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Wednesday, 8 March 2000
Page: 14195


Mr TRUSS (Minister for Agriculture, Fisheries and Forestry) (5:36 PM) —May I thank all those members who contributed to this debate on the dairy industry bills. It is a very significant piece of legislation before the parliament. It is probably the biggest restructuring package in the history of any primary industry in Australia. As I said in my introductory speech, it is to the industry's credit that they have been able to negotiate a package of this magnitude to win the support of dairy farmers, even though they acknowledge—as I believe everybody else in the industry and most members who have spoken acknowledge—that the dairy industry is going to go through a very difficult period associated with restructuring. They have acknowledged that this was inevitable and that the industry needed to respond. The government has been prepared to listen to what they have had to say, and this legislation is a practical demonstration of the government's willingness to work with the industry to achieve the best possible outcome.

The opposition has proposed an 11-point amendment, which of course we will be opposing. It contains very little substance and I welcome the fact that, in spite of his criticism, the shadow minister basically indicated that the opposition would be supporting the bill. He made 11 points of criticism and I would like to respond to each of those. First of all, he criticised the fact that the bill was being pushed through at the latest possible time. In reality, the government has moved very quickly to bring forward the bill. It was only in very late December that the Victorian government completed their poll and made the decision that that state would proceed with deregulation. So there has been an extremely limited time frame. I compliment my department and particularly Tim Roseby and Paul Sutton who have worked very hard to put together a comprehensive piece of legislation and enabled it to be brought to the House so promptly.

The second point of criticism was that the package failed to deliver a clear vision for the future of the industry. What it does deliver fundamentally is a future for the industry. It provides some capital to enable farmers to make decisions about their future, to assist those producers who make the decision to adjust out of the industry but, most importantly, to provide some wherewithal for those farmers who want to reinvest within the new environment for the industry to get the capital they need. The package of legislation is indeed visionary and a positive and constructive move for the industry. The honourable member then criticised a failure to carry out any proper assessment of the likely impact of the package. There have been any number of assessments and documents. ABARE have prepared a detailed summary. The industry itself has done a lot of work on the impact on various sectors of the industry. If the shadow minister has not had an opportunity to see any of that work, I am more than happy to make it available to him.

The shadow minister's fourth point was to criticise a new tax on milk. This bill does impose an 11c a litre levy on milk, but it is a smaller tax than currently applies to milk. Under the current marketing arrangements, there is a much larger transfer from consumers to producers than will exist under the new arrangements. There will not be any kind of new windfall tax on milk because the consumer transfers will fall. I take this opportunity to comment on the matter of whether there is a government tax windfall, as referred to by the honourable member for Dawson. The reality is that, as a result of deregulation, dairy incomes will fall. The taxation paid by dairy farmers to the federal government will also fall. The government's expectation is that deregulation will result in reduced income to the federal government and not any windfall in tax. It is in fact the case that the money paid to individual farmers is taxable. That is why the package was bulked up to its current level—to acknowledge the fact that the package would be taxable. Again, work done by Treasury implies that the actual tax impact is neutral because money that is paid by consumers in relation to the increased price of milk is money they would otherwise spend on other things and may, therefore, be taxable. The Treasury's view is that the impact of this measure is revenue neutral from a tax perspective.

The fifth point of the opposition's amendment expresses concern about the fact that the package does not assist workers in the dairy industry. The entire $1.63 billion paid to farmers will assist farm workers and indeed the industry as a whole. The money to individual producers will undoubtedly flow into the community, so the package is very much directed towards assisting workers in the dairy industry. The amendment also complains about a failure to retrain farmers. The reality is that the government already has a significant number of programs available to assist with training needs. For instance, the whole FarmBis suite of measures that are designed to assist farmers is certainly available to help dairy farmers as they look to the future of their industry.

The seventh point concerned the need to have measures specifically aimed at encouraging investment in new plant and equipment on farm or beyond. Again, I can say that here is $1.6 billion that will go to farmers. Many of them will choose to use it to upgrade their farm investment and to look at the best way of coping with the new environment in the industry. The amendment also talked about a failure to open up and expand overseas markets. Again, this whole deregulation push is being driven by exporters—those who desire to open new markets around the world. It also criticised a failure to provide money for research and develop-ment. The Commonwealth govern-ment al-ready provides around $10 million each year for research and development in the dairy industry and we have no intention of reducing our commitment in that regard. The amendment complained about the assistance not being appropriately targeted to farmers. It is all going to farmers—the most affected people, the dairy farmers—whose incomes will fall as a result of deregulation of the industry.

In the final point the shadow minister talked about a failure to provide any adequate mechanism to ensure that consumers benefit from any fall in the price that farmers receive from their milk. Again I am sure he could have noticed that the bill provides $500,000 so that the Australian Competition and Consumer Commission can supervise the introduction of the new arrangements and ensure that the real benefits of price falls flow through to consumers and that there is no profiteering in the industry. The government rejects the opposition's amendment.

We believe that the points raised lack substance and are not worthy of support. The deregulation of dairy's farm gate pricing arrangements now look set to take place, with state agriculture ministers agreeing in principle last Friday to remove milk pricing arrangements from 1 July 2000. The government has responded to the likelihood of deregulation by proposing this adjustment package which will assist dairy producers to respond to the sudden and significant changes ahead in an orderly way, and which will also assist to minimise hardship and provide exit opportunities for those farmers who wish to leave agriculture.

