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Wednesday, 12 February 2003
Page: 11573

Mr TRUSS (Minister for Agriculture, Fisheries and Forestry) (9:10 AM) —I move:

That this bill be now read a second time.

The Dairy Industry Services Reform Bill 2003 is the result of a dairy industry and government process aimed at providing the industry with greater ownership and control over dairy industry service arrangements. The bill provides for the conversion of the Australian Dairy Corporation, the ADC, into a company under the Corporations Act 2001, to be known as Dairy Australia Ltd, and for all the assets and liabilities of the Dairy Research and Development Corporation, the DRDC, to be transferred to this new company—in effect, merging the R&D and marketing arms of the dairy industry.

This bill will deliver three main benefits to dairy farmers:

· a direct say, through a vote in their company, Dairy Australia;

· bringing together R&D, information, marketing and trade development; and

· delivering better value for their levy investment.

Following amendments last year to the Dairy Produce Act 1986, which allowed the ADC to investigate and fund an appropriate reform process, a comprehensive investigation of the best option of reform was undertaken by the government's legal and business advisers. The results of that investigation are this bill and the Primary Industries (Excise) Levies Amendment (Dairy) Bill 2003, which I will be presenting shortly. Additionally, this reform process broadly adheres to similar successful reforms in other agricultural industries including meat, wool, horticulture, pork and eggs.

This bill is the culmination of a cooperative effort between the dairy industry and the government and follows on from significant changes in recent years in the market situation and corporate structure of the Australian dairy industry. These changes have been particularly marked since the deregulation of farm gate milk pricing arrangements in July 2000. The dairy industry, as a forward looking and innovative industry, has sought rationalisation of industry statutory service arrangements to assist in the adjustment to the new environment, particularly in respect to the delivery of collectively funded R&D and market promotion services.

The bill provides that the ADC will be converted to a company to be known as Dairy Australia Ltd. The effect of this is not to create a new legal entity but to change the nature of the entity that was the ADC. The DRDC will have all its assets, including staff and liabilities, transferred to Dairy Australia, thereby completing the merger process. Dairy Australia is to be a Corporations Act company, limited by guarantee, with membership comprising voting members drawn from dairy levy payers—that is, group A members—and non-voting members made up of the peak dairy farmer and processor bodies, group B members. Details relating to membership will be contained in the constitution of Dairy Australia and therefore are not dealt with in the bill.

As Dairy Australia will be responsible for undertaking functions on the behalf of the dairy industry, similar to those currently undertaken by the ADC and DRDC, it will be necessary for the levy moneys collected by the government to flow to the new company. Also, matching Commonwealth R&D contributions in relation to eligible R&D expenditure by the company are also to be directed to Dairy Australia. The intention of this privatisation process is to hand responsibility for these services to the new company, which will be accountable to its members, and therefore reduce the influence and control of government in these processes. However, while these levy payments and matching contributions continue, it is appropriate for the government to monitor the expenditure of these moneys. Therefore, the bill provides for a number of mechanisms by which the government will maintain a relationship with the company.

In the first instance, the minister will declare an eligible body to be the industry services body for the purposes of receiving levy funds and matching contributions. This is to ensure that the company will only receive these funds so long as it remains accountable for them to both levy payers and the parliament. Additionally, the company will be required to enter into a contract with the Commonwealth, to be known as the statutory funding agreement, to ensure that planning and reporting requirements, over and above the requirements of the Corporations Act, are adhered to.

Finally, before Dairy Australia is registered with the Australian Securities and Investment Commission, the minister must first approve the constitution of the company. The minister must also approve the inaugural directors of the company.

The staff of the ADC will continue to be employed by Dairy Australia following the conversion of the ADC. Also, DRDC employees will transfer to Dairy Australia. The bill provides for the fair and equitable treatment of all staff and expressly provides that for all purposes employment with Dairy Australia is continuous with employment with the DRDC. Consistent with the government's policy for guiding decision making on staffing and employee conditions in privatisation processes, a human resource management strategy is to be developed in conjunction with the ADC and DRDC in relation to these continuous employment provisions.

The bill provides for the current promotion levy, research levy and corporation levy currently directed to the ADC and DRDC to be rolled into one levy to be known as the dairy service levy. The separate Primary Industries (Excise) Levies Amendment (Dairy) Bill 2003 imposes this new dairy service levy. The advantage of combining the old levies into one is that the industry services body will have greater flexibility in determining its expenditure breakdown, but will remain accountable for this expenditure through the statutory funding agreement. Combining these levies will also facilitate the conduct of future periodic polls of levy payers to determine the rate of the dairy levy.

