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Wednesday, 8 March 2000
Page: 14112

Mr O'CONNOR (10:25 AM) —The dairy industry bills we are debating today give effect to one of the largest and most important packages of assistance ever legislated for a rural industry in Australia. The Dairy Industry Adjustment Bill 2000, the Dairy Adjustment Levy (Excise) Bill 2000, the Dairy Adjustment Levy (Customs) Bill 2000 and the Dairy Adjustment Levy (General) Bill 2000 set the legislative framework for the $1.74 billion package of dairy industry assistance to be provided by a consumer levy of 11c per litre on the sale of drinking milk, which will be collected at the wholesale level or by wholesale processes over the next eight years.

I welcome the opportunity to debate this package and the future of the dairy industry. The opposition has serious reservations about several aspects of this legislation, and we believe there are grave inadequacies of this coalition government in structuring a national response to the deregulation of state based market milk arrangements and the ending of the Commonwealth Domestic Market Support Scheme.

I come to this debate as someone with a long association with the dairy industry. I am the son of a dairy farmer from the Western District in Victoria, and I recall in my growing years an industry—before milking machines and vats—where the cows were milked by hand and the milk was delivered to the factory in cans. I can recall vividly the clattering of those cans as they were delivered to a small butter manufacturing plant just over the paddock from our home farm. My parents were casualties of the structural adjustment process that has been at work in this industry over the last four decades and that has now brought us to this point in the industry's history. I also come to this debate as a member of the Labor Party, which has a proud history of turning this industry from an inward, protected, domestically based industry to one which now has an estimated wholesale sales value of around $7 billion and which exports around $2 billion of product.

The foundations of the current prosperity of the dairy industry were laid by Labor ministers Kerin, Crean and Collins, whom I pay tribute to in this debate. Those ministers acted in the face of great hostility, fuelled by certain elements of the Liberal and National parties—and I certainly do not include the honourable member for Corangamite, who is in the chamber today, because he was not one of those who scoured the Western District of Victoria—to the changes that were being instituted to the dairy industry at that time. Those Labor ministers guided the dairy industry through a period of massive restructure, where those who chose to stay and make their living did so with growing confidence and those who chose to leave the industry did so with some real dignity.

I recall with some humour now, but it was not so humorous then, a visit in 1984 when I first stood for the seat of Corangamite and my opponent was the honourable member for Corangamite. I visited the Heytesbury region in Victoria and had a meeting with dairy farmers at one of the local halls. If they had had a rope there, they would have hanged both of us on the day, but we pointed out to them that they had 10 years. They had a short window of opportunity to structure their industry and to prepare for the challenges of the future, because there was a big wave coming from the New Zealand industry, and the only way they could have survived was to engage that process of structural adjustment with the government and prepare the industry for the challenges that it was facing.

On behalf of successive Labor governments, Ministers Kerin, Crean and Collins articulated a clear vision of how they wanted this industry to grow. They implemented an ongoing and evolving industry development plan to realise the latent economic potential of this great rural industry. Sadly for dairy farmers and sadly for this nation, this government has failed to provide real leadership in constructing a comprehensive industry development response to the great challenges that are now being faced by dairy farmers in the final phase of deregulation of their industry. Let it be a matter for the public record that this government played a very minor role in the construction of the package we are now debating here today—leaving that task to dedicated industry representatives grappling with the commercial reality that was facing their industry. Let it be a matter for the public record that it signed off on this package before agreement was reached with state governments—holding the deregulation gun at the heads of those state governments who were seeking to construct alternative responses to that commercial reality faced by their dairy farmers. Let it be a matter for the public record that this package is funded by Australian consumers. The federal government has put precious little of its own funds into the future of the dairying industry at this point in time. It has really shirked its fiscal responsibility and it has placed the financial burden of this massive restructuring that is about to take place in the dairy industry once again on consumers and on dairy producers.

