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Thursday, 25 March 2004
Page: 21939

Senator BOSWELL (Leader of The Nationals in the Senate) (1:16 PM) —The Dairy Produce Amendment Bill 2003 complements existing legislation to assist Dairy Australia in its administration of the government Dairy Structural Adjustment Fund. Briefly, the bill aims to provide indemnity for the directors of Dairy Australia from personal liability under the Corporations Act for certain legal issues that could arise in the administration of the trust. I understand that the risk of such a disaster arising is pretty remote, but I agree with Senator O'Brien that it is best to cover all your bets.

This bill gives us an opportunity to look at where the dairy industry is at the moment, since deregulation. As Senator O'Brien said, the dairy industry is probably our third biggest export industry and has contributed $3 billion to the gross value of our agricultural production. At the moment, we are exporting $2.5 billion a year in cheese, milk powder and other derivatives of dairying. Dairying has been a great industry for Australia. Some people say that we marched on the sheep's back, and that is true to a certain extent, but I can remember that in the early sixties just about every town had a butter factory at one end that employed 20 or 30 people and sustained the town. So dairying has been a great employer for rural Australia.

I listened closely to some of the contributions to the debate on the deregulation package. I thought some of them were quite good, but others were way off the pace. In effect what happened—and Senator O'Brien will probably agree with this—was that the dairy farmers in Queensland and high-quota states were receiving 54c to 58c for their milk. They were then getting in additional cows and getting about 21c for manufacturing the milk, cross-subsidising the milk and therefore undercutting the Victorian dairy farmers in their exports. The Victorian dairy farmers said: `We've had enough of this. We will deregulate.' It had nothing to do with the state governments and it had nothing to do with the federal government. The matter was driven entirely by the Victorian dairy farmers. Some people say that 89 per cent of the Victorian dairy farmers voted for deregulation, but they had a gun at their heads. Part of the question was: `Do you want a package?' And that was the part that really forced them to say yes and to deregulate.

I think that sort of logic completely denigrates the dairy farmers. You are really saying that they have limited intelligence if they would vote for deregulation because they thought a package was there. The Victorian dairy farmers voted for deregulation on the exact date that the 1½c per litre levy for manufacturing milk was taken away. They did not do it because they were silly, they did not do it because they were bright and they did not do it because of a package. They did it because that was their wish. They did it because some of the states that were getting higher drinking milk prices were cross-subsidising and undercutting the Victorian dairy farmers, of which about 92 per cent are producing for export and about six or seven per cent for drinking milk.

It was a commercial decision made by the Victorian dairy farmers, and they would probably make that decision again if they were given the same choices. The government did not vote against deregulation and we did not have any legislation that would deregulate. The states deregulated, and I do not blame them. They had to do it because Victoria had deregulated. Once one state deregulated the whole lot had to go, otherwise we would have had Victorian milk travelling over the border, undercutting milk prices in New South Wales, South Australia and Queensland.

The government, with bipartisan support from the Labor Party, produced a package worth about $1.8 billion to $1.9 billion to offset the loss of quotas. I found it absolutely offensive to hear Pat Rowley denigrated in the other house. Although his name was not used, the inference was that it was him. When Pat Rowley came to this place and said that he wanted a billion dollar package I said, `Pat, you are held in great esteem here, but I don't think you'll ever get a billion dollar package.' Well, he got a $1.9 billion package, and everyone on both sides of the house agreed with it.

Let us not rewrite history; that is the true story. When Victorian dairy farmers deregulated, following a referendum which resulted in 89 per cent of producers voting in favour of deregulation, there was no alternative but for all the state governments to deregulate. Therefore, we now have a different system governing the milk industry—and I will get to that in a minute. A $1.8 billion readjustment package was put out there and it has been successful. But what Senator O'Brien said was right. The drought has hit dairy farmers worse than any other commodity producers in Australia. Warren Truss's office put out a press release saying that the drought has cost the average dairy farmer $76,000. The government has tried to alleviate that cost by giving drought relief.

I think we have to look at some of the positives. The dairy industry has done well out of the United States free trade agreement. It will have additional access to the US market, worth around $55 million in the first year, building to $75 million after 10 years and $135 million after 20 years. That is on top of the $36 million quota we have at the moment. So our dairy industry will get an immediate lift of $50 million. That is a positive. That is up 250 per cent on the value of current exports to the US, increasing over the period of the agreement to up to 475 per cent.

Free trade for Thailand is another positive for the dairy industry, with at least $9 million in extra sales for the first year. These things come with a lot of work. Senator O'Brien is always very critical of the National Party ministers. I suppose that is his job. He has to score a few points. I know he does not mean it when he gets up there and says it. I know he thinks they are all doing a pretty good job, but that is politics and the roles of opposition and government. If he did not do that, they would remove him from the front bench. But I know in his heart he thinks the National Party is doing a pretty good job on trade and primary industry.

The thing that has hit farmers very hard is a loss of $76,000 on average in the last financial year. It will take them many years to recover. I think we have put something like $1 billion worth of EC in drought payments for Australian farmers, including dairy farmers, in those EC declared areas. We have never walked away from the dairy industry. Another EC declaration of $1.8 billion covered most of the dairy farmers. We have beavered away on the free trade agreements with Thailand and the USA and have delivered. We have stuck right with the dairy farmers.

