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Wednesday, 28 August 2002
Page: 5906


Mr TRUSS (Minister for Agriculture, Fisheries and Forestry) (9:39 AM) —I move:

That this bill be now read a second time.

The Egg Industry Service Provision Bill 2002 provides for the establishment of an egg industry company limited by guarantee under the Corporations Act. The company, to be called Australian Egg Corporation Ltd or AECL, will be responsible for providing services to the industry. These services will include generic promotion and the R&D functions that are currently provided by a subprogram of the Rural Industries Research and Development Corporation (RIRDC).

These new arrangements will allow a more coordinated and commercial approach to the delivery of services to the egg industry. Importantly, it will ensure that, for the first time, all egg producers can be directly involved in the application of their levies to best effect.

The egg industry has experienced a difficult period since deregulation of state marketing arrangements in the late 1980s. Further pressures have resulted in recent years from newcastle disease outbreaks and changes to layer hen housing to meet animal welfare requirements.

Through a period of declining fortunes, egg producers have suffered from a limited ability to adopt a whole-of-industry approach to crucial issues. They have been unable to communicate to consumers about the health benefits of egg consumption and to benefit substantially from industry R&D.

Between 1989 and 1999 Australia's annual average egg consumption decreased from 146 to 137 eggs per person. The industry argues that this decline is due to a market failure in egg promotion. Whilst there are some producers large enough to carry out marketing and create brand recognition, this alone has not been enough to redress declining per capita consumption.

In 2001 the industry came to government with a proposal to establish a new promotional levy, and to use the money generated to fund generic promotion. In addition, they wanted to establish a single industry owned company to manage promotion and industry R&D. The industry strongly argued that a national generic promotion campaign was needed to boost flagging egg consumption.

After an extensive consultation process, the Australian Egg Industry Association demonstrated that such a company was required, and that a majority of the industry supported the proposal. Having secured government agreement for the proposal during June this year, the industry are now preparing themselves for a transition date of 1 January 2003.

Under the arrangements, all egg producers who pay the statutory promotional levy will be eligible to become registered members of AECL, and therefore will be able to have a direct input into the management and application of their statutory levies. Registered levy payers will be able to exert their influence through voting rights, appointment of board members, and input to the company's policy development and planning activities.

Integration of R&D, promotion and other industry services will enable the egg industry to be more responsive to the challenges it faces. The new company will also improve communication within the industry, with consumers and with government. This will especially be the case on issues such as food safety, animal welfare and disease management.

In terms of R&D, the new arrangements will see the existing egg subprogram transferred from the Rural Industries Research and Development Corporation to the new company. The arrangements for this transfer are dealt with in a cognate bill, Egg Industry Service Provision (Transitional and Consequential Provisions) Bill 2002.

The bill

The Egg Industry Service Provision (Transitional and Consequential Provisions) Bill 2002 provides for the new industry structure by enabling the Minister for Agriculture, Fisheries and Forestry to declare a company limited by guarantee as the industry services body.

Before the declaration can be made, the minister must have entered into a contract with the industry services body detailing the arrangements under which the company will manage and administer industry levies collected by the Commonwealth and Commonwealth matching R&D payments. The contract can only be entered into if the minister is satisfied that there are satisfactory accountability measures in place, including in the company's constitution.

Once the declaration has been made, the Commonwealth can make promotion and R&D payments to the company, as well as matching Commonwealth contributions for eligible R&D expenditure.

Accountability

There are a number of benefits associated with the new arrangements. More than ever before, levy payers will have a direct influence on the way in which their industry levies are utilised. Through their voting rights, members will hold the company's board accountable to the way in which they deliver industry service arrangements.

In addition, the new structure and levy will enable the egg industry to address the market failure which currently hinders egg promotion. By improving communication with consumers and boosting egg consumption, the company will promote the development and profitability of the egg industry.

While the model allows the industry to have a greater say in the management of its affairs, there will also be increased responsibilities. The distancing of government means the industry accepting responsibility for its activities and appreciating that there is no automatic recourse to government assistance when the going gets tough. In short, the industry will be responsible for planning its own future, strategically seeking priority outcomes, and managing for risk.

In terms of accountability to the Commonwealth, the new company will be bound by a number of measures. These measures will be outlined in the funding contract with the Commonwealth and in the company's constitution. They include:

comprehensive planning and reporting requirements, with copies of plans and reports to be made available to the Minister for Agriculture, Fisheries and Forestry;

regular performance reviews to assess the company's efficiency and effectiveness in meeting planned priorities;

regular meetings between the chair of the industry company and the Minister for Agriculture, Fisheries and Forestry to discuss industry issues and to ensure that the government's priorities for R&D are being addressed;

a requirement for a mix of producer and specialist skills based directors on the board of the company, including a specialist in corporate governance; and

a requirement that the company remain separate from any industry agri-political activities. These sorts of activities should be conducted by the peak industry body, which has not been included as part of the new company.

Should the company change its constitution in an unacceptable way, become insolvent, or fail to comply with the legislation or funding contract, the Minister for Agriculture, Fisheries and Forestry will have the ability to temporarily suspend or terminate the payment of statutory levies. Alternatively, the minister will have the option to rescind the declaration of AECL as the industry services body.

Not only will these requirements ensure that the company is using statutory levies for their intended purpose; they will also help to secure a successful future for the new company.

Conclusion

This Egg Industry Service Provision Bill paves the way for the industry to look to the future with a more commercially driven and consumer responsive approach. With this new company, the industry will have the capability to respond more effectively and efficiently to current and emerging industry challenges. Ultimately, this will mean increased egg consumption and improved industry profitability.

I commend the industry on its unity in bringing this proposal to government. Their initiative is another example of a maturing agricultural and food industry looking to secure its future. It provides me with great pleasure to be working with the egg industry in implementing the arrangements, and I am particularly impressed with the extensive levels of consultation throughout the industry, with stakeholders, and with government.

This bill, and the accompanying transitional bill, creates a turning point for the management of industry affairs and for the potential for industry growth and development. It will establish a solid foundation for the industry to improve its position in terms of egg consumption and overall profitability. I commend the bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Cox) adjourned.