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Monday, 25 June 2001
Page: 24945

Senator FORSHAW (12:32 PM) —The Dairy Produce Legislation Amendment (Supplementary Assistance) Bill 2001 demonstrates just how this federal government has mismanaged the deregulation of Australia's dairy industry. This bill is an admission of failure by the federal government. I take the Senate back to the report of the Senate Rural and Regional Affairs and Transport References Committee on the deregulation of the Australian dairy industry, which was tabled in the Senate in October 1999. That report was a detailed analysis of the impending deregulation of the dairy industry and the serious issues that confronted the dairy industry at that time. It was a unanimous report. In almost 200 pages, the report detailed the various problems confronting the dairy industry at that time and the consequences for the dairy industry in particular regions and particular states if deregulation were not managed in a coordinated and timely manner.

The report particularly highlighted the likely devastating impact that deregulation would have on dairy farmers and their communities and regions in New South Wales and Queensland. In the preparation of that report, the committee had the opportunity to examine the package that was then being structured and negotiated by the dairy industry with the Commonwealth government in order to prepare the industry for deregulation in July 2000. Because the committee had the opportunity to look at that package, it was able to highlight some of the inadequacies of the package at that time. For instance, it pointed to the problems that would occur in cooperatives. It highlighted the fact that, whilst the package, as it was then being developed, would provide assistance to dairy farmers or those receiving income from milk production, there was nothing in the package to deal with structural adjustment issues and the particular consequences for communities and regions in which the dairy industry was curtailed or, indeed, disappeared.

The report highlighted the particular need for the federal government to take the lead in a coordinated approach involving the states and the industry. That report put the government on notice that deregulation of the dairy industry could and would have devastating effects if not handled properly. Unfortunately, the government did not listen. The government sat back and washed its hands of the problem. It said that this was not an issue for the federal government but an issue for the states because the states issued milk quotas or regulated the industry.

The federal government's attitude was that it had nothing to do with deregulation. The federal government's only proposal was to threaten the states and the industry by saying that, if the industry and the government ultimately developed and agreed upon a package, that package would not apply unless every single state signed up to it. So the states and the industry effectively had a gun at their heads: they could have deregulation with no package or deregulation with an assistance package but only if every single state signed up. There was no attempt to bring all the parties together to work through the problem. Rather, it was a stand-and-deliver situation. That detailed report, tabled in October 1999, was not responded to until 12 or 15 months later.

Senator Woodley —It got three paragraphs.

Senator FORSHAW —As Senator Woodley states—and I was going to point this out, as I have on a number of occasions—the government's response to a 200-page unanimous detailed report was two large paragraphs and one three-line paragraph—that is, it was three paragraphs. That was an insult to the committee, the Senate and the industry. All that government response said was that we have implemented a package; we have passed legislation to impose a levy on consumers to fund a package. Therefore, they did not think they had to do anything else.

That brings me to the legislation that was passed last year: the Dairy Industry Adjustment Bill 2000. That legislation implemented the amended package that had been initially developed by the industry. I say `amended' because the significant amendment to the package that was made during the negotiations between the industry and the federal government was that it went from $1.25 billion worth of assistance to $1.85 billion worth of assistance, in round figures. The extra $500 million or so was not extra assistance to the industry; it was actually tax revenue that went back to the government. So the government said, `We will have a package for the industry, but only if it is taxed when it is received by the farmers.' That meant consumers, who were to pay an 11c levy on the retail price of milk in order to fund the package, had to pay that levy for a longer period of time—now up to eight years—in order for the government to claw back $500 million in tax. They are the big winner out of this package, which is funded by a new tax introduced by a Prime Minister and a Treasurer who said they would never ever introduce new taxes and that they would never increase taxes. They introduced this levy to assist dairy farmers but in the process will pick up $500 million for themselves.

The committee had the opportunity to look at the legislation. The Rural and Regional Affairs and Transport Committee issued a report into the Dairy Industry Adjustment Bill. In our supplementary comments, Senator O'Brien and I drew attention to some of the concerns we had. Firstly, we drew attention to the fact that the legislation at that time had been hurriedly introduced in order to meet the deadline date of 1 July 2000. We stated in that report:

1.6 It is the view of the Opposition that the committee has not been able to properly consider the effectiveness of the scheme in achieving its stated objective.

1.7 However, the Opposition has agreed to the Government's timetable only because to extend the time for consideration of the Bills may well put a significant financial burden on the majority of industry participants at a time when the industry will already be under financial pressure from further deregulation.

We went on and said:

1.8 The Opposition considers that the fairness and effectiveness of the scheme may well be compromised by the haste with which the Parliament is being asked to progress the legislation.

1.9 The Government has already been forced to move a number of amendments to deal with unforseen problems with the Bills and the Opposition believes further amendments may be required.

1.10 While there is broad industry acceptance of the restructuring package, and the industry should be commended for advancing the process to this point with little Government support, a number of issues of concern have been raised during the committee inquiry.

We went on to point to some of those issues of concern, such as the problem with respect to lessors, who may not be dealt with in an equitable manner under the proposed package. We put it on the record fairly and squarely at that time that the government—having dropped the ball or not even bothered to pick up the ball—had sat on its hands and done nothing for a number of months, other than say to the industry, `We will support your package, providing: (1) it's taxable and (2) all the states are prepared to sign up.' It then proceeded to introduce at the eleventh hour legislation to impose the levy in order to fund that package. It was done in haste, and it was clear that problems were going to eventuate.

