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Wednesday, 15 March 2000
Page: 12861


Senator FORSHAW (3:57 PM) —I rise to speak on the Dairy Industry Adjustment Bill 2000 and associated bills which are finally before the Senate. I say `finally' because today represents the point when we have to consider in this Senate legislation to give effect to the package plan developed by the Dairy Industry Council to take account of the effects of deregulation of the dairy industry from 1 July this year.

This legislation has been some time in the making. However, I have to say at the outset--and I will return to this later in my remarks--that we in the opposition and, I know, people in the industry and in the states are extremely concerned about the approach adopted by the federal government with respect to this most important issue.

The federal government knew, firstly, that from 1 July this year the Domestic Market Support Scheme—the DMS Scheme, as it is known—would cease to operate by virtue of legislation that had been carried some years ago; and, secondly, that the move to deregulation was inevitable. They had known that for some time--for at least the last year or more. But the Minister for Agriculture, Fisheries and Forestry sat on his hands and did virtually nothing to try to draw together all of the various interests in the industry and the states to bring about an orderly process of deregulation of the dairy industry so that those affected right across the board would be able to cope with that situation.

In October last year, the Senate Rural and Regional Affairs and Transport References Committee handed down its extensive report on deregulation of the Australian dairy industry. This report followed the committee's lengthy inquiry into the likely deregulation of the dairy industry and the plans by the Dairy Industry Council to cope with that situation. The committee has been complimented across the political spectrum from all sides and, indeed, it has been acknowledged by the industry itself and by the various parliaments that the report we issued on that occasion was of invaluable assistance in considering the complex problems and complex issues arising out of deregulation.

We highlighted when debating that unanimous report of the committee our concerns about this government's lax attitude to, and its failure to take a leadership role in, this most important question. I do not need to go over all of that again today, and time does not permit. But, since that report was handed down, we have seen a continuing failure by the government to grab the reins of this issue until the very last possible moment and try to bring about an orderly process of deregulation.

At that time, the industry and the parliament were faced with a situation where the previous Victorian government under Mr Kennett had indicated it would deregulate come hell or high water, if I can use that metaphor for the dairy industry. That, of course, would inevitably—as we found—lead to deregulation in other states. The new Labor government in Victoria decided to consult the dairy farmers in that state as to whether or not they wanted to deregulate. The farmers in that state voted overwhelmingly in favour of deregulation, and that occurred just before Christmas last year. Since that time, the other state governments, particularly in New South Wales and Queensland, have recognised that, given that position in Victoria and given the end of the DMS Scheme, deregulation would have to occur. It has really been only in the last couple of months that the government finally understood how urgent it was to get an agreed process in all states across this industry.

It was only a few weeks ago that the federal minister and the state ministers finally reached agreement on some of these important issues. That is why in the last sitting week before this scheme is due to commence operation—from 1 April this year—we are here today dealing with this legislation. This is legislation that should have been on the table months ago.

Further to that, as we noted in our legislation committee report on the bill itself that was handed down today, we really only had a chance to look at this complex and detailed legislation in the last two weeks. Indeed, we were still sitting as a committee on Monday and we had to sit again last night to get more information in respect of this legislation.


Senator Murray —We still haven't got it all.


Senator FORSHAW —We do not have it all. All we have received in respect of the ministerial orders that will be attached to this legislation where the detail of how this scheme will operate is drafting instructions. We wanted to see those ministerial orders because the devil will be in the detail.

As we also know, it was only yesterday that we were apprised of the very late decision of the government to finally acknowledge one of the concerns that we raised in our report back in October last year of the need for assistance for those regions that would be affected by deregulation. I understand that the minister and the parliamentary secretary will be enlightening us on that, hopefully, shortly. We have pressed that issue about assistance for regions affected time and time again.

So we find ourselves here today having to debate this legislation because we have to get it through this parliament if this scheme is to be introduced from 1 April. It has to be done hurriedly and in such a short space of time. I know that many members of this Senate would like to have had more time to consider the implications of all that is contained in this plan. This is the biggest single adjustment package or compensation package—as I think probably more correctly describes it—that has ever come before this parliament with respect to an industry. This is a package which comprises $1.8 million of assistance to be paid over the next eight years to people affected by deregulation. That is a huge amount of money. As we know, that $1.8 billion is going to be raised by the imposition of a new tax--called a levy but, in effect, a tax—on consumers of milk of 11c per litre, and that will continue to exist for the next eight years to fund this package.

Time does not permit me to go into all of the complex arrangements as to how this package will operate. But so people understand what we are talking about I want to say that as a result of deregulation—such as the abolition of the quota in quota states and the deregulation of the market milk sector of the industry—dairy farmers will no longer receive a guaranteed price for milk. Competition in the market will take the place of the regulated system we have had for some time. That will inevitably mean that the income from milk producers will fall as a result of there no longer being a guaranteed payment in respect of market milk and manufacturing milk. The manufacturing milk sector has for a number of years had the payment through the DMS Scheme. As I said, that will cease to operate from 1 July.

