are saying in a market policy sense, and I think Senator Xenophon inferred it to a certain extent as well—is that some of the food-processing effort that we are currently losing from the local market (Senator Edwards mentioned Heinz, McCain and a number of others that are moving to nearby countries for a lower cost base, whether it be for labour or for other inputs) means that the industry will get hollowed out and you will lose that capacity, and then there is a significant issue in getting it back if there is a need for it from a certain perspective. But what you are saying to us is that the market will provide that impetus if it is in fact needed; is that right?

Mr Francis : I am not sure I understand the question.

CHAIR: Any re-establishment of the food-processing effort will come through a market process rather than through any other system unless there is a direct policy decision made to intervene in the market, effectively, through a scheme such as Senator Edwards discussed.

Mr Francis : I am not an expert on the structure of the industry, but I would have thought Australia had some natural reasons why some food-processing capacity would be retained in Australia, particularly because we have a large agricultural sector and it would probably make some business sense to do food processing close to home. You can certainly point to individual cases of factories or other operations closing down, but I find it hard to believe that we would lose our food-processing capacity completely when it makes sense to do some sort of processing in Australia.

Ms McCrea : The objective of competition policy, by its very nature, is in one sense to assist the transition where price signals or consumer demand is such that there is no longer as much demand for those manufactured goods and you may get a decline in the number of manufacturers. Yet, correspondingly, once the price signals increase or the demand for those goods increases, competition policy should ensure that there are no barriers to entry. What we are aiming to do is allow manufacturers to re-enter the market at a time when the market is ready for what they produce.

CHAIR: I suppose the only hurdle, then, is the investment hurdle—the initial investment in the asset that would be required. That becomes a question of where the market sits at that point in time.

Mr Francis : Yes, I think that is right.

CHAIR: Senator Xenophon asked you about processes that are occurring in other countries, and one of the things that we have tried to get a bit of a handle on—and we will do some more of it later—is the ombudsman proposal that has been put up by the Food and Grocery Council. Have you had a look at what is happening in other countries and whether the introduction of that additional regulation in the UK has had a marked effect? I think your submission talks about having a light touch in regulation. Pure market theory would say that that is what you would probably want, although no regulation of the market does not necessarily work completely. So, in that sense of a pure market, it must have some parameters wrapped around it. I am just interested to know whether you have had any sense of the impact of that additional regulatory process in the UK. It has obviously come about as a response to changes within the market itself, and that is often how these things evolve. The market itself evolves to the rules that are there and finds ways to get around them, deal with them or work within them, and then the regulatory process will respond to that. I am interested to know whether you have had a look at that and what you have gleaned from it.

Mr Francis : We have had a very preliminary look at some of the codes and some of the developments in overseas markets. I should say that Treasury will never actually be experts in these areas, but we know it is topical so we have had a preliminary look at it. I do not think the sort of—

CHAIR: But you are usually the department that governments would come to for advice on—

Mr Francis : I would think that the department of industry and the department of agriculture might be first points of call for something such as an industry code dealing either in horticulture or alternatively in the retailing space. We would have an input into the policy process but we would not be the main department sponsoring such a development. The Assistant Treasurer has policy responsibility for codes that attach to the Competition and Consumer Act—

CHAIR: Which is effectively what we are talking about.

Mr Francis : but that would normally be done with another agency that was more expert in the area developing the code. It would be done in consultation with us.

CHAIR: Okay. So what are your learnings?

Mr Francis : I would say that our work is too preliminary at this stage to draw any firm conclusions. I would also say that there is not strong evidence to suggest one way or another that such codes have an effect, either a positive or a negative effect, on prices in those markets or consumer prices in those markets. From what we understand—and it is only anecdotal—the codes seem to have been reasonably well received by some producers in those markets, but again that is just anecdotal.

Ms McCrea : And in terms of the ombudsman issue in the UK, which is one that is often held up, the supermarket adjudicator legislation is actually being introduced to parliament this year. There is no supermarket adjudicator in the UK yet. There is an announced policy but it has not been implemented, so it is not something we can monitor the effect of as such.

CHAIR: So it is perhaps too early to have an understanding of whether it will work, what it will cost—

Ms McCrea : That is right.

CHAIR: and what its impact will be.

Mr Francis : Exactly.

CHAIR: It is still a concept, largely, or a developing concept as the legislation comes together?

Ms McCrea : Yes.

Senator MADIGAN: Does Treasury have any concerns regarding job losses in the food-processing sector and its effect on the economy in regional Australia?

Mr Francis : We are concerned about job losses all the time but we are concerned with job creation as well. I think part of the structural adjustment that we are going through is that jobs are being created in one sector, and a consequence of those jobs being created in a sector that is being strongly stimulated is actually squeezing other sectors, hence you see job losses in other sectors.

Mr Garton : Just to add to that, I think that when people are worried about the exchange rate the real issue is whether that is resulting in unemployment moving further away from full employment. At the moment, we still have unemployment around five per cent, which is what most people think of as pretty close to full employment, so it does not look like the exchange rate so far has been too high for macroeconomic purposes. If it did turn out to be the case that it was, then the appropriate remedy under our policy regime would be monetary policy. If the Reserve Bank think that the economy is slowing too much and spare capacity is opening up, they will ease monetary policy, as in fact they have been doing. So I think that that, rather than thinking of other measures, is probably the remedy for a problem of the exchange rate being too high.

Senator MADIGAN: Does Treasury think the government has a place to put in place policies that intervene in the market?

Mr Garton : In the foreign exchange market, do you mean?

Senator MADIGAN: Yes.