That assistance package was predicated on a prediction that the farm gate price for milk would fall by somewhere between 8c and 15c per litre. Yet the government had been warned in evidence from the Australian Bureau of Agricultural and Resource Economics that prices could fall by as much as 25c a litre—somewhere between two and three times the fall the government predicted. The government's own think tank research organisation, ABARE, said it could fall by up to 25c a litre. The government ignored that. What happened? ABARE was right. Milk prices for farmers fell in particular parts of Australia, particularly in New South Wales and Queensland, by as much as 25c a litre. Even with the assistance package that had been implemented, which the consumers were paying for through a levy, it was not enough to cover the gap between the farmers' incomes before deregulation and after deregulation.

That is why we have this assistance package before the parliament today: the government got it wrong. They got it wrong because they ignored the advice of ABARE. At the time, they said, `No, we've got to get this legislation through the parliament in order to ensure that payments will start to flow to dairy farmers.' We cooperated and the Democrats cooperated in getting the legislation through, but we put the government on notice that problems could eventuate because they had not thought it through and they had done it all in haste.

What else happened? There were substantial delays in payments. Even though payments were supposed to flow around August or September, some farmers still had not received a first payment till the end of last year. They were coping with substantially reduced incomes, but they were not receiving the assistance that the package was supposed to deliver. Communities and regions were hard hit, as we know. Then, unfortunately, some regions in northern New South Wales and southern Queensland actually copped floods on top of everything else. It really was a terrible Christmas and New Year for many of those dairy farmers.

What was the government's response to this? They sat and said, `Look, the package is in place; we do not have to do any more. Look at the great thing we have done: we have delivered the greatest assistance package ever in the history of this country—$1.9 billion.' That is what Minister Truss said he was delivering to the industry. He delivered nothing to the industry. It was simply a new tax to raise funds to pay assistance to farmers and it was developed primarily by the industry in the first place. That is why, when the government and minister continue to say that the federal government have done their bit and the states should pick up their share, they are actually engaging in a false argument.

All the government have done is implement a levy to raise funds from the consumers in New South Wales, Queensland and every other state to pay this assistance package. Not one cent has come out of the budget for dairy farmers, yet the government have the hide to turn to the states and say, `We are providing funds; you should do it as well.' It is the taxpayers in those states that are paying for the funds for the assistance package in the first place. We have reached a situation where the government engaged ABARE earlier this year to look at how serious the problems were. ABARE told them in their report that the industry was facing serious problems, notwithstanding the assistance package having been implemented. That report was released in January.

The government has now been forced to act again. It brings in this new bill, the Dairy Produce Legislation Amendment (Supplementary Assistance) Bill 2001. This bill has three key components. Firstly, there is $100 million for additional adjustment payments to producers who earned more than 35 per cent of their income from market milk before deregulation; secondly, there is $20 million for discretionary payments; and, thirdly, there is an extra $20 million to go into the Dairy Regional Adjustment Program. I want to comment about that. It was at the eleventh hour, when the first legislation was passed last year, that the government finally accepted the calls from the opposition for the granting of funds to regions in particular to assist with the problems, and it instituted the program called Dairy RAP.

Where did some of those payments go? They were supposed to go to assist the dairy industry and the communities suffering from the effects on the dairy industry. But in one case $220,000 went to a polocrosse field and equestrian centre in Beaudesert in Queensland, while in another case $55,000 of dairy regional assistance package funds went to a wine appreciation course at Ipswich Grammar School. This is an absolute joke. Not so long ago, $1.5 million was announced by the Prime Minister—not by the minister for agriculture—for a meatworks in the electorate of the minister for agriculture. Talk about pork-barrelling—except in this case it might be called milk-barrelling. The scheme has been mismanaged and has clearly been used but not to assist dairy farmers.

There is a lot more that I can say. I am sure we are going to get time during the committee stage to debate this bill further. I just want to make a couple of comments in conclusion. Firstly, the committee has had the opportunity, though briefly, to look at this legislation. It seems that we are spending a lot of time looking at the government's attempts to fix up its own mistakes in the dairy industry. As we highlighted in our supplementary comments from the opposition in the report, we have firstly noted that once again we are faced with legislation being introduced into this parliament in haste, where we have had very little time to properly examine it.

The government has known about this problem and issue for months and months, yet the committee was given the legislation only about two weeks ago. We only had a couple of days in which to have a public hearing and then try and report back to this parliament. We did our level best to meet that timetable. We brought down a report, after an extensive public hearing, within a matter of a week. We are here today to deal with this legislation because, if the further supplementary assistance is to be paid to farmers, it has to be dealt with this week. We will cooperate with that. But we believe there still are some major deficiencies in the legislation. They are again brought about by the slack attitude of this minister and this government when it comes to dealing with these issues.

One of the particular issues that we want to focus on is the fact that many dairy farmers who relied on market milk for a significant proportion of their income will not have access to the supplementary market milk payment. Therefore, the 35 per cent threshold should be reviewed. We have proposed an amendment, which has been circulated, which will extend the payment under that additional assistance payment to more farmers that have been affected seriously by deregulation and by this government's unfortunate mismanagement of the entire exercise. There will be much more to say when it comes to the committee stage. We will ultimately be supporting the legislation, but on the basis that there will need to be some improvements to it to recognise the harsh realities and problems that dairy farmers face as a result of this government's mismanagement.