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Wednesday, 8 March 2000
Page: 14141

Mr CAUSLEY (12:47 PM) —It is a pleasure to participate in this debate on the dairy industry bills, and maybe I can be a little more relevant than the member for Batman. The member for Batman forgets that most of the legislation we are living with at the present time was introduced by the Labor Party in government, yet they have the audacity to come into this House and start to talk about the effects of it.

Mr Zahra —The member for Corangamite says it is groundbreaking.

Mr CAUSLEY —The member for McMillan is still wet behind the ears. He is gradually learning how to behave himself in this chamber, but it is taking quite a time. There is one thing that the member for Batman should understand: the driving force behind most of this change has nothing to do with competition policy but has a lot to do with section 92 of the Constitution and has a lot to do with Victoria, the state that the member for Batman comes from. If you want to really get down to the genesis of this, you have to go back a few decades and start to understand what went on with Victorian milk coming into the Sydney market through the Jewel supermarkets. That was the genesis of the whole issue. Of course, the dairy marketing scheme was put in place to try and alleviate some of the problems associated with that.

Mr Zahra —So Jewel supermarkets have triggered this $1.7 billion package.

Mr CAUSLEY —The member for McMillan was not even born in those days. He comes in here and tries to make a lot of noise, but empty vessels usually make a lot of noise. The fact is that the dairy marketing scheme was put in place to alleviate these problems. Yes, I acknowledge that Minister Kerin and Minister Crean were part of that dairy marketing scheme.

These bills before the parliament today are before the parliament at the request of the dairy industry. The dairy industry came to the government and requested some help in the deregulation of the industry which was being forced by the Victorian industry. The Victorian industry had made it very clear that they were not interested in continuing with the dairy marketing scheme because they believed that it was inhibiting their ability to compete on the world market because of the New Zealand situation and therefore they wanted to deregulate the market and be more competitive, so they believed. I know that the Australian Dairy Industry Corporation laboured long over this particular issue but came to the government and asked for some support in the transition period in the dairy industry. So we must get it in context that what is being put before the parliament at the present time is at the request of the dairy industry.

Having said that, there is no doubt that there will be some changes in the dairy industry. Not everyone in the dairy industry is satisfied with the outcomes. They know that there will be some significant changes and some significant effects. One of the things that probably worries me the most is the ability of the producers to get a fair share of the value of the milk that they are going to produce. It was said clearly at last year's ABARE conference by Woolworths in particular that they were not getting a big enough mark-up on the whole milk that they were selling through their supermarkets and they wanted a bigger share. It was made very clear to me by some of the manufacturers that they wanted a bigger share. So one of the real issues in this is not so much the deregulation of the industry but how you protect the producers and make sure they get a fair price for the milk that they produce.

It is one of those balancing acts, I suppose, because you cannot protect an industry that is inefficient. I do not believe this industry is inefficient, but you cannot continue to be efficient unless you have competition which will ensure that. Of course, there will be lumpy areas within which you will have some effects. We have in Australia—and it is often quoted—the tyranny of distance. You will find that some sections of the industry will be affected more than other sections of the industry. That is something that the government and others have to come to terms with.

Competition policy was introduced by the previous Labor government, I believe, without thinking exactly what the full effects of it were going to be. Undoubtedly, when you start to run across it the test of benefit to the consumer, in many instances that benefit cannot be shown. Something in this particular area that worries me is that, if you run the test across it as to whether this policy will give a benefit to the consumer, it is very hard to see where the consumer is going to get that benefit. On the other side, it is very easy to see where the producer can be disadvantaged.

As I said, there are many sections of the industry at the present time that are very apprehensive about this situation. I know that the issues involved have been debated long and loud within the industry. I happen to disagree with some of the conclusions that have been reached. Nevertheless, the industry have debated this and have come to their conclusions. They have had meetings in all states to vote whether or not they should deregulate and the industry have voted to deregulate. We do have to get this in perspective. The fact is that this is not being pushed by the government. This is not government policy. This is an effort by the government to try to help the industry in that transition, which will inevitably see a different industry, probably a more competitive and more efficient industry, into the future.

I hope that the package that is being facilitated by the government will help people in the industry to exit if they need to. I think some will. Even the industry itself estimates that probably 30 per cent of producers will exit the industry. I hope it allows other sections of the industry to build up their productive capacity so that they are efficient. I hope also that the Trade Practices Act is enforced in such a way that there is no cross-subsidisation of product where some manufacturers might try to dominate market share and that would in the long term be detrimental to the interests of the consumers. These are all areas which I believe are very important and have to be watched very closely.

My electorate of Page on the North Coast of New South Wales is centred on Lismore and Grafton. I have grave concerns for the industry in that area, although I suppose it is an advantage that we are close to Brisbane. It is not one of the bigger metropolitan areas in Australia, but we are close to Brisbane. Once you go into a totally deregulated market, the scale of production is extremely important to remain competitive. These are the areas that worry some of us. I know that, with a dairy industry in his electorate, the member for Kennedy has the same concerns. If you do not have economies of scale, then you cannot compete with some of the bigger producers. When I say economies of scale, if 30 per cent of the producers in my area do decide to exit, I worry about the ability of the manufacturing base in my area to compete with larger competitors. That is why I say that the Trade Practices Act needs to be strictly enforced.