Water availability is another issue that has hit dairy farmers this year. Farmers are uncertain of their future because there is no certainty about their access to natural resources and water. Solutions to raise the confidence levels of farmers to rebuild and invest in their businesses are needed. John Anderson is working on water rights. He has the support of the New South Wales Labor Minister for Planning, Infrastructure and Natural Resources, Craig Knowles, who he quite frequently says is doing a great job. Together they are trying to work out water rights in New South Wales.

Let us not forget the dollar. If the dollar were still at US 55c, the manufacturing milk price would be up by 6c to 8c a litre. The higher dollar, roaming around 77c or 78c, has caused a 25 per cent to 30 per cent reduction in farm gate prices in Victoria. Because the price is down, no pressure is put on drinking milk—when the price of the dollar is up, sales fall. There is no pressure to drive the other sections of the industry, which are the white milk industry and the manufacturing milk industry, so there is a collective downward pressure on both the industries.

I think I understand the dairy industry as well as anyone in this place. I have taken Roger Corbett out to the dairy farmers and I have pleaded with him to listen to their concerns. He said that he is a price taker and a humble grocer and that, as such, he will take the price and put a normal mark-up on it. But the fact is that, according to a report put out by ABARE—a report requested by Warren Truss—the price of milk has fallen by about 10c a litre or 20c for two litres. So the public is doing nicely out of deregulation.

In 1997 the retailers' share was 17 per cent of milk sales. In 2000 it was 16 per cent and in 2003, after the dairy industry deregulation, it was 23 per cent. The retailers' share of milk sales has grown from 17 per cent to 23 per cent. The consumer has gained, the processors' share has gone from around 40 per cent to 42 per cent and the farmers' share has gone from 42 per cent to 25 per cent. In Queensland, depending on the where you are, the price of milk can range from 35c or 36c down to 29c. In Victoria milk is a lot cheaper than that because the Victorian farmers produce milk in a different way: the calving is done all at once in the winter, and this produces extra milk. Queensland farmers have to milk the whole time and they cannot get the cost-effective benefits that Victorian farmers get, because the majority of the milk produced is drinking milk.

The fact is that the farmers' share has gone from 42 per cent to 25 per cent. I do not believe that the retail chains are putting a massive mark-up on the milk. I think they are putting a normal mark-up on the milk. There are three processors out there—National Foods, Dairy Farmers and Parmalat, which operates Pauls—and there are two major retailers, Coles and Woolworths. The fact is that three processors are selling milk to two retailers, which is driving the price right down. So there are 10,000-odd dairy farmers, three processors and two retailers. I think everyone in this house would agree that the market power is pretty distorted. It is getting to the stage where dairy farmers are living like serfs while supplying the processors, who are supplying Woolworths and Coles. Woolworths and Coles are putting the squeeze on the processors, the processors are putting the squeeze on the producers and the price is being driven down to make it an uncompetitive market.

At some point, as dairy farmers leave the industry, prices will meet demand. There is no question about that; it is as clear as night and day. That will then kick the milk prices and we will be paying a lot more for milk. Economic rationalists would say that that is market forces working. But people who represent dairy farmers do not want that market force brutality that disassociates itself from families, farms, country towns and the contribution that dairy farmers make to these towns. Aldi are out there now, too, with their own generic brands, and they are cutting the price further. What concerns me is whether Woolworths and Coles will chase Aldi down as well. The market out there is pretty competitive. There is no doubt about it: the cost of deregulation has been borne by the farmer, but there has been a package to offset that.

Is the way out of this through collective bargaining? Last week I took a group of top dairy farmers—including the President of the Australian Dairy Farmers Federation—to meet Graeme Samuel, the Chairman of the ACCC, and we talked about collective bargaining. As more industries are being deregulated, as the market power between Coles and Woolworths is building up and as opportunities to sell to other retailers are diminishing, the seesaw is getting awfully unbalanced. You have at one end of the seesaw the farmers and the small business people sitting on the ground and at the other end the large retailers sitting up high. We have to get that seesaw level again. The only way I can see to do it is through collective bargaining, and we are going to do that. That was one of the recommendations of the Dawson report. I have appealed to the Prime Minister and to John Anderson to get that legislation up very quickly, together with section 46. If we do that, there also has to be a type of boycott. There has to be something to make people negotiate and get them to the table.

Senator Sherry —Do you endorse collective bargaining for workers, Ron?

Senator BOSWELL —You have got the unions; they collectively bargain for you. There cannot be any discrimination against people that get together to collectively bargain. There cannot be someone with a big stick who says, `You've got the audacity to collectively bargain against me; I'm going to penalise you.' That is one of the concerns I have. I do not think any business in Australia would do it. If they did, the wrath of this parliament would come down on their head, and I advise anyone who might try to do it not to do it. There is an imbalance in the dairy industry. Dairy farmers are getting out very quickly, particularly in Queensland. They are getting out for a number of reasons, including the dollar, the drought and the prices— (Time expired)