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Thursday, 25 March 2004
Page: 21943


Senator CHERRY (1:36 PM) —The Dairy Produce Amendment Bill 2003 seeks to make some minor amendments to the Dairy Produce Act 1986 to facilitate the functioning of Dairy Australia, which was known as the Australian Dairy Corporation until 2003. Specifically, it is to facilitate the administration of the Dairy Structural Adjustment Fund and the shifting of that function over to Dairy Australia. I will deal briefly with some of the points made by Senator Boswell about the current state of the dairy industry and then talk generally about Dairy Australia.

Senator Boswell highlighted some of the potted history of dairy deregulation in this country. He referred to the report which I am going to refer to by Whitehall and Associates, commissioned by Minister Truss, on food pricing. I have taken a great interest in food pricing. It was the key topic of my first speech in this place three years ago, and I have been following it through in terms of legislation, the Trade Practices Act, the retail code of conduct and various agricultural products ever since. The report really interested me. Reading Minister Truss's press release and the report, I think it was obvious they were talking about two very different reports.

Senator Boswell highlighted some of the very significant changes in prices received from dairy products. On a two-litre packaged milk product, he pointed out—and it is in the report—that in 2000 the producers were getting 42 per cent of the final price and the retailer was getting 17 per cent, and that post deregulation, in 2003, the producer was getting 25 per cent and the retailers' share had risen to 23 per cent. That shows that the real winners from deregulation have not been the dairy farmers; they have been the food retailers. There is no question about it. The government now have this confirmed in their own research.

It is time the government fessed up to the dairy farmers of Australia and the public at large: they stuffed up dairy deregulation. They stuffed it up, because it has completely destroyed the economic base of so many dairy farmers across this country. The figures from ABARE show that the debt levels of Australian dairy farmers are higher than the debt levels of any other farming segment in this country. They show that it was not just dairy deregulation but the drought, the collapse in the world price and now the rise in the dollar that have all conspired to destroy the livelihoods of so many farmers around this country.

Senator Boswell highlighted the fact that dairy deregulation was an initiative of dairy farmers in Victoria. It is rather ironic that the dairy farmers of Victoria are now the ones screaming the loudest about having been hit hardest by deregulation. Dairy farmers in my state of Queensland, as I am sure Senator Harris will point out, knew this and suffered first and hardest because deregulation obviously hit their industry harder than in any other state. But now the flow-on effects have impacted on all dairy farmers, and it showed that the dairy farmers of Victoria were sold a pup by the industry leaders back in 1999. It has not worked out the way they thought, and they are now hurting as a result.

Senator Boswell kept saying the frustration is that the federal government could do nothing about it and it had no choice but to accept the decision once it was made by Victoria. That is poppycock. A federal government with all of the powers of a federal government, all the money at its disposal and all its arm-twisting abilities could have stopped deregulation if it wanted to. But the simple fact is it was obsessed with the deregulation of farm industries, obsessed with economic rationalism and obsessed with its whole free trade agenda. It wanted the dairy industry deregulated. It was happy to have the whole issue taken out of its hands and to wipe its hands Pontius Pilate style and say, `The Victorians told us to do it.'

The Victorians could have been stopped from deregulating quite simply by the exercise of federal power. This government chose not to do so. The results are in the report tabled by Whitehall and Associates last month. As I said, the producers' share of a two-litre milk product sold in the supermarket is down from 42 per cent to 25 per cent. Even on cheddar cheese products, which were also reported on in the same report, the farm gate share fell from 39 per cent to 36 per cent between 2000 and 2003 while the retailers' share rose from 18 per cent to 22 per cent. It really has been a disaster for dairy farmers. There is simply no other way to describe it, and this report shows the minister, if nobody else, what a disaster it has been.

So what do we do about this disaster? What do we do about the enormous social and economic damage done by this government to the dairy industry across Australia over the last four years? For a start, we need to, as Senator Boswell highlighted, fix the Trade Practices Act. Collective bargaining will not fix the problem but will go some way towards it. Collective bargaining, particularly the model currently preferred by the ACCC, is to be done by geographical area. I was in the Hunter Valley last year talking to dairy farmers. They pointed out that milk is now being trucked from as far as the Hunter into Queensland and from Queensland back to the Hunter because that was where the processors could find the lowest value milk. Milk trucks are travelling all over this country as we speak, and that is why regionally based collective bargaining will almost certainly fail in this country. Eventually, they will find someone somewhere who is prepared to buck collective bargaining and undermine it. That is why we need to ensure that the Trade Practices Act is toughened up and the collective bargaining model currently proposed by the ACCC is significantly enhanced. It has to be on a national basis to have any meaning.

