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Tuesday, 23 March 2004
Page: 26949

Mr TRUSS (Minister for Agriculture, Fisheries and Forestry) (5:53 PM) —I thank the large number of members who contributed to the debate on the Dairy Produce Amendment Bill 2003. In particular, I would like to compliment those members who spoke with a degree of optimism about the dairy industry and its future potential. We read in the media all sorts of stories about the difficulties facing dairy farmers, and many of those stories are real. But all members on this side of the House—and, for that matter, the shadow minister—have spoken with optimism about the future potential of the industry and, whilst acknowledging that there are current difficulties, they have recognised the outstanding contribution the dairy industry has made, is making and will continue to make to Australia in the future.

Dairying is certainly one of our most important agricultural industries. It contributes about $3 billion a year to the gross value of agricultural production in this country. As a number of speakers have said, it contributed something like $2½ billion from exports last year, because of the drought, but has peaked at $3.2 billion in export income. So it is indeed one of our most important agricultural industries, and I have no doubt that the dairy industry will grow and prosper in the years ahead. A number of factors will help to improve that position. As the industry continues to focus more heavily on exports, the negotiation of free trade agreements with Thailand, the United States and, potentially, China opens up new opportunities. But in other places as well, some of the barriers to our products are starting to break down. I was pleased to announce today that Bangladesh is lifting some of its penalty tariffs on Australian dairy exports, and it is potentially an important market. So I think there is potential for the industry to grow and expand in the future.

There were, of course, one or two speakers who could only talk about doom and gloom: there was the honourable member for McMillan; and he, of course, was trumped by the member for Kennedy. But we have come to expect that kind of response from the member for Kennedy. In their comments, the member for McMillan and the member for Kennedy—and even, unfortunately, the member for Corio, who is the shadow minister—have repeated the oft-quoted argument run by Labor states that the Commonwealth was responsible for deregulating the dairy industry. During his speech, the honourable member for Corio was corrected by the parliamentary secretary, the honourable member for Murray—who came from the heart of the dairy industry—who pointed out quite clearly that at no stage did the Commonwealth pass any legislation to deregulate the dairy industry. We had no regulations to repeal. The regulations for farmgate pricing and market milk pricing were all state regulations. It was the state governments that made the decision to deregulate their industries.

The unfortunate thing was that, when the deregulation occurred—when the states decided to repeal the regulations—only one state offered any assistance to their dairy farmers to cope with the impact of the change. Ironically, that was the only coalition government at the time, in Western Australia. They at least put up some financial assistance to help the industry to deregulate. But in the Labor states, not only were the farmers' quotas taken away from them and essentially made worthless but the states were not prepared to offer any compensation or assistance at all. Were it not for the fact that the Commonwealth intervened and offered assistance packages totalling $1.94 billion, the transitional phase from a regulated industry to a deregulated one would have been catastrophic.

It is true that there have been continuing difficulties for many in the industry. Some of the impacts of deregulation were not felt initially, because the world price was high. Many in the industry thought that perhaps the implications of deregulation were not going to be as substantial as they had thought. But now that the world price has returned to more normal levels, some of the true impact is being felt, especially in those states that previously had a high dependence on the market milk sector. In Victoria, which, as the honourable member for Corangamite quite correctly pointed out, is by far the largest dairying state—and its share of the industry continues to grow—the impact of deregulation was much less, because it was largely a deregulated industry anyhow. But their drought has had an enormous impact. The drought has been particularly severe for dairy farmers, especially in the irrigated areas, so their income has been savagely cut as a result.

All those sorts of things have led to some degree of despair in many sections of the dairy industry. There are no quick or easy fixes to the problems, despite what some in the industry might be saying. If there were easy solutions, the industry would have grasped them years ago. If there were some magic loophole in the Constitution that enabled something to happen that was not allowed to happen a couple of years ago, the industry certainly would have grasped it. But the reality is that the circumstances that led to deregulation in the year 2000 have not changed. There is nothing about the architecture of the Constitution or, indeed, about the powers of the states and the Commonwealth that have changed since that time, so there is no practical way in which you can reconstruct the regulations that existed in that era. If anybody is going to re-regulate the industry, it clearly has to be the states, which had the regulations in the first place. The Commonwealth has no price-setting powers. The public ruled on that issue, well and truly, in a referendum a couple of decades ago. So if there is to be any re-regulation, it has to be done by the states and not by the Commonwealth.

But none of the states is of a mind to take that action. The Western Australian parliament commissioned an inquiry that has just recently reported. They spoke enthusiastically about re-regulating, but the state Labor government has no plans to take that kind of approach. They appreciate the real practical difficulties that would be associated with any proposal to re-regulate.

It is also important to note that the current difficulties facing the dairy industry do not entirely stem from deregulation. As I have already mentioned, the drought's impact of higher feed prices and the lower world price for milk products have quite obviously had a huge impact on dairy farmers. The cut-price tendering by the dairy companies has not been helpful either. It has certainly ensured that the returns to dairy farmers have not been as high as they otherwise could have been, and the wholesale price benchmark has been driven down by this practice. The Australian government is keen to continue to work constructively with dairy farmers wherever it can to improve their operating environment and to strengthen the future of the industry in the interests of farmers, their families and the communities that depend upon them.

There has been a number of measures that we have taken in addition to the $1.94 billion industry adjustment package. A large proportion of the Australian dairy farmers are now eligible for drought exceptional circumstances aid. In northern Victoria, the take-up of the drought assistance has been quite remarkable: around three-quarters of the dairy farmers in some areas have accessed that income support. We continue to provide around $35 million a year in assistance through the industry's research and development operations. Multilateral and bilateral trade negotiations are very important for the industry. Through the National Food Industry Strategy, we have also been able to fund and support the industry in developing some innovative new products and opportunities for the future.