The dairy industry had every reason to expect more than it got from this lazy government, for now it occupies a very significant place in Australian agriculture. As the recent Senate inquiry noted, the Australian dairy industry is the third largest industry behind beef and wheat, and the third largest exporter of dairy products globally after the EU and New Zealand. It is valued at the wholesale level at $7 billion; it has 13,500 dairy farmers, and it is a significant regional employer with 60,000 people directly employed at the farm and in the value adding chain. The prominent place it now occupies in the economic fabric of many rural communities and in the Australian economy has been built on the increasing skills of dairy farmers themselves: their application of new capital intensive technologies, pasture and land improvements and huge gains in on-farm productivity. As the industry prepares for further substantial changes and the challenges ahead, it is instructive to reflect on the momentous structural changes that have already taken place, often in very short periods of time. In the 10-year period between 1986 and 1996, milk production increased by some 40 per cent. This increase in production occurred despite a decline in the number of dairy farms and dairy farmers. Over that period, the dairy herd rose from 1.8 million to around two million cows. The average size of dairy herds increased from 96 to 136 over that period. Since then, average herd sizes have increased substantially. From 1996 the process of structural change has continued as farmers have grappled with static or declining world prices for their manufactured milk products and have sought further productivity improvements from their enterprises. Long established trends in the industry to increase herd sizes and land holdings have continued unabated with the entry into the sector of large purpose-built dairies that milk herds in excess of 1,000 cows.

These commercial and structural changes have put increasing pressure on farm family enterprises and the communities that sustain them. In the face of these momentous changes, we have had a federal government that has washed its hands, virtually, of its responsibility to sponsor a far-reaching industry development plan for the dairy industry as it meets these challenges over the next decade. The government's sins in this whole exercise are really sins of omission, because in their response they have failed to include measures that really address the long-term future of this industry in what we know to be a corrupted and extremely competitive global trading environment. In reflecting on the concerns of many members of this side of the House about the government's policy failure in this instance, I move:

That all words after “That” be omitted with a view to substituting the following words:

“the House, whilst supportive of Australia's dairy industry and whilst not declining to give the bill a second reading, condemns the government for:

(1) seeking to push this important Bill through the parliament at the latest possible time, given that it has had the industry package in its hands since April 1999 and endorsed it in September 1999;

(2) failing to articulate a clear vision for the future of the dairy industry;

(3) failing to carry out a proper assessment of the likely impact of deregulation on dairying regions and failing to make any provision for assisting communities to cope with the impact of deregulation;

(4) imposing a new tax on milk;

(5) failing to make any provision to assist workers in the dairy industry who may lose their jobs as a result of deregulation;

(6) failing to assist in the re-training of farmers and others displaced as a result of deregulation;

(7) failing to include measures specifically aimed at encouraging investment in new plant and equipment, either on farm or beyond;

(8) failing to include measures aimed at opening up and expanding overseas markets;

(9) failing to include a research and development component within the package;

(10) poor targeting of assistance to farmers; and

(11) failing to develop an adequate mechanism to ensure that consumers benefit from any fall in the price farmers receive for milk, in the face of price increases that have accompanied the removal of state based regulatory arrangements in the past.

In moving this detailed amendment to the second reading of the bill, I want to make this point abundantly clear: I do not doubt in any way the integrity or the good faith of those industry representatives who over many months were engaged in developing future options for the dairy industry. They were thrown to the wolves by a lazy government that basically told them to go away. That government said, `Develop a response to the potential deregulation of the industry, secure agreement with all state based dairy farmer organisations, secure agreement with state governments of various political complexions and then come back to us with a ready-made proposal that we can sign off on with a minimum of fuss and bother.' It is a lazy government dealing with one of agriculture's great rural industries.

The government had a unique opportunity to guide the development of an industry package that met important national policy objectives in the early stages of the development of this package. It knew when it came to office in 1996 that the Domestic Market Support Scheme sponsored by the Commonwealth would end on 1 July 2000. It knew that national competition policy would require a review of state based arrangements, that some states would increase public pressure to dismantle those particular arrangements. Above all, it knew, or it should have known, of the emerging commercial pressures within the Victorian industry that would eventually threaten the state based market milk quota arrangements in Queensland, New South Wales and Western Australia. Yet it waited and waited and did precious little to assist the industry to prepare for what the Senate committee report termed `the inevitable march to this industry's deregulation'. Its failure to take this leadership role eventually pitted dairy farmers in one state against another and dairy farmers within states against each other. It pitted states against each other and the legacy of its non-involvement is a divided industry with significant sections quite fearful of their long-term future.

In the course of this debate today no doubt many of my colleagues will elaborate on the many areas that we feel should have been addressed by the government in dealing with the long-term future of this industry. But there is one area that deserves particular comment, and that is the issue of the wider impact of dairy deregulation on regional communities in the processing and manufacturing chain and on the myriad of small businesses in regional areas that rely on the growth of the dairy industry for their survival. From the very early days in this debate within industry and rural communities on the proposed package of assistance, the issue of the adverse impact of dairy deregulation on rural communities has been raised with this government. Calls have been made for it to focus its research resources and efforts to not only identify hot spots but also provide specific packages of assistance that can be accessed by affected farm communities. I made that call publicly back in June 1999. In a press release I issued I called for the government to at least consider a policy option that acknowledged that particular communities would have great difficulty in managing the impacts of structural change beyond the farm gate.

