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Tuesday, 14 October 2008
Page: 9075


Mr CHESTER (5:49 PM) —It is with great pleasure that I rise to speak in relation to the Dairy Adjustment Levy Termination Bill 2008. The bill finalises the Dairy Industry Adjustment Program by terminating the dairy adjustment levy, winding up the Dairy Structural Adjustment Fund and terminating the Dairy Adjustment Authority, and I join the previous speaker in commending the staff of the authority and others who have been directly involved in the deregulation process.

I take this opportunity to refer to the deregulation of the dairy industry and the future of the industry in my electorate of Gippsland. Deregulation of the Australian dairy market involved the removal of price support mechanisms. As the minister noted in his second reading speech, the dairy adjustment levy was developed to help farmers adjust to the removal of state and Commonwealth price support measures. These measures resulted in payments to about 13,000 individual dairy businesses to assist in the transition process.

In relation to the 11c per litre levy which will be removed under this bill, there is an obvious need for those savings to be passed on to consumers. I urge vigilance at the checkouts—Australian mums and dads should be 11c per litre better off when the milk levy is removed, and I support the previous speaker in his remarks on this subject.

Regarding the dairy deregulation itself, according to a report prepared by economist David Harris with support from the Rural Industries Research and Development Corporation, the farm level adjustment mostly occurred in the first two years of the deregulated market. A number of farmers left the industry—some older farmers retired, some switched into alternative farm products and others found jobs outside agriculture. But Mr Harris reported:

… the impact on industry output was limited as the remaining farmers adapted to the new market conditions by improving the productive performance of their dairy enterprise. In general the response was to increase farm output - deregulation created growth opportunities for individuals in the fluid milk sector.

Some reacted by expanding herds and increasing land areas. But most made changes to improve the physical performance of their farms - greater carrying capacity, improved pasture management and increased milk yields.

The overnight policy change made the full impact transparent. It sharpened the incentive for farmers to make decisions about their future. It helped to speed up gains in per farm performance that typically flow from policy reforms.

I believe that the dairy industry has adapted to the changed operating environment. I am informed by Dairy Australia that there are now about 8,000 dairy farms and 1.8 million dairy cows in Australia, producing 9.1 billion litres of milk annually. This makes dairying Australia’s third largest rural industry, with a farm-gate value of $4.4 billion. It is important to keep in mind that Australia is a significant dairy exporter and accounts for about 11 per cent of total world trade, ranked third behind New Zealand and the European Union.

The dairy industry in Gippsland has adapted also to the deregulation in the industry. We can become a bit blase about facts and figures but, in the case of the Gippsland dairy industry, they are quite impressive numbers. The industry has about 1,750 dairy farmers and produces about 1.9 billion litres of milk annually, making dairying the biggest agricultural contributor to the Gippsland economy. The value of dairy product exports from my region is estimated to be about $665 million and the industry directly employs over 4,000 people, with a further 3,250 in the processing sector.

That is the picture of Gippsland on the broader scale. The dairy industry in the seat of Gippsland itself is concentrated mainly in the Macalister Irrigation District, which I will refer to more extensively later on. This is the largest irrigation area south of the Great Dividing Range. There are some other substantial dairy interests in the neighbouring seat of McMillan, but I will leave it to Mr Broadbent to extol the virtues of the dairy industry in his own region. Suffice it to say that the South Gippsland and Central Gippsland dairy farmers are among the most productive and efficient in the world. That is a description that easily fits the farmers in the Macalister Irrigation District. They are world-class producers and they are producing a world-class product.

By way of history, as far back as the 1840s, the region was recognised by early white settlers as offering productive and valuable grazing land. But the early settlers were exposed, unfortunately, to the vagaries of the weather patterns and rivers that would flood or run dry with the seasons. Even last year, we witnessed two major floods which had significant impact in the MID and caused enormous damage to natural assets and manmade infrastructure. In the early 1900s, a study was made of possible storage sites within the area of the Macalister River, which led to the construction of the Glenmaggie Dam. Although that is not a large storage, the Glenmaggie Dam has a capacity of about 190,000 megalitres, which, again, has been reduced following the sediment run-off related to the flood events I have just mentioned. The MID is a gravity irrigation system and relies on the capacity of the system infrastructure to generate sufficient pressure to move the water from Glenmaggie, Cowwarr and Maffra weirs through the channel system to the farmer.

That brings me to the point of my comments here today and the future of the dairy industry in my region, post the deregulation era. Water security is one of the absolutely critical issues facing dairy farmers. We have an ageing infrastructure network which does not come close to meeting current best practice around the world, and I will comment a little further on that in a few moments. But, as I have said, the dairy industry is really big business in Gippsland. In the Wellington shire, a more defined area of my electorate, milk production in 2005-06 was valued at over $181 million, an average of about $480,000 per day. The shire has 477 dairy farms, of which 380 are located in the Macalister Irrigation District. The Murray Goulburn Co-operative is located in Maffra. The Murray Goulburn Co-operative was formed in 1950 and is now the largest processor of milk in Australia, processing over 35 per cent of the nation’s milk.