There is still real hope and opportunities for this industry. Those who believe that the industry's problems can be solved by deregulation are not very good students of history. I am not one that believes in deregulation for deregulation's sake. I have occasional disagreements with the member for Corangamite on those issues, and also with the parliamentary secretary, who perhaps believes much more strongly in open and free trade than I might. I think there is sometimes a role for governments to ensure that the environment is appropriate for an industry to prosper but, on the other hand, to suggest that regulation for regulation's sake is also good is a nonsense. The honourable member for Kennedy goes on about regulation as though it is some kind of panacea for the industry. I can remember the days in Queensland when it was illegal under state law to carry any luggage in the back of your car. It was an offence to carry spare parts or any equipment in your car if there was a train service going the same way in the next week. That is in my lifetime. Surely that was regulation gone mad. Surely the honourable member for Kennedy does not believe that we should return to that kind of regulated environment.

Mr TRUSS —It was actually a Labor government that did that. One of Joh Bjelke-Petersen's claims to fame in his early days was when he campaigned against some of the ridiculous regulations associated with what you had to carry by rail in Queensland. He was a deregulator in those days.

No amount of regulation applied in one sector of the industry can cure its problems if there is no drive and determination for that industry to be efficient and effective by world standards. By providing subsidies or support, you can help a certain number of people. If you look at the situation in the United States, you will see the one thing that US farmers want more than their 20 per cent subsidy is a 30 per cent or 40 per cent subsidy. The reality is that, however much money you pour into something, you can help a few more people but, ultimately, the industry has to stand on its own feet. That surely applies to all sectors of the community. And that is the difficult decision that the dairy industry came to grips with in the year 2000. They decided it was the only way they could proceed, and the Commonwealth stood beside them during those difficult times and helped put in place transition measures which would enable the industry to prosper.

As honourable members have said during this debate, there are many areas where the industry has made significant advances. The honourable member for Eden-Monaro spoke about the terrific work that the Bega Cheese Cooperative is doing. It is a real benchmark. It has become a leader in its field. Yes, it has had some help from the Commonwealth government, and I have been delighted to go there a couple of times and be involved in ceremonies to hand over amounts of money to assist it with its projects. But, essentially, it has been the drive, initiative and forward thinking of the management of that organisation that has led to its own more favoured position at the present time. The honourable member for Corangamite referred to Warrnambool. The honourable member for Parkes spoke about some of the activities in his own region. Even in states like my own, where dairying is more challenging than in states like Victoria, there are still many examples of very successful people who are doing new and innovative things. We ought to congratulate and encourage those people to achieve their objectives.

I would like to thank those members who have contributed to the debate. The government knows that there are many people in the dairy industry facing particularly difficult times, and it is prepared to do what it can to help them through those difficult times. I note that this bill has been supported by all speakers in spite of the free-ranging debate that has occurred on dairy issues. While it is only minor in nature, it will certainly help Dairy Australia in its ongoing management of the Dairy Structural Adjustment Fund and will ensure that the prudent and practical financial management of this fund continues for the benefit of the dairy industry and the Australian community.

I note that the shadow minister commented that we should have thought of all these things at the time the legislation was first introduced. What he neglected to recognise is that we have moved on a long way with the Dairy Structural Adjustment Fund and its management since the original legislation came into parliament in 2000. We no longer maintain a large staff to run this operation because its functions are now somewhat limited, so its activities are essentially being absorbed into the operations of Dairy Australia. Circumstances have now arisen which could not have been contemplated when the arrangements were originally put in place, so we need to address those circumstances, and that is what this legislation does. It indemnifies the directors of Dairy Australia against any liabilities arising from keeping and administering the Dairy Structural Adjustment Fund to ensure that there is no personal risk to the directors in undertaking this important service for the dairy industry.

The amendments address Dairy Australia's ability to enter into and to perform financial accommodation arrangements by specifying the financial activities the company can undertake in relation to the Dairy Structural Adjustment Fund. Specifically, the amendments allow the company to borrow or raise money by dealing in securities hedged through currency contracts and to obtain credit. The amendments provide that the termination day for the dairy adjustment levy will not be declared until contractual arrangements, in all reasonable likelihood, have been paid out of the Dairy Structural Adjustment Fund. The amendments also broaden the definition of `an Australian deposit taking institution' to include the Reserve Bank, as is obviously appropriate. When enacted, these amendments will finalise the dairy industry statutory reform process. This process has been an extremely positive one for the industry. I trust that Dairy Australia will continue to provide excellent service to the dairy industry through its research, development and promotional activities.

This great Australian industry has certainly entered a new era—not without trials and tribulations, not without difficulties and not without real hardship for many in the industry. The nearly $2 billion structural adjustment package that has been put in place, as the honourable member for Corangamite rightly acknowledged, is the biggest single adjustment package ever put in place for an Australian agricultural industry. The industry undertook major change and it did that under the guidance and extraordinary leadership of people like Pat Rowley, who could see what was happening, who knew that there would be difficulties but who took the courageous decision that the industry needs to embrace the new world as it actually is and get on with the task of building an industry that is well equipped to meet the challenges of the future.

I commend the bill to the House. I thank all members who have contributed to the debate and I wish the dairy industry every success in the years ahead.

Question agreed to.

Bill read a second time.