I made that call because I felt that not only was there a place for such a package in the overall response of government to the impact of dairy deregulation on rural communities but also it would send a powerful message to those communities that some Commonwealth resources were available to be employed in partnership with the communities in developing innovative local responses beyond the farm gate to cushion the impact of deregulation. It was a view incidentally that was shared by industry leaders. As I understand it, the proposal was actually put to the government for consideration in its response to the initial industry proposals. As history indicates, it was rejected by the government. Further weight for that argument came at the Senate committee hearings when communities articulated their concerns in this area. That committee, in a bipartisan manner with the support of coalition members, recommended that specifically tailored assistance measures for rural communities be considered by government in its response to deregulation. One community in the Bega Valley commissioned its own study into how deregulation would impact not only on farm enterprises but on the wider community. On the back of that study they called for further government consideration of this matter. State governments, particularly those standing to lose substantially from deregulation, also called for specific regional assistance for potentially adversely affected communities. As history tells us once again, it was only after this pressure was brought to bear that the government, in its recent communique following ARMCANZ last week, belatedly agreed to set up a high level task force to research this matter, monitor the adverse impacts of deregulation and make specific recommendations where necessary to ameliorate the harsher effects.

The government has argued that the package itself pours tens of millions of dollars into these communities in income support and that it already has programs in place that can be accessed by these communities should they seek assistance. The minister has gone to great lengths in his second reading speech and the explanatory memorandum to this legislation to document that income support to regions provided by this package. We do not dispute that but we know, as the minister knows, that farm families will utilise this assistance in many ways, by purchasing other land or stock or equipment, or retiring debt, in which case the banks will get it. While the impact of deregulation will be felt almost immediately on farm incomes and on local businesses and local communities, the flow-on assistance from the package will take many months to play out in those communities.

The federal government has done little research of its own into the regional impacts of deregulation and has structured its response around the simple belief that, if it ticks off on the industry package, the potential problems faced by these communities will be met in a very simple way by its one-size-fits-all package. Only today in the Queensland Country Hour concern was expressed about the future of dairy farmers in Central Queensland, where returns are expected to drop by around $50,000 a year for a quarter of dairy farmers in the short term. That figure could be as high as 80 per cent. If price falls go lower than anticipated, 80 per cent may well be affected.

Let me turn to the consumer levy mechanism that is being used to fund the $1.74 billion package to this industry. We have heard much in this chamber in many debates on the new taxation package about the need to remove wholesale sales taxes and the importance of reducing the cost of compliance in the taxation system to business. Indeed, we hear this mantra from the Treasurer on every occasion. Only yesterday the Minister for Agriculture, Fisheries and Forestry got into the same act. But here we find the government imposing a new tax on the consumers of this nation and trying to disguise what it is doing by calling it a retail levy. The fact of the matter is that the government is collecting this revenue through processors at the wholesale sales level and doing it to minimise the administration costs involved in the collection of this revenue.

So, in addition to the 10 per cent GST that the Treasurer is going to whack on flavoured drinking milk, he is putting another 11c a litre on the retail price collected by processors at the wholesale level. It is really now a question of how much cant and hypocrisy this parliament can take from this discredited government. I think it would be fair to say that the minister has not done any work on the likely impacts of this taxation whammy on the consumption of drinking milk products or of the measures that are implied in this project. If he has, he ought to make them available to the parliament, to dairy farmers and to the consumers of these very important products. It is a very competitive marketplace out there in the beverages market. The demand impacts of this consumer levy ought to have been carefully thought through by both the industry and the government. This is an issue I am sure many of my colleagues will take up in subsequent debate on this legislation.

As far as the exit package is concerned, once again the duplicity of this government is evident for all to see. It stands as naked as a jaybird as far as many of the provisions of this legislation are concerned. The exit package is subject to the same criteria as provided for under the Farm Family Restart Scheme, but there is one very important distinction. Not one cent of this federal government's money is going into assisting dairy farmers to exit this industry in the face of deregulation. The exit package of $30 million is being funded specifically from levy income, which contrasts with the manner in which other exit packages are funded by the government.

The second point to note is that for many farmers the exit package will be the up-front payment which they will take and they will then proceed to exit the industry in a normal commercial manner. Once again, no federal government funds are involved in that process. It will all be funded by consumers. In a practical sense, however, and as many dairy farmers and the industry already realise, most dairy farmers will not be in a position to access this provision. If the requirement is a net debt limit of $90,000 for farmers to access the full entitlement, any dairy farmer in that position has already fronted his creditors before this and has probably been forced to leave the industry. In short, there are likely to be very few dairy farmers who can avail themselves of the benefit of this provision.