Post deregulation of the dairy industry, the MID is well placed to continue to be one of our nation’s great food bowls, but it will require further investment, both private and public, particularly in the area of water security. If we accept that our climate is becoming more variable—and the prolonged drought in Gippsland continues to make things very difficult for a lot of my farmers—then we must use water in the most efficient manner possible. As I informed the House this week, large parts of Gippsland remain drought affected, but the irrigated areas of the MID are in better shape than the rest of the electorate. For all intents and purposes, the Glenmaggie Weir is full and our dairy farmers are in good shape to capitalise on the situation this year.

Looking to the future, the dairy industry is faced with ageing infrastructure, as I just mentioned, and an inefficient irrigation system. While the perilous state of the Murray-Darling Basin has quite justifiably made the headlines, when we are talking about our nation’s food security and export opportunities, the irrigation infrastructure in the MID should not be ignored. The plans to provide billions of dollars in assistance for upgrades to irrigation infrastructure in the Murray-Darling Basin have widespread support. But there will also be a need in the future to provide funding for irrigation infrastructure upgrades in the Macalister Irrigation District. I can inform the House that a plan is already well advanced, having been out for about 12 months now. The MID 2030 strategy was released in September last year. I quote from the executive summary by Jan Greig, the Chair of Southern Rural Water:

The strategy takes advantage of the abundant potential of the Macalister Irrigation District (MID). The irrigation area has good soils, good drainage, excellent quality water and substantial water resources—all the fundamentals for sustainable irrigation systems.

The time is right for a review of the MID’s future. The supply system is out of date and inefficient. Drought and the concern of climate change provide a push for improved water efficiency both in the supply system and on-farm. The alignment of Government, a willing Board, along with the ongoing commercial imperatives for irrigators, make this major planning effort timely.

The upgrades to the supply and drain system, contained within the strategy, give confidence about a more certain and productive future of the MID. The major SRW infrastructure upgrades will markedly increase both water delivery efficiency and customer service levels. These improvements will remove long standing system barriers to on-farm investment.

Further, the clear support for ‘closed irrigation’—ensuring no runoff of excess irrigation during the irrigation period—promotes both on-farm improvements and reduces nutrient export from farms into rivers and the Gippsland Lakes.

On that last point, I must emphasise the efforts by the dairy industry in Gippsland to support the broader community efforts to reduce nutrient flows into the Gippsland Lakes. Reports by the CSIRO commissioned by the Gippsland Coastal Board have found that the MID is a major source of nutrients into the Gippsland Lakes system. The high nutrient load entering the lakes system is blamed for algal blooms, which are both unsightly and potentially detrimental to the health of humans and a variety of marine species. Reducing the flow of nutrients from farms in the MID into local streams and further into the Gippsland Lakes is an issue of critical importance to both the dairy industry and the tourism industry.

For those not familiar with the lakes, I will take the time to describe them. They are a vast network of coastal lagoons which feature world recognised wetlands. The lakes and rivers are the tourism icons of Gippsland and they are heavily impacted by activities in the catchment. They are perhaps only second to the coastline represented by the member for Eden-Monaro. Protecting the health of the Gippsland Lakes is critical to the social, cultural, economic and environmental aspirations and lifestyles of Gippslanders. I make that point today because of the strong link between the future of the dairy industry in the MID and the Gippsland Lakes themselves. I admit that that link may not appear obvious to those who do not know the geography of my region that well, but I will attempt to make it clearer.

Reducing the flow of nutrients from both private and public land into the lakes system is the focus of work by the Gippsland Coastal Board. The dairy farmers in the MID have worked in partnership with the board to fund projects like whole-of-farm management plans, effluent re-use and reduction initiatives and better irrigation management, including the adoption of spray systems and re-use initiatives. For every dollar of government investment that we have seen in the MID, the dairy farmers have put their hands in their own pockets and poured a substantial amount of cash into the improvements on-farm because they recognise the environmental imperative, and there are certainly very good economic reasons for running their properties in this very efficient manner.

The future of dairy farming in the MID will involve more partnership projects such as this, efficiently using the water resource and managing the effluent waste products. The state government for its part has contributed to the nutrient reduction projects since 2002, albeit with a reduced commitment from 2006 to 2009. I am hopeful that the funding round from 2009 onwards will be more generous and will recognise the severity of the situation we are facing with nutrient run-off and algal blooms in the Gippsland Lakes. This is one of the most critical issues facing the electorate of Gippsland, and I take the opportunity today to raise it in the context of the future the dairy industry will play in reducing those nutrient run-offs. As I said, some good work has started on farm and in areas of public land, but there is much more to be done.

That brings me to the federal government’s commitments through the announcements made by the Minister for Agriculture, Fisheries and Forestry. I say at the outset that I am grateful for the minister’s visits to the Gippsland electorate during the by-election. I am sure he had other motives in mind, but I am still grateful for his visits and his firsthand inspection of both our fishery industry and our agricultural sector. I certainly take the opportunity to invite him back in the future. But, unfortunately, I believe the federal government is dragging its heels and has failed to deliver any of the promised $3 million in funding for water quality improvements in the Gippsland Lakes and catchment.

