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Thursday, 27 March 2003
Page: 10476


Senator CHERRY (8:17 PM) —We are debating the Dairy Industry Service Reform Bill 2003 and the Primary Industries (Excise) Levies Amendment (Dairy) Bill 2003. These bills, as Senator O'Brien has pointed out, convert the Australian Dairy Corporation—the ADC—into a company under the Corporations Act to be known as Dairy Australia and transfer the assets of the Dairy Research and Development Corporation to the new company, merging the R&D and marketing arms of the dairy industry. The levies bill provides for the imposition of a new levy—the dairy service levy—to replace the current dairy promotion, research and corporation levies. The bills also provide that the levy will be determined by the minister following a ballot of dairy levy payers and a recommendation based on that ballot being provided to the minister. The levy payments will then be paid by the government to Dairy Australia, which will be a private company limited by guarantee, out of which appropriate payments will be made. Determinations of the allocations of funding by Dairy Australia will be done by its board, which will be elected by the same voting system as will apply to the determination of levies.

The Democrats referred this bill to the Senate Rural and Regional Affairs and Transport Legislation Committee because we were concerned about the proposed structuring and some of the accountability issues that arise out of this particular arrangement. This is the third occasion in recent years when the Senate has considered the effective privatisation of a statutory agricultural body into a private company structure. The Democrats are of the view that the first two experiments have not been particularly great successes. To be honest, we believe it would be appropriate for the Senate to learn the lessons of the first two experiments—in the meat industry and the wool industry—in deciding how we deal with the dairy industry.

It should be noted from the views expressed to the Senate Rural and Regional Affairs and Transport Legislation Committee that the Dairy Farmers Federation were quite clearly in favour of this bill, and they certainly represent the majority of dairy farmers. But a very large proportion of dairy farmers have joined a different dairy farmers organisation, the Australian Milk Producers Association. They are opposed to this bill and feel that there has been inadequate consultation. During its examination the committee looked at the question of how much industry had been consulted, particularly on the important issues of how the board would be elected and how levies would be determined, the proposed constitution for Dairy Australia and the proposed Dairy Australia structure, the details of the collection and proposed use of the dairy service levy to be imposed under the levies bill, and the accountability mechanisms proposed for Dairy Australia.

The Democrats are somewhat concerned that the structures proposed in this bill fall short of what would be reasonable accountability. We need to remember that what we are doing with this bill—as Senator O'Brien has correctly pointed out—is actually setting up a private company which will receive $30 million of government funding a year. This will comprise $15 million collected compulsorily from dairy farmers, effectively as a tax—it is called a levy but it is a tax—and $15 million in matching R&D funding. The funding priorities for that $30 million will then effectively be determined by the board of Dairy Australia, which will be elected by the levy payers. Senator O'Brien also referred to the concerns the committee has expressed about the lack of information before the Senate on which to make decisions. We do not have a final constitution, although a draft was provided on the first day of the committee's hearing. We do not have the draft regulations. The statutory funding agreement has yet to be finalised; we have not been provided with that. Really, we are trying to make a stab in the dark. We have the bare bones of a facilitating bill. Beyond that, we simply have to assume that $30 million of public money will be handed over to a private company each year, and it will all turn out to be all right on the night. The Democrats think this is a rather unfortunate way of determining public policy.

I am not saying that there is anything untoward in what has been proposed for Dairy Australia. But I believe it would be appropriate for the Senate, in making its decisions on these matters, to have before it all of the agreements the government proposes and for all of the funding mechanisms and accountability mechanisms to be in place, so that it can make a properly informed decision. Those were certainly the very clear conclusions and recommendations of the Senate rural and regional affairs committee, which described the situation as `less than satisfactory'. It said:

... the Committee considers the Senate should be able to have access to a completed constitution to allow informed debate on the Bill. This matter is particularly important in view of the mechanism proposed for establishing the corporation, its board election system and voting structure.

The committee was also somewhat critical of the proposed accountability mechanisms, stating in the report:

As the Committee has noted with respect to the constitution for Dairy Australia, the Senate should ideally be aware of all provisions of basic regulatory documents before debate on the Bill proceeds.

In addition, the Committee notes that necessary regulations relevant to matters in the Bill— namely the mechanisms to be used to conduct the poll on the level of the dairy service levy—should ideally be available to the Senate before debate proceeds.

In the committee stage I will be moving an amendment to ensure that that particular recommendation is met. I will be moving an amendment to ensure that, at the very least, in terms of the determination of the recommendation on the levy, the procedures for the conduct of the poll will be included in the regulations and that the regulations will also include provisions for allocating the votes to each dairy service levy payer.

The Democrats are quite concerned about the current model proposed by the industry and accepted by the government. That model will allocate voting strength in respect of the determination of board directors and in the determination of the levy recommendation on the basis of levy paid in the previous year. That means the bigger the dairy farm the more votes they get. This is, in principle— remembering that this is a compulsory levy being collected under this bill—effectively a tax. Essentially we are saying, `The bigger the taxpayer the more votes they should get.' That is a principle I have great difficulty applying to a publicly funded corporation, because that is effectively what this will be. It is a principle which, if applied further, would see ratepayers at the local government level allocated votes not on the basis of each ratepayer getting a vote but on the basis of the rates they pay. It is a principle that, if applied to tax law as a whole, would see the big end of town determining the votes in this place as opposed to every citizen being rendered equal.

I can accept the argument that, because this has a quasi-commercial aspect, being a private company, there should be an element of recognition of the size of levies being paid. But I think that is a matter industry needs to consider again. I accept, in terms of the evidence provided to the committee, that it is a live issue on which there are opposing viewpoints. But I do believe that the model presented in the proposed constitution— which, I might add, is not a matter before the Senate at the moment—is not satisfactory in terms of what our standards should be. Rather than hold up this debate discussing that, I propose that that be a matter for regulation. We will have that debate when we see the regulation from government. I am putting industry on notice tonight that the Senate has genuine and serious concerns about the voting system proposed in this bill and that we ask that industry consider alternative models.

It should be noted on the record that the voting system proposed in this bill is similar to the voting system that was put into the privatised Wool Innovation Ltd, which was set up under legislation a few years ago. I have received a number of pieces of correspondence expressing concern about how that voting system has operated in practice. The last AGM of Wool Innovation saw the previous board, which I understand attracted the support of over 60 per cent of wool growers, removed and replaced by a board supported by the larger wool growers. That is a very unfortunate outcome. I would hate to see that operate in the dairy industry.

As a Queensland senator I am concerned because 63 per cent of milk produced in Australia comes from Victoria. Whilst I think Victorians are very nice people and Victoria is a lovely place to visit, they should not be determining by a 63 per cent margin how much levy should be collected from Queensland dairy farmers and how that money is spent. A system that entrenches that Dairy Australia will always have a majority of Victorian votes and a Victorian majority in the determination of both levy and board directors concerns me.

In evidence we received it was pointed out that around 25 per cent of dairy farmers would be contributing over 50 per cent of the levy. In this system we are proposing what is, to my mind, a fairly undemocratic system. The Senate needs to put industry on notice that it is not good enough. Senator O'Brien will also move amendments in the committee stage dealing with improved accountability mechanisms to ensure that the parliament is properly apprised of how its $30 million is being spent. That is a very important issue and the Democrats will be supporting the Labor amendments. With those very short comments I indicate that the Democrats will be supporting this bill in the second reading and that we will discuss these matters very briefly in committee.