A well-rounded industry development plan should also address some of the long-term requirements of an industry to ensure that it remains competitive and productive in the face of a tough global trading environment. We see little evidence that this government recognises, let alone is prepared to act on, these requirements in the package we are debating here today. It is clear from the farm survey data published by ABARE—with regard to not only the dairy industry but other rural industries as well—that there is an urgent need to skill this and other sectors, especially in relation to the use of new information technologies. I can understand the reluctance of many older farmers to engage in further development of their skills or to acquire new ones, but it is fair to say that learning is a lifelong experience and further development of existing skills and the acquisition of new skills will be critical to the survival of family farm enterprises in a deregulated domestic market environment and a competitive global trading environment and in an industry where its own structure is changing so rapidly to very large corporate dairies.

This government has not addressed skill development issues in this rural industry at all, preferring a passive, `let it pass' attitude to the issue. Labor is proud of its record in skilling the sector. A little known fact publicly, but nevertheless acknowledged by the industry, is that under Working Nation there were hundreds of trainees operating in the dairy industry. For many young farmers today their first taste of dairy life came through their experience as a trainee under Working Nation. There is no acknowledgment in this package of the importance of the research and development effort that underpins the productivity of the dairy sector as well as many other industries in this sector. Nor is there any specific acknowledgment of the need to leverage open new markets for the output of the manufacturing end of this sector.

Half of our milk production is exported in the form of dairy products. Dairy export markets are becoming increasingly sophisticated and diverse and a concerted effort must be made to leverage new opportunities for our dairy exports to secure the incomes, the livelihoods and the lifestyles of our dairy farming families. Yet in the government's public statements relating to deregulation in this industry, there is scant mention of the industry's needs in this regard.

In my concluding remarks let me make some comments about the future of this great industry. Over the next couple of years the dairy industry and the farm families that earn their living in this industry face great challenges in an uncertain market environment. Like other farmers throughout the nation, they have endured drought, they have coped with plagues and suffered low international prices for their products caused by the market-corrupting behaviour of our powerful competitors. In recent times, farmers supplying milk for manufacturing have suffered very low returns from that international marketplace.

Things are about to change radically in the marketplace for manufactured and market milk dairy products, and understandably many farm families are uncertain about their future. They were hoping for a government to present a clear, strategic vision for their industry in response to the next phase of deregulation. Many are now disappointed that this has not occurred.

In consideration of this industry and the industry's future, I have travelled to many interesting communities and met many dedicated dairy farmers. I have conducted over 40 consultations with farmers, their representatives and, at the local, state and federal level, unions involved with the industry, state government ministers and representatives from the general community. Those consultations have given me great hope and optimism for the future of this great industry. While the new challenges it faces are quite substantial, there is a resolve in the sector to become more innovative, more efficient and more productive, to ensure that in the long term the industry continues to grow and to secure the futures of dairy farming families. The dairy industry can take great pride in the contribution it makes to the economy of rural regions and to the national economy. It can take great pride in the fact that Australia is one of the great dairy exporting nations of the world. It can take real pride in the contribution that is made to their regional communities by farmers, dairy industry workers and others associated with the industry.

This is a very complex industry with a very complex set of marketing arrangements. In the past it has not been a very easy industry for any federal government at all to manage. It has undergone significant structural adjustment over the past decade, both on farm and in the manufacturing sector. Its regulatory environment is changing as we debate these issues here today. It is currently suffering a period of prolonged low world prices, which has put increasing pressure on many of those farm family enterprises, and its world trading environment remains distorted and corrupted. These are great challenges. In coming months as dairy farmers face these great challenges, I am sure that resolve that I mentioned previously will be redoubled so that the future and the growth of this particular industry can be assured.

It needs to be put on the public record very clearly that the federal government has not put its own funds into this particular industry at this point in the industry's development. That must be on the public record. This package is funded by consumers, not by the federal government. The consumers of Australia have funded it and the dairy farmers, I am sure, will respond to the moneys that are made available here under this package and restructure their enterprises. But they need to understand that this is the last bite of the cherry. There can be no more levies that continue for another eight years. I think the industry now understands that. As the industry faces these new challenges, I wish it well. (Time expired)

Mr DEPUTY SPEAKER (Mr Jenkins)—Is the amendment seconded?

Mr Martin Ferguson —I second the second reading amendment moved by the member for Corio.