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Wednesday, 15 March 2000
Page: 12874


Senator McGAURAN (5:14 PM) —I wish to make some brief comments on the Dairy Industry Adjustment Bill 2000 that is before the Senate. I would have thought those final comments by Senator O'Brien were somewhat of an argument not to have deregulation. The government cannot be criticised for their timing of this legislation. We have done everything right. To say that the government have not consulted with the industry is wrong. The industry has been in constant consultation with the current Minister for Agriculture, Fisheries and Forestry, Mr Truss, and with Minister Vaile before him. There have been doors opening and shutting on this issue for the past 12 months. The fact that the legislation will pass through the Senate this evening—that is, in March—and deregulation occurs on 3 July will mean that there is plenty of time to put the package in place and prepare for deregulation.

What we have before us is the largest package of compensation or restructure—whatever you want to call it—in the history of primary industry. This is the largest deregulation in primary industry history. It would dwarf any of the former deregulations in the tobacco industry, the citrus industry or the pig industry. It is worthy that this package matches the size of the industry. It is perhaps the largest and last. It would probably match the wool industry deregulation when the floor price scheme was abolished. The wool industry, regrettably, received no compensation, no adjustment package, when those opposite were in government. It was a disgraceful effort that the industry is still suffering from. There was no thought given to an adjustment package at that time. This government has in place the largest adjustment package in primary industry history.

Perhaps we have learnt the lessons of the past. One thing wrong with the winds of deregulation that have run through primary industries over the last 15 to 20 years is that governments present and past and parliaments present and past have not had a sufficient adjustment, safety net package in place for the rural sector to meet those changes. I particularly point out the citrus industry. It did not have the sort of adjustment package it should have had when those opposite were in government. That is something I have always thought about. The pig industry did, because we were in government and increased their package.

The point is that this package should not be criticised but be praised, Senator Forshaw. It is a package of $1.74 billion. It tips over the $2 billion mark with the recent announcement by the minister that there will be a $45 million Dairy Community Assistance Program on top of the $1.7 billion package. Funding will be delivered through the federal government's Regional Assistance Program and will assist dairy communities with new industry development and adjustment programs. The funds will be raised through the eight-year 11c levy on milk prices. The funding will be available for seeding new industries, supporting counselling services and retaining community infrastructure. It will go to the estimated 15 regional communities most affected by this deregulation.

It needs to be said that we are dealing not only with one of the largest primary industries in Australia but also with an efficient industry. Over the last 20 years this industry has gone through adjustment and great change. It has had to keep pace with technology, with rising costs and with very static returns. There has already been a reduction in the number of dairy farms. I believe it has declined from some 30,000 in 1974 to 14,000 in the year 2000. Herd sizes have increased from an average of 77 in 1975 to around 150 in 1998. Of significance are improved herd genetics as well as the advances in pastoral management and supplementary feeding regimes which have seen the average annual yield per cow increase.

This is already a very efficient industry. So it would beg the question, as the infuriated Senator Woodley asked: why are we deregulating? Why would you tamper with such an efficient industry? That was a question I asked also, and I am from the state of Victoria. Why would you tamper with an efficient industry and an industry that epitomises so much the family farm? There is no other primary industry that is made up so much of family farms, which are efficient, economic and social units. It is where my party started from. It was the dairy industry in Victoria which created the Country Party in 1920.

The answer to that question lies with the industry in Victoria. There is no question about it: this is a Victorian driven issue. I do not think the other states, least of all Queensland, and the dairy farmers in Bega, want deregulation. It has been thrust upon them by the Victorian industry, as pronounced by the industry body, the UDV. They were out there some time ago pushing the virtues of deregulation because they felt the Victorian industry was very much restricted. It was only able to produce seven per cent of the market milk. In a nutshell, they wanted to be able to cross the border into the very lucrative Sydney market.

With the Commonwealth domestic market support scheme terminating in July 2000, and with obligations with regard to national competition, they felt it was time to act. During Doug Anthony's time, we saw a push by the Victorian industry to cross the border into the lucrative Sydney market. That has been halted. This time it looks like it is really going to happen. The atmosphere and the economy have changed. The UDV, which represents the Victorian dairy farmers, has now decided that deregulation is on the cards. It has now become inevitable. You can argue about the question, but the result of the referendum that went around the Victorian farmers was a unanimous yes for deregulation.

The two Victorian state governments—the previous Liberal-National Party state government and the existing Labor state government—you would have to say support deregulation. So that is a pretty convincing case for all those who may have been sceptics and for all those who will not accept that deregulation will be beneficial for the industry as a whole, and I would have to say to Senator Woodley that that is a pretty convincing case for why deregulation has become inevitable.

But there will be a social cost, and that is even recognised in the explanatory memorandum. We know there will be a social cost, no less than across the border in New South Wales in the Bega Valley, where they could lose as many as 30 per cent of their dairy farmers. In Victoria, over a certain time that we are not sure of—perhaps five years—as many as 2,000 farmers could exit the industry. That is exactly why we have this package in place. This package's broad regulatory objective is to facilitate and coordinate a very orderly adjustment in the dairy industry so as to maximise the long-term benefits of deregulation while minimising the very short-term costs that will be brought about, such as through the many farmers exiting the industry and facing income reductions.

The payments to farmers are to be administered by an independent statutory body known as the Dairy Adjustment Authority. This authority will receive administrative support from the Dairy Corporation but retain full independence in its decision making and accountability. A key feature of the adjustment package is that it will be funded from a Commonwealth levy on sales of liquid milk products over a target period of up to eight years. The levy is to be imposed at retail with collection by milk processors. Full deregulation is expected to initially result in significant reductions in farm incomes, with some consequential level of industry dislocation.

The key stakeholders likely to be affected by deregulation are the farmers. ABARE estimate that the impact of deregulation would be an average annual per farm fall in income of $28,000. So the package is designed to assist farmers to adjust to this fall in income and, in doing so, secure the long-term benefits of deregulation. It is estimated that in my own state of Victoria the package will on average pay $95,000, while in Western Australia it is expected to average $240,000.

While the farmers are winners and losers in this, the manufacturers and processors are the winners, I would think. That is why they have been very much at the forefront of pushing deregulation, although a little too much. I must say that one of the things that came out of this that I was surprised at—and perhaps I should have known, but I confess my ignorance—was that the federal body that represents the dairy farmers, the farm gate, is actually made up not just of farmer representatives but of processors. I would have thought, particularly on this issue, that there was a conflict of interest.

At our last committee hearing, when we were discussing the intricacies of this particular package, the nuts and bolts of it, no less than the issue of lessors and lessees, we had before us not a representative of the dairy industry--far from it--but a representative of the cooperatives, Mr Hughes. I would have thought they could have at least found a dairy farmer representative to come before us. I recognise Mr Hughes in the gallery, but I have to make that point. I would have thought the ADIC should have a greater representative of dairy farmers or there should be a separate dairy farmer federal body.

As explained in the explanatory memorandum, there will be a shift of income towards the manufacturers and the processors. In regard to the wholesalers and retailers, the explanatory memorandum states:

It is anticipated that wholesalers and retailers will benefit from the flow on effects of lower input prices for liquid milk products and, with the abolition of the manufacturing milk levy, lower prices for dairy products.

As for the consumers in all of this, that is going to be a very long-term benefit, but the explanatory memorandum states:

Accordingly, it is believed deregulation will eventually provide substantive benefits to consumers.

All in all, the legislation before us is timely, it is hugely significant and it is the largest package ever in primary industry. It is to be supported, and I support the legislation.