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Thursday, 16 October 2008
Page: 6153


Senator LUDWIG (Minister for Human Services) (9:42 AM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

DAIRY ADJUSTMENT LEVY TERMINATION BILL 2008

The Dairy Adjustment Levy Termination Bill 2008 will amend the Dairy Produce Act 1986 to finalise the Dairy Industry Adjustment Program.  The Adjustment Program was established in 2000 by legislation supported by both sides of the Parliament.

To finalise the program the Bill will allow the Government to wind-up the Dairy Adjustment Authority and the Dairy Structural Adjustment Fund.

The Bill makes consequential amendments to remove references to the adjustment program in other Acts and repeal of the Acts that established the Dairy Adjustment Levy.

The Bill clarifies that activities associated with the closure of the program can be considered a cost of the program and that surplus levy funds will be returned to the Consolidated Revenue fund.

Importantly the Bill will allow the Government to terminate the Levy, paid by consumers on fresh milk, in a manner that minimises over collection. In doing so, the passage of this Bill will reduce the levies paid by Australian consumers.

Termination of the Dairy Adjustment Levy

The Levy has funded a number of adjustment measures to help farmers adjust to the removal of state and Commonwealth government price support measures.

These measures included 32 quarterly payments to around 13,000 individual dairy businesses over 8 years. The last scheduled quarterly payment was made in April 2008.

Given the Adjustment Program has fulfilled its purpose it is timely to terminate the eleven cent per litre consumer levy on fresh milk sales, which has funded the program.

Revenue from the Dairy Adjustment Levy is appropriated into a trust fund, which is administered according to statutory obligations, and a statutory funding agreement between Dairy Australia Limited and the Commonwealth.

Initial outlays related to the Adjustment Program exceeded income from the levy. The then government decided to use commercial loan arrangements rather than Budget funding to meet these initial costs.

While final payments have been made to farmers, the levy continues in order to pay off loan debts.

Once the levy has generated enough revenue to bring the Adjustment Fund into balance, I can remove the levy under provisions in Schedule 2 of the Dairy Produce Act 1986.

Avoiding over collection

The Dairy Adjustment Levy generates around $20 million per month and takes around 60 days to fully flow from consumers to the Adjustment Fund.

The Act requires the Minister to give 28-days notice before removing the levy. But the legislation provides that notice can only be given against receipted revenue.

Because of the notification process and the delay in collections being receipted, levy termination arrangements set out in the Act currently would result in around 50 million dollars being collected in excess of what is needed.

It is not acceptable to continue to collect up to 50 million dollars from consumers once the job for which it is collected is funded.

The Government is committed to terminating the levy as soon as is practical.

The amendments will allow me to consider levies paid, but not yet receipted into the adjustment fund, when declaring a levy termination date.

It will also allow me to reduce the levy termination notice period from 28 to 7 days.

The department will work with milk processors to ensure this happens and that the levy is removed in a seamless manner.

The Government expects the removal of the levy to be passed onto consumers.  Any complaints or suggestion of anti-competitive conduct in relation to removal of the levy will be dealt with by the Australian Competition and Consumer Commission.

Wind-up of the Dairy Adjustment Authority

The Dairy Adjustment Authority was established as a statutory authority under the Agriculture, Fisheries and Forestry portfolio in 2000. The Authority was created to make eligibility determinations for payments to farmers under the two largest components of the Program.

At the peak of its operations in 2000, the Authority had 83 contracted staff and a number of consultants. The Authority now has four part-time staff.

This downsizing reflects that the Authority has substantially completed its functions and can now be wound up.

I would like to acknowledge the work of the Authority and its staff over the past eight years, particularly Dr John Drinan, who recently retired from his position as Chief Executive.

Dr Drinan and the Authority have worked closely with my department over the past 18 months to finalise the Authority’s operations. From 1 July 2008 the Secretary of the Department of Agriculture, Fisheries and Forestry assumed the role of Chief Executive of the Authority.

The amendments will allow me to wind-up the Authority by Ministerial declaration after it has completed its 2007-08 annual reporting requirements and transferred its records to the department. I expect to make this declaration by early in 2009.

