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Monday, 14 September 2009
Page: 9547


Dr STONE (7:26 PM) —The dairy industry is, without doubt, in crisis. An extraordinary overlapping of terrible events has meant that for the first time in 30 years we are seeing prices so low that dairy farmers are right now saying it is just too hard to continue. We have had drought in the southern Murray-Darling Basin and northern Victoria for seven years. We have had the global contraction of credit as a result of the global recession and so the contraction of demand for dairy product. That came on top of a scare in relation to contamination of milk powder in China. Put all that together and we saw the doors to our export industry slam shut some six to eight months ago.

On top of those hard-enough-to-deal-with factors, we have federal and state government policies creating the destruction of the irrigation infrastructure of northern Victoria and southern New South Wales. The economies of scale of production which are needed to sustain dairy manufacturing depend on drought proofing. In some parts of Australia, there has been high rainfall. In most parts of Australia where milk is produced for dairy manufacturing, that production has been sustained over the last 100 years through low-energy, gravity fed irrigation. Unfortunately, through this government’s policies, we are seeing irrigators forced to sell out at prices offered by a federal government with very deep pockets when their lenders say to them: ‘You are in debt. The drought continues. You can leave right now or you can sell some of your water and hang on a little while longer and maybe it will rain.’ The problem with that scenario is that, once you have sold your water, if you are in the Goulburn Valley, the Murray Valley or the Loddon Valley—the homeland of dairy manufacturing in Australia—it is all over; you cannot afford to repurchase water and, with the loss of the security of supply and the contraction of the numbers of dairy farmers in the region, your own dairy manufacturing factories are looking very closely at whether it is a good idea to remain in the region.

You can imagine the distress of dairy farmers when they saw the Rudd Labor government bail out the multinational car industry with nearly $6 billion and the ailing retail sector primed with another $4 billion before Christmas. We have also seen this Labor government look very kindly towards textiles, clothing and footwear. All of these industry sectors have for years battled to be classed as internationally competitive, but these particular industry sectors were handed billions of dollars to stay afloat.

On the other hand we have the dairy industry—the manufacturing or export oriented dairy industry. It has been an industry that has held its head up despite no subsidy for generations. It generates, in fact, billions of dollars—$4.6 billion value at the farm gate and $11.5 billion annually of wholesale value to the economy. The export industry alone contributes $2.9 billion to the economy. Between 30,000 and 40,000 jobs are dependent on the dairy industry. The economic regional multiplier of the dairy industry is estimated to be 2.5. This is a major industry for Australia and it is one which has been world’s best in practice for generations. It is not like our automotive industry—a multinational-led industry that staggers from crisis to crisis; the dairy industry has been superb and supreme. Now is its time of make or break.

We have been appealing to the Minister for Agriculture, Fisheries and Forestry, Minister Burke, now for six months. He says he is very understanding and sympathetic. He has visited my electorate, he has visited other parts of the Murray-Darling Basin to look at the dairy sector, and he has had his advisers come to the region. What he has told them basically is: ‘You’re in a great amount of strife here. You should be sympathised with but, sorry, we are not about to give you a hand.’ What the dairy industry needs is the difference between the below-cost-of-production prices offered and a reasonable return so they can hang on for at least 18 months, when we hope the prices will come back with international credit better restored and international demand back where it used to be. We are looking at only about $74 million. That is all it would take to give a future to Australia’s export dairy manufacturing sector and to protect the jobs for all of those who are involved, not just in the dairy production itself, but in the transport sector associated with this industry, the food manufacturing sector, the research and development sector, and the commercial sector with the retailing that goes with all of this production.

Dairy milk powders were the biggest export by commodity volume and value out of Geelong for years, yet this Rudd Labor government has turned its back on the dairy industry. It is extraordinary to contemplate. What is the difference between keeping something like automotive, retail or the textile, clothing and footwear sectors afloat and the dairy industry? I am afraid some people simply say it is the way they vote. That should not be the way that this government deals with taxpayers’ funds and with retaining jobs in this economy.

Let me say, too, that we have the most appalling water policy now. We have the minister, Penny Wong, thinking that if she puts enough dollars on the table, buys enough water from desperate farmers—who are not willing to sell, who are being pressured by their lenders—she is doing a favour to the environment. We have even the environmentalists, or those who say they have green credentials, now alarmed and disturbed that this water buyback measure has done nothing for restoring wetlands. What it has done is strand the assets of the irrigation sector and drive some of our best performers as dairy producers out of business.

Let me give you an example of how perverse and extraordinary this whole business of the water buyback is for the dairy sector. Here I have from the Australian government Department of the Environment, Water, Heritage and the Arts an offer to buy the water entitlements, for them to be sold to the Commonwealth, under the Restoring the Balance in the Murray-Darling Basin program. The offer to these farmers, who were forced to put their water on the market, was for $2,400 per megalitre. The date of the offer is 26 February this year. Note: 26 February. We have in this case and so many like it not a word since that offer was made—or, rather, their offer was accepted.

The department recommends that this party get some accounting advice in relation to signing the contract. It is supposed to be a done deal. The government has said ‘here is $2,400 per megalitre; get out of business’. They do not even have the gumption or the values to say this particular dairy farmer is completely finished because he has not been able to sell his water to save even part of his herd.

This is the sort of thing our dairy farmers are facing. I have to tell you that it is an industry that has been world’s best practice. It is one that can continue to be world’s best practice and provide dairy food security for Australia ad infinitum, protecting the environment as it goes, building on its fantastic genetic values in its herds. Its human capital is the envy of the world and yet this government has turned its back on this industry. Only $74 million we are asking for—not $4 billion, not $6 billion—$74 million. The time is almost too late but not quite. If this government gets off its backside now we could have a dairy industry for the future.