In order to assist dairy farmers to cope with that adjustment, that significant drop in income, this package has been put together and payments to people who have an entitlement will be made out of that fund, as I said, on a continuing basis over the next eight years. In effect, it is an income supplement or a payment to compensate, using my words, for that reduction in income, but funded by the consumers through that levy.

Whilst it is said that deregulation will lead to lower milk prices for the consumer, thus offsetting somewhat the 11c per litre levy, we have no guarantee that that will occur. Previous deregulation in the industry has not necessarily led to reduced milk prices. In fact, if you ask any consumer of milk over the last few years, they will tell you that the price has gone only one way and that is up, notwithstanding deregulation in other parts of the industry beyond the farm gate. As I said, the legislation for this scheme is very detailed and very complex. We are not able to go into all of that detail in speeches on the second reading, but it is set out very well in the committee's report of last October and also in the material provided by the Department of the Parliamentary Library.

There are a number of points I want to make today and I will be moving a second reading amendment, which has been circulated and which, whilst indicating that the opposition does not oppose the passage of this bill, nevertheless condemns the government on a number of counts. The first point I want to make is: it is still not clear just who will be the winners and losers out of this package. What we do know is that a range of situations are likely to arise where, for instance, lessors—owners of dairy farms who lease their property to others to carry on the milking enterprise—could well find themselves severely affected, firstly, through a drop in the value of their property, because the income that can be earned from the dairy enterprise is no longer guaranteed through regulation, and, secondly, because the leaseholder in certain circumstances would qualify for the majority of the entitlement of the package. We have sought to clarify this, but it still has not really been clarified.

What we do know is that there can be situations where such leaseholders may take the money and leave the industry and continue to receive that payment over the next eight years. We are concerned that that could lead to some serious inequities arising where the owner of the enterprise—the person who has put up a lot of the capital and years of hard work and investment into that property—because they do not technically qualify for the entitlement because they were not the person or the entity receiving the income from the dairy, will nevertheless be seriously affected. This is an issue that has come to light only in more recent times. To be fair to the department, when we questioned them about it they said, `Yes, this can occur. But the scheme is not designed to attach the entitlement to the property or to compensate for changes in capital value; it is directed to the effects of lost income.'

We also note that one winner out of this package is the federal government. Originally the package was $1.3 billion. It has now been increased to $1.8 billion approximately, and the additional $500 million has been added essentially so that the government can continue to collect tax on the entitlement—in other words, the government is not going to miss out. Those who receive the entitlement will pay tax. That is fair enough, one could say. But this federal government, whichever way it goes—whoever the winners and losers in this industry will be, and I am not too sure that there will be too many winners—is one group that will not miss out through deregulation. It will continue to ensure that it receives its tax revenue.

There are many other points that I could make, and we may get to those in the committee stage. We are also concerned that no real work has been done, as I said, on the impact on regions. We pointed to a study during our inquiry last year that had been conducted in the Bega district. We have called for the government to promote an investigation of the real impact upon regions and on regional communities. It is not just the dairy farmers that will be affected by deregulation; it will be entire communities, whether they be employees on dairy farms or businesses in towns that depend upon the income derived from that industry. I move:

At the end of the motion add “but that the Senate, whilst supportive of Australia's dairy industry, condemns the Government for:

(a) seeking to push this important bill through the Parliament at the latest possible time, given that it has had the industry package in its hands since April 1999 and endorsed it in September 1999;

(b) failing to articulate a clear vision for the future of the dairy industry;

(c) failing to carry out a proper assessment of the likely impact of deregulation on dairying regions;

(d) imposing a new tax on milk;

(e) failing to make any provision to assist workers in the dairy industry who may lose their jobs as a result of deregulation;

(f) failing to assist in the re-training of farmers and others displaced as a result of deregulation;

(g) failing to include measures specifically aimed at encouraging investment in new plant and equipment, either on farm or beyond;

(h) failing to include measures aimed at opening up and expanding overseas markets;

(i) failing to include a research and development component within the package;

(j) poor targeting of assistance to farmers;

(k) failing to develop an adequate mechanism to ensure that consumers benefit from any fall in the price farmers receive for milk, in the face of price increases that have accompanied the removal of state-based regulatory arrangements in the past; and

(l) failing to ensure an equitable distribution of the package among all those involved in the dairy industry, and particularly between lessors and lessees”.

In conclusion, I want to thank all of those people that have made representations to our committee on this issue over many months. It is a complex and difficult issue. I believe that those representations from right across the industry have certainly assisted us in developing our approach to this legislation. Finally, whilst we support the implementation of this package because it has essentially been developed by the industry, we have reservations about many aspects of it. We can only await how it operates in practice over the following months and years, and I feel sure that we will be back in this parliament having to review parts of it. (Time expired)