On the one hand it is very pleasing that the $3 million has been promised, but on the other hand it is disappointing that work has not started on the ground in Gippsland. The minister has, as I said, visited on several occasions, but unfortunately there have been the same announcements in relation to that $3 million for the Gippsland Lakes nutrient reduction work. There is much to be done in terms of practical environmental projects associated with the dairy industry in the Macalister Irrigation District. The Gippsland Coastal Board has publicly announced in the past week that sections of the Gippsland Lakes are still mildly affected by the algal bloom that had a severe impact on recreational activities last summer, so the need is both urgent and pressing.

We accept that there are some long-term issues—they are not going to be solved overnight—but we would love to see the money starting to flow in Gippsland. There is no risk to human health with the type of algal bloom that we have experienced over the past summer, lingering on into this winter period and now into spring. The lakes can still be enjoyed, but it is vital that we get on top of the water quality issues that are affecting both the lakes and the catchment itself. I believe the Gippsland Lakes should be regarded as the Great Barrier Reef of the south. They are that important to the economic prosperity of my region. They are world renowned wetlands and they are critical to the social, economic, cultural and environmental life of Gippslanders.

I have also been calling for a locally based research facility to overcome the knowledge gaps that we have in relation to this synechoccus algal bloom which we are experiencing at the moment. We need to investigate these algal blooms and the broader water quality monitoring issues along with increased funding for practical projects to reduce the amount of nutrients entering the lakes from private and public land.

Returning specifically to the dairy industry in the era post deregulation, being seen as good environmental custodians is critical to the future of the industry in Gippsland. It is here where the MID 2030 strategy is a great plan for our region. The strategy involves a total cost of $116 million in infrastructure works and would deliver an estimated water saving of 37,400 megalitres. I quote again from the strategy:

The MID can transform itself from a supply system with one of the lowest industry efficiencies to one with an efficiency of 85% for its channels and 95% efficiency for its pipelines.

Eliminating losses from the supply system and closed irrigation practice on farm means that most of the time, there will be zero flow in the drains. There will be a significant decrease in the export of nutrients and other pollutants from the MID, resulting in improved water quality for the downstream rivers and lakes.

Local rivers will have flow patterns that support their improved condition and the external environmental impacts will be minimised.

This project is a win-win for Gippslanders and the broader Australian community. There are significant environmental benefits to be achieved and increased productivity on offer for our dairy sector. It is estimated that the average annual nutrient export to the Gippsland Lakes can be reduced from over 40 tonnes of phosphorous per year to 10 tonnes per year through this project. Naturally, there are some questions about how the work can be funded and I take the opportunity to invite the Minister for Agriculture, Fisheries and Forestry to return to Gippsland to, once again, get this $3 million of funding flowing and also to discuss the opportunities under the MID 2030 strategy. It is my belief that such a significant investment, in the order of $116 million, will not occur without significant federal government or state government funding support. Indeed, there are many precedents of both state and federal governments investing in water-saving projects of this nature.

I understand that feedback from MID customers indicates that they are interested in exploring the benefits of funding the whole strategy themselves compared to the benefits of a joint funding arrangement with either governments, but I doubt that this will eventuate and believe it is more likely that an arrangement such as the 80-20 model is more appropriate in the prevailing circumstances in Gippsland. Under such a model we would see governments contributing 80 per cent of the investment and customers sharing 20 per cent of the investment through increased supply charges. There would then be a situation of equal sharing of the water savings—again providing environmental benefits to local streams and the Gippsland Lakes, which I have already mentioned.

In closing, I thank the House for the opportunity to raise these important issues in relation to the dairy industry in the era post deregulation. I hope I have not strayed too much from the topic at hand. The dairy industry in Gippsland has adapted to the changing operating environment and has become more productive and more innovative over the years. It certainly would be remiss of me on this occasion to not mention the Macalister Demonstration Farm in the context of innovation and increased productivity in the dairy industry. The demonstration farm seeks to demonstrate best practice management through practical research and projects. The farm is located at Riverslea, near Maffra, and it aims to test and demonstrate improved farming practices in collaboration with a large team of farmers and service providers for the benefit of the entire dairy industry.

If the minister does make it back to Gippsland, I would certainly encourage him to visit the Macalister Demonstration Farm. I will hopefully be on hand with him and we can present the demonstration farm with a cheque for ongoing activities. As we would all appreciate, there is a constant need for funding for these types of research activities. The dairy farmers in the MID have themselves made an enormous contribution to the Macalister Demonstration Farm, and we would certainly appreciate ongoing federal support in the future. Just this week, the farm released details of a subsurface irrigation system that it is trialling at the moment. It is just another way of delivering high-quality water efficiency and a further demonstration of the dairy industry’s willingness in Gippsland to invest with confidence into the future.

I do not oppose the bill before the House. I commend the Gippsland dairy industry for its ongoing contribution to our nation. Once again, I also commend the staff of the authority and all those who have been directly involved in the deregulation process.