Dairy Australia will also administer the Dairy Structural Adjustment Fund (DSAF), currently administered by the ADC. For this reason, the dairy adjustment levy (DAL), which applies to all retail sales of milk, will also flow to the industry services body, but will be quarantined from other levy amounts. This is because the DAL is to continue to be used exclusively for making payments into the DSAF for the purposes of funding the dairy industry adjustment package and related matters. Importantly, the DSAF is to be administered by the industry services body in the form of a trust. The bill makes no substantial change to the operation of the DSAF from its current administration by the ADC other than that it is to be kept and treated as a trust. The minister will retain joint responsibility for the solvency of the DSAF, as is currently provided for under the Dairy Produce Act.

Export control is the only function of the ADC that is to be retained by the Commonwealth and will be administered by the Department of Agriculture, Fisheries and Forestry. In practical terms, the only export controls currently exercised by the ADC, under powers conferred by the Dairy Produce Act 1986, relate to the administration of quotas for cheddar to the EU (3,750 tonnes) and varietal cheeses to the US (7,000 tonnes). The bill provides for regulations to be made to give effect to a system of administration that mirrors the current ADC arrangements, thereby ensuring no commercial disadvantage to current exporters. However, the Commonwealth will require the costs of administration of this function to be met by exporters. Previously, the ADC absorbed the costs of this function through levy funds.

A number of provisions in the bill provide for the flow of levy payer information to Dairy Australia. In the first instance, the bill allows for the one-off provision of information to the ADC in order to begin initial work on a register of levy payers. This information will be provided by the manufacturers directly to the ADC and will include the names, addresses, contact details and ABNs of the manufacturer's suppliers. Details of amounts of levy paid by individual producers will not be provided at this stage. This information can then be used by the ADC for the purposes of:

· informing producers of the amendments being made to the Dairy Produce Act;

· making producers aware of their eligibility to become members of Dairy Australia;

· inviting producers to apply to become members of Dairy Australia; and

· developing a list of those producers eligible to become members.

This initial exercise will ensure a comprehensive list of dairy levy payers is developed and utilised for the purposes of conducting a mail-out to all levy payers. The mail-out will include an information kit on the proposed arrangements for Dairy Australia and a membership application form.

The ongoing flow of levy payer information to the industry services body will be conducted through AFFA's Levies Revenue Service (LRS) and will relate to the maintenance of a register of members and levy payers for the purposes of voting at annual general meetings and voting in future periodic polls.

In addition to the details collected in the initial exercise mentioned above, LRS will also collect and provide to Dairy Australia amounts relating to the amount of levy paid by each producer. This will include certain information for verification purposes, such as details of milk fat and protein rates produced. This information will enable Dairy Australia to determine and allocate voting entitlements:

· to each member of the company for voting at AGMs, and

· to each levy payer for voting at future periodic levy polls.

Dairy Australia, as the industry services body, will be required to conduct periodic polls of levy payers on the rate of levy. Details on the conduct of these polls (including the timing of the polls) will be set out in regulations. This bill allows for regulations to be developed for this purpose. The provision of a periodic levy poll will ensure that all levy payers have a direct say in the rate of levy they pay. Therefore, farmers will be able to determine for themselves the amount of levy they believe should be expended on services to the industry and will, in broad terms, make judgments about the direction of that levy.

The bill also includes provisions which clarify the obligations of the staff of the Dairy Adjustment Authority to comply with a lawful direction from another Commonwealth body. This is to ensure that full protection of staff of the DAA is provided when complying with a lawful request for information.

Of course, with removal of direct government control of the industry services arrangements, it will be a matter for the company and its members to determine the direction of the company and the nature of services it provides. For this reason, the new company should have more direct relevance to the dairy industry and will be better able to respond to the wishes of dairy farmer members.

I am pleased to present this bill as the culmination of very detailed investigations and significant input from the dairy industry. The efforts of the industry leadership in this exercise are to be applauded as they have worked extremely hard on behalf of dairy farmers to ensure that the continued provision of services to the industry is up to date, relevant and beneficial to all farmers. I understand that the industry has continued to consult with individual farmers and that this consultation process will be maintained in the coming months as the start-up date for the new company nears.

Finally, I would encourage all dairy farmers to examine the benefits of the new arrangements for them and also consider becoming active members of Dairy Australia. It is an important opportunity to have a direct say in the company and its activities, and the more farmers are involved at this level, the more it will ensure that the company is able to develop programs and directions which truly reflect the business and farming needs of the entire dairy industry.

I commend the bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Cox) adjourned.