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Wednesday, 8 March 2000
Page: 14123

Mr SIDEBOTTOM (11:16 AM) —I wish to support the Dairy Industry Adjustment Bill and three related bills before the House, and in addition I support the shadow minister's second reading amendment. I, like many of my colleagues on this side and opposite, represent people and communities in regional and rural Australia. As we know, the challenges we face are many, and now there is another one to add to the list: the deregulation of Australia's dairy industry. The dairy industry in Australia is Australia's largest processed food industry and ranks in the top four of the nation's rural industries. Australia has over two million dairy cows producing around 10 million litres of milk each year. Australia is one of the world's leading exporters of dairy products, exporting some $2.2 billion worth of milk and related products annually. About half of all Australian milk is exported in some form, be it as cheese, milk powder, butter or lesser known products like casein or whey powder, from processing plants like the UMT factory in Wynyard in my electorate.

We are told that dairy deregulation was inevitable. Dairy farmers and dairy communities are bracing themselves for the fallout from the removal of the Domestic Market Support Scheme, effectively ending milk supply and pricing regulations. The potential impact is a major concern in my electorate of Braddon because one of the enduring features of the north-west coast of Tasmania is its agricultural and farming heritage, from the diverse vegetable cropping and livestock growing areas throughout the region to the lush dairying country of Circular Head in the far north-west and King Island. Agriculture in its many forms supports valuable processing and manufacturing industries that provide jobs and generate wealth.

The rural sector is indeed the backbone of many communities across my electorate—a situation mirrored across regional Australia. Too often its worth is taken for granted, but recent political events in Victoria have clearly demonstrated that governments which ignore the interests of country people do so at their peril. Yet as we confront another major issue facing regional and rural Australia—that is, the deregulation of the dairy industry—the Prime Minister, despite his recent foray into the so-called bush, and his government appear to have learnt nothing. What has the Prime Minister learnt of what it is really like to live in regional Australia? Precious little, I suspect. I pose the question because it provides an insight into this government's capacity to deal with dairy deregulation. Of late, the Prime Minister seems to be making policy on the run for regional Australia, but at almost every turn he stumbles and the policy falls over. For example, not long ago we heard from the Prime Minister that he would ensure that important services to regional Australia would be maintained if the remaining 51 per cent of Telstra were sold off. Almost immediately we saw the closure of more Employment National offices around the country. In my electorate, offices in Devonport and Burnie were shut down and now, except for a skeleton work force, Employment National has virtually disappeared from Tasmania. So what is next? What of our Treasurer? He believes that people in country areas are not worth as much as their metropolitan cousins. He believes they should be paid less. The member for Page, with the diplomacy and sensitivity of a bull in a china shop, suggested that the unemployed in regional Australia be forced to move away from home to get work or lose the dole.

This government's approach to deregulation of the dairy industry is yet another example of its walking away from its responsibilities to rural and regional communities. It has taken a hands-off approach while farmers continue to grapple with all the complexities and the unknowns of dairy deregulation. Nowhere is that more evident that on the dairy farms across the north-west coast of Tasmania and the Circular Head region in particular. The Tasmanian dairy industry employs around 2,000 people at farm level and a further 1,600 at factory distribution level. Currently around $115 million is paid to farmers for milk and over $270 million is value added post farm gate. Some 13,600 cows grace our magnificent pastures spread over 736 dairy farms. These produce in the vicinity of 529 million litres of milk products: 10 per cent fresh milk, five per cent Tasmanian consumed products, 35 per cent mainland consumed products and 50 per cent products sent overseas. There are seven fresh milk processing plants, one UHT processing plant, seven manufacturing plants, seven farm cheese operations and three cheese shredders. The majority of the farms, some 400 of the 736, and the majority of the cows, processing and manufacturing plants are located in my electorate, most notably in the Circular Head district and on King Island.

I will focus on Circular Head because its economy revolves largely around the dairy industry. In fact, it is often said that if the local industry sneezes the whole of the district catches a cold. Dairying in the Circular Head region directly employs over 1,000 people, and that is a conservative estimate and does not account for the multiplier effect on jobs. Six of the nine members of the local municipal council, including the mayor, are dairy farmers. They are well aware of the uncertainty facing dairy farming families in the wider community. Mr Deputy Speaker, you may understand my concern then at the high level of anxiety in this particular community—and it is by no means an isolated case—over deregulation and my frustration at the lack of leadership from this government on the issue.