If there is a cost of transport from one state to another—for this particular argument, let us say from Victoria because they are the biggest producers—if there is a cost of transport to the Sydney market or to the Brisbane market, then that cannot be subsidised by other areas of their manufacturing base. As far as I am concerned, that is predatory pricing and a deliberate attempt to try to obtain a monopoly in the marketplace. I make that point very clearly and hope that the trade practices people involved will ensure that that does not happen. The effects of the economies of scale that I was talking about earlier are not as sharp as if there were some cross-subsidisation in the marketplace. The dairy industry is very important in my electorate, the manufacturing base is very important in my electorate—there is a very big employment base there—and that is why I am concerned to ensure that the changes will not be manipulated by those who are more powerful in the marketplace.

There is no doubt, whether you live in Victoria, Queensland or, to a lesser extent probably, South Australia or New South Wales, that there is going to be some pain involved in this transition. As I said earlier—as did some of the comments put forward by the member for Batman, who rarely touched on the bill and was more interested in playing politics on the issue—it is extremely important that we work very carefully through this issue to ensure that the participants in the industry get a fair return for the efforts that they put in.

I believe that the government has reacted to the industry's concerns. There is no doubt there was pressure and that some sections of the industry are not happy with this and some states are not happy with it. They would prefer to see the quota systems and the regulated markets maintained. I doubt very much in my mind whether the state governments have been genuine in some of these negotiations. I have always believed, and have believed since I was a minister in New South Wales, that quota is a property right, that governments should give undertakings that people be given guaranteed access to a market and that they should be able to buy and sell that access on the open market for substantial prices. I believe that is a property right.

I do not believe that the state governments are being responsible. In the past, I believe that Victoria has been bought out, but certainly in relation to New South Wales, Queensland and Western Australia I do not believe that state governments have been genuine in addressing the value of quota. They have just confiscated a property right that has rightly been bought with good value by the producers and given them no comfort whatsoever in saying that there could be some value in that. I believe that the industries need to have a closer look at that. They need to get some very good legal advice because, in my opinion, they have a case against the state governments that I have mentioned to get some compensation for the quota for which they paid very good money and for which, in this particular instance, they are receiving no compensation.

If anyone has any doubts about that—and I am sure the member for Corangamite would well know and anyone from Sydney would well know this—in my opinion, there is no difference between the property right involved in a milk quota and the property right involved in a taxi licence in either Sydney or Melbourne. I would like the Victorian government or the New South Wales government to put forward a proposal to deregulate the taxi industry without giving compensation to the taxi owners. If they did that, they would have riots in the streets. The governments are making no effort to recognise the money that people have outlaid in this quotas.

There is more to this. It is not just the responsibility of the federal government to react to what the industry is asking—the federal government had to be involved because it was a cross-state issue—but I do not believe that the state governments, and I target in particular the New South Wales government, have done anything to try to compensate dairy farmers for the severe loss that they will incur. I think that the state government needs to be reminded of that. I dare say that that is a matter for the state oppositions to remind them of.

The dairy industry is a vital industry to Australia. Undoubtedly, during the era of the dairy marketing scheme, other states, particularly Victoria, accessed many world markets. I hope that the changes that are now taking effect will ensure that the dairy industry can remain competitive on the world market in the future. No doubt they will need to remain competitive in the world market. I believe that a myth that has been generated from Victoria is that they can look across the border at the market milk in Sydney as some market in which they can gain some ascendancy and get a good return. I have always believed that not to be the case. I do not think that any farmer in New South Wales would allow someone to come into the market and underprice them. The reality is that, no matter what the price of the milk is from the other states, it will be met by the state into which the milk might be coming. The only real effect will be that the price of milk will come down for the producer. As I said earlier, there is no indication from either the supermarkets or the manufacturers that the price is going to come down to the consumer.

Another myth is that the repayment of this loan will be paid by the consumer. Already we are seeing prices being promulgated, which will result in huge reductions in the return that the producer is going to receive. I put it to members that a smoke and mirrors trick is being played. While the manufacturers are agreeing to collect this particular amount to repay the loans, in reality the price to the producer is going to reduce in such a way that they will be the ones who are going to be paying the loan repayments. I think that that is something that producers will come to terms with. They will not be very happy, but they will start to understand it as it progresses.

In many ways, producers will get an opportunity because there will be some cash flow to them to allow them to adjust. Some will exit the industry. In the long term, this package is really a loan from the federal government, or a guarantee to allow the industry to raise the money which, in the long term, will be paid back by the industry with interest.

As I said in my opening remarks, the federal government has given everything that the dairy industry has asked for. Everything that the elected members of the dairy industry have come to the federal government and asked for, they have received. So the Labor Party should not be allowed to lay the blame for this on the coalition government. The coalition government have been willing and, in every way, they have acceded to the requests of the dairy industry. I dare say that it was not an easy decision by the dairy industry hierarchy to come to that conclusion, but what they asked for, they received from the federal government. I hope that the package will help producers in particular to become more efficient and become more competitive in the world market and have a long-term future.