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Monday, 13 February 2017
Page: 650

Dairy Industry

Mr Vasta

Thank you for your letter of 7 November 2016 about Petition PN0018, received by the Standing Committee on Petitions on the dairy industry.

Many Australians are concerned about the welfare of dairy farmers and the dairy industry, following Murray Goulburn and Fonterra's retrospective cuts to farm-gate milk prices late in the 2015-16 supply season. The Coalition Government is a strong supporter of dairy farmers and the dairy industry. There is no doubt the dairy industry is facing a turbulent time due to low world milk prices. This is a matter I take seriously. I am concerned for the personal and financial health of many hardworking farmers who are now making difficult family and business decisions.

I note the request for a 50 cent levy on the retail sale of fresh milk to assist dairy farmers through these tough times. During my consultations with dairy farmers and processors, it has been made clear that the industry would not support a return to regulated marketing and price controls. Processors are also concerned a levy on milk sales may have a severe detrimental impact on sales of processors' branded milk products, compared with sales of lower priced supermarket private label milk products. The government would not introduce measures that may have negative impacts on the long term viability of farmers or premium dairy brands.

The government is working hard to support dairy farmers and the dairy industry in several other ways. The government has implemented a $579 million support package to assist farmers manage through the current period and return to profitability. This package includes additional funding to ensure the Rural Financial Counselling Service is able to assist dairy farmers in need, and an extra $900 000 contribution to Dairy Australia to further roll out its Tactics for Tight Times programme to increase farm business management skills and business resilience.

I note that in 2009 when farm gate milk prices were lower than today, there was no assistance or support provided by the former Labor Government.

The Prime Minister, the Hon. Malcolm Turnbull MP, and I have met with the board of Murray Goulburn and Fonterra's Australian management and we discussed what steps these companies plan to take to support their suppliers manage through the current period of low milk prices. What these two companies do has a big impact on the industry. Since this time, both Murray Goulburn and Fonterra have announced minor 'step ups' in milk prices to be paid to their farmer suppliers. Whilst coming off a low base, these step ups will be welcomed by dairy farmers.

The Australian Competition and Consumer Commission (ACCC) is currently undertaking a detailed inquiry into the national dairy industry. The inquiry will investigate better sharing of risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry, and the effect of world and retail prices on profitability. The ACCC is also investigating the retrospective price cuts announced by Murray Goulburn and Fonterra in April and May 2016. This regulatory investigation will consider whether the processors have engaged in misleading, deceptive or unconscionable conduct under sections 18 and 21 of Schedule 2 of the Competition and Consumer Act 2010.

The Senate Economics References Committee is also conducting an inquiry into the Australian dairy industry. The inquiry seeks to establish a fair, long term solution to Australia's dairy crisis, with particular attention to the legality of retrospective elements of milk contracts, the behaviour of Murray Goulburn, and any other related matters.

In terms of the retail price of white milk in Australia, I have made clear my strong desire to see the major retailers and dairy processors bring to an end the retail strategy of marketing milk at $1 per litre. The $1 per litre price was set artificially by Coles to bring customers into their stores. At less than the cost of bottled water, this strategy is diminishing the perceived value of quality dairy products. Such strategies should not be underwritten by farmers.

I note that when the Standing Committee on Petitions has considered this response it will be presented in the House and be posted on the Committee's website.

Thank you for bringing this petition to my attention. I trust this information will be of assistance to you.

Yours sincerely

from The Deputy Prime Minister Barnaby Joyce