Dairy deregulation is another test of this government's commitment to assist regional Australia and again appears flawed. It is a failure to comprehensively address issues of real regional concern. This so-called industry negotiated package provides a total of approximately $1.74 billion for compensation and exit payments to dairy farmers to be funded by a Commonwealth levy of 11c per litre on sales of drinking milk applied at retail level and collected at wholesale level over the next eight years; in other words, a consumer paid levy, not Commonwealth paid. The levy will begin on 8 July 2000—just another tax to join the infamous GST—with payment rights accruing from 1 July 2000. Determination of dairy producer entitlements will be the responsibility of an independent body—the Dairy Adjustment Authority. It is interesting to note that the legislation before us contains a mechanism whereby the package will be automatically withdrawn should all states and territories not deregulate their milk marketing arrangements to the minister's satisfaction within six months of royal assent. There is no flexibility here and the presence of this punitive clause highlights the simple fact that, contrary to the government's claims, it is not so much responding to dairy deregulation but in fact driving it. It is the Commonwealth and not the majority of states that is initiating and supporting moves towards national deregulation. The states are required to facilitate deregulation by removing their market milk controls. The Commonwealth itself, despite this situation, is not contributing any funding to this process.

Dairy farmers, their families and the local communities have been left to contemplate a future less certain because of the prospect of deregulation and what this government has done. There are many questions that need to be asked. Has this government played an active role in the development of a restructuring package for dairy farmers? No, to date it has failed to do so. Has it articulated a long-term vision for the dairy industry in Australia? No. Are there any initiatives aimed at upgrading the skills of those in the dairy industry? No. Has the government made any attempt to assist regions adversely affected by deregulation? No.

I find it difficult to comprehend the government's inaction and `hands-off' approach when, in the words of the Minister for Agriculture, Fisheries and Forestry, `the dairy industry proposals represent the single biggest deregulation of any Australian rural sector'—and the federal government has done nothing save for endorsing a compensation package negotiated by the dairy industry, that is, a $1.8 billion package to be paid for by an 11c per litre levy on all drinking milk over the next eight years. The reality for dairy farmers is that their incomes will fall substantially following deregulation.

The impact of deregulation on farm income is difficult to predict, but the government's own figures indicate considerable losses. In Tasmania, the current farm income is listed as $58,300 with a predicted annual fall in income of $22,230. In dairying areas with quota systems the falls are substantially bigger. Indeed, the New South Wales National Party leader, George Souris, said on 4 March that he estimated that 30 per cent of 1,800 dairy farmers in New South Wales would be forced out of the industry.

The fact is that this government has not taken the opportunity in this legislation to build on the compensation package presented to it by the dairy industry with initiatives that would reflect a clearer vision for the growth of the dairy industry and future prosperity of farmers. That this government committed itself to the package before the findings of the Senate committee inquiry into the deregulation of Australia's dairy industry probably says it all. Let me be very clear on this point. In the advent of deregulation, a financial assistance package must be secured for dairy farmers. I do not dispute that there must be a package, but how can that be properly calculated if we do not know the full extent of the impact of deregulation on dairying communities? The Senate inquiry reported that it was concerned at the potential that deregulation has for disruption of the industry. Its findings stated:

... the immediate impact of deregulation will be a reduction in aggregate farm income, which in the short term will be significant and reductions in the capital value of assets, whether they are quota or land and equipment as well as the flow-on effect to local communities, suppliers and employees.

But to what extent will it impact on dairying communities like Circular Head? We simply do not know yet and the government does not seem too interested.

The recent Agriculture and Resource Management Council of Australia and New Zealand meeting on 3 March recommended deregulation of their dairy industries. It further recommended that at its August meeting regional and industry hot spots be identified by a high level task force. The latter recommendation begs the question: why was this type of study not conducted well in advance and a project and funding mechanism put in place to tackle the issues of the economic and social impact of deregulation? If the goal of the package is to provide a comprehensive scheme for the restructure of the dairy industry, then what of the personal cost or costs to displace dairy and associated workers? Where does the package specifically address the needs of affected communities? The package is not comprehensive enough. In effect, it is not broad enough and this government stands condemned for it. The proposed dairy industry adjustment package applies only to dairy farmers and will not adequately address other adverse effects from dairy deregulation, notably on dairying in rural and regional communities and on dairy workers.

The minister suggests that existing Commonwealth schemes are sufficient to tackle these potential problems, but this ignores the realities of dairy deregulation—namely, that it will be rapid and regionalised. The Commonwealth's existing schemes are not sufficiently targeted, take too long to access and assume too great a degree of community preparation to be adequate in this case. Remember: if many individual farmers do not know what the effects will be, communities have even less of an idea. The minister further considers these issues will be adequately addressed because payments to farmers will provide flow-on benefits to communities in addition to existing schemes. The point to remember is that adverse financial impacts will be uneven, with some farmers and their communities being more seriously affected than others. There will be immediate job losses and impacts on economies of dairying communities with the perception of government neglect towards and discrimination against workers and communities because package payments go direct to farmers.

