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Wednesday, 15 March 2000
Page: 12876


Senator TROETH (Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry) (5:28 PM) —The state agriculture ministers agreed in principle on 3 March last to remove milk pricing arrangements from 1 July 2000. That means that the deregulation of dairy farm gate pricing arrangements will now take place. This government has responded to the likelihood of deregulation by proposing an adjustment package which will assist dairy farmers to respond to the sudden and significant changes ahead in an orderly way which will minimise hardship and provide exit opportunities for those farmers wishing to leave agriculture.

Before I go on to make a few remarks about what we are providing through that package, I would like to briefly comment on some of the remarks made by other senators. Senator O'Brien and Senator Forshaw made some castigating remarks about the intention of the government and how we should have moved much earlier to do this and how we have moved to do this. I would like to remind those two senators that the intention of the government is to give industry control of its own affairs, as we have done with the meat industry and as we have done with the wheat industry. I believe the dairy industry is to be commended in this case for the leadership it has shown, and I would like to recognise those dairy industry leaders who are present with us today.

They have been very instrumental in educating their members of the need for this package, highlighting its advantages and constantly communicating with the government about the way the package is to operate. As I have said, I would like to commend them for the leadership that they have shown. But for Senator O'Brien to say that the government has not shown any leadership is a misinterpretation of leadership. The government's role in determining industry policy has not been to tell industry what to do. Rather, it has been to facilitate the process, to listen to industry, to hear what it had to say and then to put into place a workable operation which would provide industry with what it needs. We believe that that is what has happened.

The dairy industry adjustment package is a total cost of $1.74 billion, and it will provide a dairy structural adjustment payment worth a total of $1.63 billion to help farmers adjust to the new market, paid in 32 instalments over eight years. Those payments, available to eligible persons involved in dairying on 28 September 1999, will provide significant assistance to both individuals and regions that are dependent on dairying. Not only that, we have a Dairy Exit Program worth $30 million which will provide a tax-free grant of up to $45,000 for those eligible producers who wish to exit agriculture and an 11c per litre dairy adjustment levy on drinking milk products to fund the Dairy Industry Adjustment Program.

In the development of this package, a number of issues have been raised both by industry representatives and the broader dairy community. One thing is very clear, however: if deregulation occurs, this adjustment package will be vital to maintaining the continuing growth of the Australian dairy industry overall, but it will also assist individual producers to respond to deregulation. This is an adjustment package. It is not intended to compensate for the removal of regulated arrangements or to provide income support. As I said, it will assist producers to adjust to the changing circumstances with dignity and in an orderly fashion, improve industry performance and, in turn, maintain and increase job opportunities and incomes in regional dairy areas.

In relation to any compensation issues, it is the government's clear view that it is now up to the states to address issues that are the direct consequence of states removing farm gate pricing arrangements, and that includes quota compensation. The package addresses issues which have been brought about largely through the existence of state market milk arrangements, and it is up to the states to provide additional input if they see it is necessary. The government is conscious that the Commonwealth's taxing powers will contribute all the funds towards assisting the industry to adjust to the removal of state arrangements while the states will receive national competition policy payment for their dairy reforms.

However, we are aware of the very real concern about the impact on dairy farming communities. To address this concern, I will later be introducing an amendment on behalf of the government that will establish the Dairy Regional Assistance Program. This program will provide a total of $45 million available as payments of up to $15 million per year for three years beginning on 1 July 2000. It will be a subprogram under the Regional Assistance Program and be administered by the Department of Employment, Workplace Relations and Small Business. It will be funded from the dairy industry adjustment package and met from the levy of 11c per litre on liquid milk. Funding under that program will be provided primarily to supplement private sector investment to assist employment generating projects in affected regions. It will focus on supporting initiatives to create long-term employment, retraining, counselling and community infrastructure and services.

Restructuring will have significant economic and social impacts on regional communities reliant on dairy farming. Reduced returns to dairy farmers and declining employment opportunities impact on the viability of other businesses and services. The Regional Assistance Program will be directed at assisting those dairy dependent communities considered to be at risk following deregulation and assist them to become self-reliant.

It is inevitable that, in any assistance program of this nature, there will be individual producers who are concerned about their eligibility for payments from the package. The eligibility criteria were arrived at after extensive discussions with dairy industry leadership, and they are the result of a careful balancing of the levels of entitlement to the adjustment pressure they will face. The Dairy Adjustment Authority will be charged with making the determinations on eligibility for all applicants, and the vast majority of producer eligibility and entitlement are expected to be determined without dispute by the Dairy Adjustment Authority. However, disputes will arise in some cases and the Dairy Adjustment Authority will need to resolve them on the basis of clear guidelines and principles.

Other producers may not for various reasons be technically eligible for entitlements, even though they are current producers and were delivering milk during the 1998-99 financial year. The Dairy Adjustment Authority may determine eligibility for these producers, taking into account the individual merits of each case. Of course, an appropriate appeals mechanism has been established in the legislation for those producers who are not satisfied with the Dairy Adjustment Authority's determination. I will also later be moving a technical amendment on a matter that has been brought to the government's attention since this bill passed through the House of Representatives. This amendment brings this bill into line with the Australian criminal law policy in relation to dealing with confidential information.