The other things that need to be done are the recommendations made by the Senate Economics References Committee last sitting week. They recommended significant changes to the Trade Practices Act in addition to the collective bargaining initiatives recommended by the Dawson inquiry. These included a complete overhaul of section 46—the misuse of market power provision—to ensure that the ACCC can make its actions stick. It has lost eight out of eight actions on the misuse of market power—the provisions written, as I understand it, when John Howard was business and consumer affairs minister back in 1977. It has lost eight out of eight actions because the provisions are not worth the paper they are written on. The retailers know that. They know the ACCC is a toothless tiger in these areas of market power. Until we beef up that section, until the ACCC has the powers of the US commerce department to actually bust misuse of market power by a cause and effect test by being able to look at the whole issue of the effect of the misuse of market power and until we have decent cease and desist orders and evidentiary provisions, we are not going to be able to stop that.

Those powers are important because the ACCC's powers underpin the retail industry's code of conduct, which is currently being reviewed by government. The retail industry code of conduct, in my view, as a mandatory code backed up by the ACCC, is probably the one single initiative that could start to unravel some of this misuse of market power and the imbalance in bargaining strength in the dairy industry and other agricultural industries. But it needs a tough Trade Practices Act to underpin it and a minister prepared to say, `The code won't be voluntary anymore; it will be mandatory. There are going to be breaches if you don't actually comply with the code.' I will be very interested to see whether the government is prepared to do a favour for the National Party at long last and sign up to a retail industry code of conduct that is much tougher than the pathetic, weak little thing that Peter Reith wrote several years ago, which we are currently operating under. Maybe then the poor old National Farmers Federation, which have been threatening to walk out of the governing council code for the last three years, might finally get what they wanted, which is something that will protect the interests of farmers.

I want to return to Dairy Australia itself and talk about the concern I have with its structure. It is the same concern that I had with the structure of Australian Wool Innovation Ltd, which was reported on by the Senate Standing Committee on Rural and Regional Affairs and Transport earlier this year. It is the same concern that we had with Meat and Livestock Australia, which we reported on last year. The concern I have is that they are not democratic organisations, and if they are not democratic organisations then they are not going to be accountable.

My concern all the way through, with all three organisations, has been that these are now hybrid, public-private organisations. They are underpinned by levies—in fact, taxes—that are collected under federal law and are just given to these organisations, which are then private companies. The shareholding of those companies is determined by a memorandum of understanding between the government and the body. In the case of Dairy Australia, it is to be based essentially on the milk tax collected from the different farmers. That means that a big farmer has a lot more shareholder votes than a small farmer. As a result, Dairy Australia will end up being dominated by the large producers, to the exclusion of the small producers.

We have seen this happen with the Australian Wool Innovation corporation, where the team headed by Ian McLachlan, which enjoyed the support of the larger producers, was able to knock off a team which was supported by the smaller producers. We have seen it in Meat and Livestock Australia, where only last year a proposal at their AGM to widen the ability to appoint the directors of the board was successfully kyboshed by the Lot Feeders Association—a very large business sector which was able to again ensure that the small beef producers were not represented effectively on the board of Meat and Livestock Australia. The problem with all three areas is an undemocratic structure, which the government has signed off on. In terms of Dairy Australia the same mistake has been made: your voting strength, which determines the levy recommended to government for the purpose of taxing farmers and determines how those taxes will be spent in terms of the decisions made by the board of directors, will be determined by the size of your farm.

In terms of electoral reform in this country we got rid of that principle in relation to electing members of parliament years ago. Queensland was one of the last states to do it, when we got rid of the Bjelke-Petersen government and introduced one vote, one value. In Western Australia, for some reason, they still believe that farmers' votes should be worth more than city people's votes. Hopefully, that will be wiped out some time soon if the Greens actually vote the right way in the upper house. In other parts of the electoral system we got rid of the principle that wealth should equal more votes a very long time ago. We got rid of it in local government—we got rid of it in all levels of government. Yet now the National Party is reintroducing the principle into these new hybrid public-private bodies being established to administer taxes on farmers.

I think it stinks. I think it is antidemocratic and I think this government stands condemned for allowing bodies such as Dairy Australia, Meat and Livestock Australia and Australian Wool Innovation to develop, where they allow these appalling voting systems to continue. When the government responds to the recommendations of the Australian Wool Innovation report that we brought down from the rural affairs committee, I hope that they ensure that they put into their new memoranda of understanding for these hybrid bodies an insistence that democratic principles be followed and that one vote, one value be the principle for determining taxes—in terms of their collection and in terms of how they are spent. From that point of view the Democrats are happy to support this bill because it follows on from a bill that was supported by the parliament last year. But I again urge the government to ensure that Dairy Australia, Australian Wool Innovation and Meat and Livestock Australia are restructured to be more democratic than they currently are.