A broader package is required beyond direct payments to farmers, a more comprehensive package to help all groups of stakeholders affected by deregulation. The minister's assumption that the package will provide flow-on benefits to communities appears to imply that jobs lost from the dairy industry will be replaced in other industries and enterprises. However, some commentators argue there will in fact be less money circulating in rural and regional communities. Additionally, given the focus on adjustment, many farmers will use any surplus funds to retire debt, invest in other more profitable industries—intensive tree farming, for example—or invest in more secure sectors (property, shares, fixed deposits) to fund their retirement. The combined effect of these two factors is that capital will move out of these regional communities, not into creating local replacement employment in agriculture and food processing.

Because of the short lead time for the proposed deregulation date—and, understandably, dairy farmers' focus on the impact of deregulation on their individual businesses—dairy regional communities will not be in a position to prepare for adjustment and develop strategies for alternative industries, employment and growth in the short term. These communities require additional targeted resources to cope. Accessing existing Commonwealth regional community initiatives, such as the Regional Assistance Program, are flawed because these programs have competitive submission processes requiring significant preparation and community readiness. Other programs, as suggested in the ministerial communique of 3 March, only address particular elements of the adjustment process—for example, strategic planning, alternative industry assessment, training, et cetera—and are all open to highly competitive application processes. In addition, the priorities of the Regional Assistance Program are set by area consultative committees which cover broad regions, in which dairy deregulation may be only one of a competing range of issues, and the current funding for the rural plan may be exhausted on existing applications currently being assessed.

Dairy workers displaced by deregulation will face immediate difficulties, but the current Job Network and labour market assistance programs which might assist retrenched dairy industry workers will not be available for six to 12 months. The ARMCANZ communique of 3 March talks of a task force to deal with issues related to deregulation. It will not need much time to discover what I have outlined above. Such actions have been too long in coming and are not accounted or budgeted for, even though the Commonwealth and the states to date have not been required to outlay any funds to finance the package. Yet $30 million of consumer levy money has been budgeted for the Dairy Exit Program, money not likely to be taken up, given the meagre compliance and almost inaccessible assets test. Why was a similar provision not made for the dairy industry community assistance package and the dairy industry worker assistance package? NCP funds or even the DEP residue funds could perhaps be used for this purpose. Indeed, in the minds of the dairy industry and its communities, deregulation is a government initiated process. Where then is the government investment in this process? It is deregulation on the back of a milk tax, a tax collected by processors or others near the end of the milk supply chain, and I am sure the irony is not lost on the minister that he has introduced a consumer tax collected by the wholesaler.

By contrast with the federal government's approach, the Tasmanian Labor government has at least tried to gain some insight into the effect that deregulation will have on our state. It conducted a survey of dairy farmers to gauge their response to deregulation and a compensation package. With over a third of the dairy farmers responding to date, it was revealed that 18 per cent of them will leave the industry over the next three years, although it is not expected the total milk production will be affected. Tasmania is only a small player on the national dairying scene but, as my earlier brief snapshot of the industry has shown, it is a major contributor to the state's economic and social wellbeing. The survey found that one-third of the farmers needed much more information about the compensation package and the impact of deregulation on their businesses before they could confidently make a decision about their future. It also revealed a number of areas where farmers believe they will need assistance. Issues they raised included technical advice on low cost dairying options, taxation advice, advice on business opportunities outside dairying, financial analysis courses and investment in business structure courses. Put simply, farmers need to know what this government's vision is for the dairy industry and if there will be a framework to help farmers and dairying communities not only survive but prosper in the future.

There are many more unanswered questions but what is clear is that the government must play a much more active role in assisting the dairy industry plan for the industry's future. There needs to be appropriate industry support and development strategies over and above the compensation package to help as many family farms as possible survive in a deregulated market. Moreover, specific regional development initiatives should at least be considered to assist communities to adapt to any adverse effects of change. I note the Productivity Commission's draft report of May last year into the impact of competition policy reforms on rural and regional Australia, says:

In addition to generally available assistance measures, governments may need to give consideration to specific assistance to some people in regions where adjustment to change is difficult.

Surely these issues must be addressed by government; at least they would be by a government in tune with regional Australia and in sync with the needs and aspirations of rural communities across Australia. I fear this government is not.