Finally, I would like to congratulate those dairy industry leaders who recognised in advance the commercial forces facing the industry and examined the options to deal with these pressures. The coherent strategy that they developed was presented to the government and demonstrated to our satisfaction that that strategy had the support of the majority of industry.

I would now like to consider the two second reading amendments that have been presented by the opposition and Senator Woodley respectively. Taking firstly the second reading amendment that was moved by Senator Forshaw: there is no substance to this amendment and this provides no constructive input. The one true remark Senator Forshaw or Senator O'Brien did make was that this is a very complex industry and that it was the states' choice to deregulate, and that is why the government has moved in the way it has.

In response to (a), in the end, there was a limited time frame for the development of this legislation because the decision to deregulate in Victoria was delayed until late December because of the state election. That is why we were anxious to know the opinion of industry rather than depend on what we were being told. So it was very necessary for that plebiscite to happen. Following that development, state ministers, who are, after all, responsible for deregulation, have only recently agreed to deregulate at the ARMCANZ meeting last Friday.

In response to (b), this package is designed specifically to assist producers adjust to the needs of the future and take the opportunities which exist in export markets. The package is proactive. It anticipates the need for change to improve efficiency and it is in the interests of all who rely on it for income. Far from not being visionary, we see the package as a positive and constructive move by industry and government.

In response to (c), the task force will make proper and professional assessment of the impact of deregulation on regions and respond accordingly, and there are many programs available now which can be drawn on.

In response to (d)—imposing a new tax on milk—we are removing a tax on milk because the Domestic Market Support Scheme and the levy will be removed. Artificial pricing through state legislation will be removed. Both of those tax consumers. The levy is also not a wholesale sales tax. Rather, it is a levy targeted specifically at those most likely to benefit in the long term from deregulation, who are, after all, customers. It is well known that the Commonwealth provides for a range of levies to assist industries to adjust to changing demands.

In response to (e), we have made provision to assist workers by assisting dairy enterprises and maintaining the viability of downstream manufacturing. So employees will benefit through maintaining jobs. In response to (f), we already have a range of government programs to assist with training needs, such as FarmBis, and, in response to (g), a significant proportion of the $1.63 billion will be used for investment purposes.

In response to (h)—failing to include measures aimed at opening up and expanding overseas markets—this is exactly what this legislation is doing because it is the export oriented processors as well who are in favour of deregulation. That is because they want to be expanding into export markets and they can only do that if their major input, which is, after all, milk, is competitively priced.

In response to (i)—failing to include a research and development component within the package—the Commonwealth government already provides around $10 million each year for research and development in the dairy industry. In response to (j)—poor targeting of assistance to farmers—come on! The package is specifically targeted at those who are most directly affected, who are, after all, dairy farmers.

In response to (k)—failing to develop an adequate mechanism, et cetera—if current arrangements are continued for eight years, consumers would pay twice the amount they already pay through the levy. The imposition of the levy should not have any adverse impact on consumer demand for milk as the reduction in the farm price is expected to be greater than the levy. If anything, the impact of the levy on demand will be positive, given the fall in farm prices and the potential for other subsidiary products, such as flavoured milks, to be more competitive in a deregulated environment.

In response to (l)—failing to ensure an equitable distribution of the package, et cetera—the package is based on fundamental principles designed to provide assistance to those producers who will be most affected. Lessors will receive entitlements. However, they will not have to bear the same adverse impact as lessees, who actually conduct the dairying business. There is a right, as I mentioned, to appeal a decision by the Dairy Adjustment Authority—first, by the authority itself and then, if still unsatisfactory, an appeal can be made to the Administrative Appeals Tribunal.

I think one of the opposition senators also mentioned the tax windfall that the government would be getting as a result of this package. Any argument that the difference between the original industry proposal and the package that was finally agreed to represents a tax windfall is totally false. The original proposal from industry was for a package of $1.25 billion net of tax. We were not prepared to set a precedent under tax law and provide tax-free payments. Recognising the large tax impost which would be associated with a lump sum payment and against the background that a single up-front payment would be illegal under World Trade Organisation arrangements, the government agreed to payments being over eight years to ease the tax burden on recipients. The agreement to $1.74 billion is an approximation in present value terms of the original $1.25 billion single payment proposal.

Turning now to Senator Woodley's second reading amendment, in response to (a), which urges the governments of Queensland, New South Wales and Western Australia, all I can say, Senator Woodley, is that it is not the responsibility of the Commonwealth government to urge state governments to do anything. It is totally the responsibility of the states as to how they move in regard to the issues that you have mentioned. In response to (b), we have already developed a regional adjustment package, which I have just mentioned, so we are fulfilling that part of your amendment.

In response to (c), I believe that we have done that. The Australian Competition and Consumer Commission has been tasked by the Treasurer to monitor retail milk prices to ensure any changes in prices are in accordance with acceptable competitive practice. The ACCC will commence monitoring prior to and for a period of six months following the introduction of the levy. Concerning farm gate prices, again that is a matter for commercial negotiation in a competitive market. This monitoring will be funded from levy receipts. We do not have a role in monitoring those sorts of movements at the farm gate level.

This is one of the most important debates and important results, I believe, ever to occur in Australian agricultural history. I thank all senators for the contribution that they have made to the debate.

Question put:

That the amendment (Senator Forshaw's) be agreed to.