In summary, this package of bills, at a total cost of $1.74 billion, will provide dairy structural adjustments payments worth a total of $1.63 billion to help farmers adjust to the new market, paid in 32 instalments over eight years. These payments, available to eligible persons involved in dairying on 28 September 1999, will provide significant assistance to individuals and regions that are dependent on dairying. A dairy exit program worth $30 million will provide a tax-free grant of up to $45,000 to those who wish to exit agriculture. There will be an 11c per litre dairy adjustment levy on drinking milk products to fund the dairy industry adjustment program.

In the development of the package a number of issues have been raised, both by industry representatives and the broader dairy community. One thing is very clear, however. If deregulation occurs, this adjustment package will be vital, not only in maintaining the continuing success of the Australian dairy industry, but also in the response to deregulation able to be made by individual producers.

The purpose of the package has received considerable attention in recent months. It is important to remember that this is an adjustment package and it is not intended to compensate for the removal of regulated arrangements or to provide income support. I cannot stress enough: the package is designed to assist producers to adjust to the changing circumstances with dignity and in an orderly fashion and to improve industry performance, which in turn maintains and increases job opportunities and incomes in regional dairying areas.

In relation to any compensation issues, it is the federal government's clear view that it is now up to the states to address issues that are the direct consequences of the states removing farm gate pricing arrangements such as any quota compensation. I refer in that regard to some of the remarks made by the member for Page and others about the responsibility of states also to play their part in any measures necessary to support the dairy industry in the years ahead. I have encouraged the states to implement regional assistance measures where they consider additional assistance is warranted.

The package addresses issues which have been brought about solely through the existence of state market milk arrangements and it is up to the states to provide additional import if they consider this to be necessary. The government is conscious that the Commonwealth taxing powers will contribute all the funds towards assisting the industry to adjust to the removal of the state arrangements, while the states will receive national competition policy payments for their dairy reforms.

Can I also reject this concept that somehow or other this is not a Commonwealth initiative; that because it is paid by the consumers therefore the Commonwealth is contributing nothing. That is clearly a nonsense argument. It is no more valid than suggesting that money contributed by motorists when they pay fuel tax is not Commonwealth money, or money paid to the states when people transfer their property is not state money. Governments have no money of their own; all of the money that they have to spend on programs is raised from the people. It is taken by way of various taxes on various commodities, taxes on income, taxes on transactions. All of those sorts of things raise money for governments, and this levy is no different in that regard.

I am aware of the very real concern about the likely impact of deregulation on the prosperity of regional dairying communities. The federal government offers a wide range of integrated policy initiatives for farmers and rural communities to provide positive incentives for ongoing farm adjustment and to encourage social and economic development in rural areas. Government programs also ensure that the farming sector has access to an adequate welfare safety net.

The principal Commonwealth assistance programs available to those affected by deregulation of the dairy industry include the Agricultural Advancing Australia scheme, the Regional Assistance Program, the Rural Com-munities Program and various job as-sistance training and income support schemes. Details of these programs are all readily available for affected farmers and their communities.

In addition, the Commonwealth is developing a whole-of-government response to issues raised in the Regional Australia Summit which was held last year. Outcomes from the summit can be expected to address concerns identifiable in most rural communities. The government has agreed with the states that it will be looking at these existing programs to see if they need to be better tailored to meet the requirements of dairying communities to adjust to deregulation. At my meeting with state agricultural ministers last Friday we agreed to set up a high level task force to monitor and evaluate any regional impacts of dairy deregulation.

It is inevitable that in any assistance package of this nature there will be individual producers who are concerned about their eligibility for payments from the package. The eligibility criteria were arrived at after extensive discussions with dairy industry leadership and as a result of a careful balancing of the levels of entitlement to the adjustment pressure they will face. The Dairy Adjustment Authority will be charged with making the determinations on eligibility for all applicants. The vast majority of producers' eligibility and entitlements are expected to be determined without dispute by the Dairy Adjustment Authority. However, disputes will arise in some cases and the DAA will need to resolve them on the basis of clear guidelines and principles.

Other producers may not for various reasons be technically eligible, though they are current producers and were delivering milk during the 1998-99 financial year. The authority will determine eligibility for these producers taking into account the individual merits of each case. The government has been alerted to some minor problems with the complex package and I will later be introducing a couple of amendments to the bill to ensure it delivers on the intent of the package. These are in relation to the needs to address market bill payment anomalies in Victoria in 1998-99 and to ensure that partnerships in share farming agreements are not disadvantaged in relation to the sharing of the market milk premium. Both of these potential problems were brought to the government's attention after the introduction of the bill. Of course, an appropriate appeals mechanism has been established in the legislation for those producers who are not satisfied with the DAA's determination.

Finally, I would like to congratulate again the dairy industry leaders who recognised in advance the commercial forces facing the industry and examined the options to deal with these pressures. These industry leaders developed and presented a coherent strategy to the government and were able to demonstrate that this strategy had the support of the majority of the industry. I commend the legislation to the House. The government rejects the opposition amendments. This is a significant package. I would like to thank again all members who contributed constructively to the debate on the issue. The dairy industry faces very difficult times, but this package helps to make those difficulties somewhat easier and gives the industry a real chance to build a prosperous future for itself and for dairy industry communities into the years ahead.

Question put:

That the words proposed to be omitted (Mr O'Connor's amendment) stand part of the question.