Mr Garton : No, not in general. Currently intervention is up to the Reserve Bank. They intervene on occasion but not very often. The last time they did it was to support the dollar during the financial crisis in late 2008. Their stated approach is that they will not intervene unless you get conditions like that, where the market has become quite disorderly, so they do not try and push the exchange rate in a particular direction, particularly if they think fundamentals are justifying the high exchange rate.

Senator MADIGAN: So Treasury tends to keep out of it, with the market to sort it out?

Mr Garton : That is a reasonable description, yes.

Senator MADIGAN: Looking at it from the perspective of a person in the street, what is the point of having Treasury? They pay the taxes that pay my wages and your salary. What is the point if you say, 'Just let the market sort it out'? A lot of people out there have looked at it and they are saying that self-regulation does not work.

Mr Garton : The issue is whether the exchange rate is producing some undesirable result for the overall economy, not—

Senator MADIGAN: So some people are acceptable collateral damage in that? They can be hung out to dry?

Mr Garton : In a dynamic economy, jobs are lost and created all the time through technological change, movements in the exchange rate and changes in particular industries. I think that what we should aim for is a regime where the economy is sufficiently flexible so that we can adapt to those changes without resulting in prolonged unemployment. But how you do that I do not think is a function of exchange rate policy.

Senator MADIGAN: But continually we hear the government say that the dollar is high.

Mr Garton : Yes.

Senator MADIGAN: Has Treasury looked at anything that it can do to suggest to government policy that can help take out the peaks and the troughs for our manufacturers and food processors?

Mr Garton : We have considered the options that might be available. Our conclusion is that either they would not be very effective or they would have undesirable consequences. For example—to go through them—the most obvious way you could do it would be to direct monetary policy towards reducing the exchange rate and away from inflation targeting. The problem with that is that, had you done that in recent years and tried to hold down the exchange rate, we would have got higher inflation as a result, which means that you would probably get the same loss of competitiveness over time just through higher inflation rather than the nominal dollar.

The other option would be what they call sterilised intervention: the Reserve Bank buy up foreign currency and then offset that so it has no effect on monetary policy. Their policy, as I explained, is to not do that in general. But generally the literature, globally, on the effectiveness of that is quite mixed, so it is not clear how well it works. So, even if you wanted to do that, it is not clear how effective it would be, bearing in mind that whatever purchases the Reserve Bank make would be fairly small relative to the size of the overall market, so it is quite hard to move the foreign exchange market in general.

The other option would be some system like Norway has, where the government accumulates foreign assets, but essentially that is similar to the Reserve Bank buying up foreign exchange, so it has the same problem. Unless the government has bought assets on a huge scale, like Norway has done, it probably would not have a great effect.

The other option would be to change the mix of policy. You could have a sufficiently large tightening of fiscal policy that monetary policy could be easier, which would push down the exchange rate. To some degree, that is what is already being done. The government has been tightening fiscal policy to get back to surplus, and that would have had some effect in dampening the exchange rate. But, again, to make a big impact you would have to do it on a very large scale. To give an example of what Norway has done: since its oil prices took off just over a decade ago, it has been running budget surpluses which average around 13 per cent of GDP. That is way out of the range that anyone was thinking of here. Essentially, you would have to tax away enough of the increased incomes from higher commodity prices and then put them away in a fund through larger surpluses. So there is quite a lot of stuff you would have to forgo to achieve that, I think.

Senator EDWARDS: Could I just follow on from Senator Madigan's sentiment. Does Treasury collect any data about the high exchange rate which has led to squeezed profit margins for exporters and import-competing firms in the manufacturing sector at all?

Mr Garton : We have a domestic economy division, which looks at conditions in the economy. It does the forecasting. As part of that, they go around and talk to various businesses around the country. They would talk to manufacturing firms, but I do not personally have the details myself.

Senator EDWARDS: Yes. That is the resource. Do you provide any projections on how long the Australian dollar will be above parity or about parity?

Mr Garton : No, we do not do that, because experience says that the exchange rate is essentially unforecastable. We make what is called a technical assumption, which says that it will remain at whatever its recent average level has been. That is what is incorporated in the—

Senator EDWARDS: It will remain at that level for how long?

Mr Garton : Indefinitely. But that is not because we expect that to happen; it is just because we have no basis for making an alternative assumption.

Senator EDWARDS: You are not in that business.

Mr Garton : Yes.

Senator EDWARDS: I will not go there. Treasury mentioned in its evidence earlier in December—I am pretty sure it was in December—that it had a responsibility to transition labour and to reskill and retrain. I mentioned this earlier: 300 workers were put off at Murray Goulburn last Friday. Then there was the announcement by the federal government that there were up to 400 new jobs created by the NBN in Victoria. I just thought that here was a nice segue to ask you people—given that you say that the government has a responsibility to transition labour and to reskill and retrain them—to revisit that statement. How do we actually put that on the ground? There are 300 people out of work. Government statements say up to 400 jobs. This is nirvana, isn't it? Three hundred people go out of work and there are 400 new jobs. I put the comment out on Facebook and got an avalanche of people saying, 'We're all saved!' How do we get them from the Murray Goulburn Co-operative—a fruit packing sector—to be whiz kids in the modern age?

Mr Francis : I would not like to comment too much on that, because I am not an expert in labour market economics.

Senator EDWARDS: Who would we ask?

Mr Francis : It would probably be Social Policy Division in Treasury, but the broad—

Senator EDWARDS: Should we ask them that? Could we ask that?

Mr Francis : Yes. I can take the question on notice, if you like.

Senator EDWARDS: Thank you. That would be great. That is a real, living event from last Friday. Given that you have said that it is government's role, let us see how it translates to a practical application.

Mr Francis : I think the broad answer is that it is basically flexible labour market policies that allow people to move easily and reskill as needed.

Senator EDWARDS: With one minute to go, I will probably let you off.

CHAIR: Thank you very much for your time this afternoon.