After the Authority is wound up, the Department of Agriculture, Fisheries and Forestry will assume the powers and functions of the Authority. This will primarily include record keeping, reporting on its 2008-09 operations and finalising any outstanding payments to farmers.

Closure of the Adjustment Fund

The Act provides that all revenue raised by the levy must be appropriated to the Adjustment Fund.

If this mechanism remains in place, all levy collected surplus to the needs of the Adjustment Fund must be paid to Dairy Australia.

Accordingly, this Bill amends the Act to allow the Minister to stop the flow of levy funds from the Commonwealth to the Adjustment Fund after enough revenue has been collected and the deficit in the Adjustment Fund has been eliminated.

The decision on exactly when to stop the appropriation of levy funds to the Adjustment Fund, held by Dairy Australia Limited, will be made in consultation with Dairy Australia having regard to the present debts and future liabilities of the Adjustment Fund.

Amendments will also provide for the closure of the Adjustment Fund, for Dairy Australia Limited to return surplus funds to the Commonwealth following the completion of the Program and allow surplus levy funds to be transferred to the Commonwealth.

The closure of the Fund will signify the finalisation of the Program.

Other amendments

Revenue generated by the levy can currently be spent on a number of legislated activities, including administration of the Program. The Bill will confirm that activities associated with the wind-up of the Authority are appropriately considered in the administration of the Program.

Wind-up activities include transfer of hardcopy files to the department and staffing costs.

I have mentioned that all scheduled quarterly adjustment payments have been made. There are a small number of outstanding payments due to administrative matters like incorrect bank details, and uncertain estate arrangements where a recipient is deceased. 

The Bill includes a provision to ensure that any outstanding payments to farmers at the time the Adjustment Fund is closed can still be paid after the Authority is wound up.

The department will administer these payments. Until its wind-up, the Dairy Adjustment Authority will continue to finalise the small number of outstanding payments that exist.

Consequential amendments and repeals

A number of Acts require amendment as a consequence of the Dairy Adjustment Levy Termination Bill 2008.

Consequential amendments in this bill will remove references to the Adjustment Program and its various components. Affected legislation includes:

  • Income Tax Assessment Act 1997,
  • Remuneration Tribunal Act 1973, and
  • Social Security Act 1991.

Additionally, the Bill allows for the repeal of the three Acts that set the rate of the Dairy Adjustment Levy, namely the:

  • Dairy Adjustment Levy (Customs) Act 2000,
  • Dairy Adjustment Levy (Excise) Act 2000, and
  • Dairy Adjustment Levy (General) Act 2000.

Conclusion

This Bill will allow the government to finalise the Dairy Industry Adjustment Package.

The Package was established to help farmers adjust to the removal of state and Commonwealth government price support measures. The objectives of the Dairy Industry Adjustment Package have been realised and it is appropriate to wrap up both the administrative arrangements and terminate the consumer levy as soon as is practicable.

I therefore urge the swift passage of this legislation through the Parliament and commend the Bill to the Senate.


TRADE PRACTICES AMENDMENT (CLARITY IN PRICING) BILL 2008

The Trade Practices Amendment (Clarity in Pricing) Bill 2006 enacts an important measure which will ensure that consumers throughout Australia can be certain of the total price they have to pay for goods and services, before they enter into a transaction.

Component pricing is the practice of displaying the price for a product as the sum of multiple parts.  This practice has the potential to draw consumers in to purchases based on prices that to not fully reflect what they will ultimately have to pay.

The Bill would clarify the existing approach to the regulation of component price representations.

Component pricing is currently regulated primarily by section 53C of the Trade Practices Act 1974.  Section 53C provides that, where a corporation makes a representation about part of the price of a product, it must also state the cash price.  The term ‘cash price’ is not defined.

In 2002, the Federal Court held that section 53C does not require disclosure of a total price, provided that consumers do not have to make a complex calculation to determine the total price.  The meaning of ‘complicated calculation’ is not clearly defined and what is complex will vary between consumers. 

In April 2005, the Ministerial Council on Consumer Affairs discussed the potential detriment caused by the use of component pricing where a total price is not clearly identifiable and resolved to support reforms to the Trade Practices Act.  This Bill delivers on that resolution. 

It is fundamental that every consumer knows how much they are going to pay when they make a purchasing decision.  This Bill will ensure that when a business states the partial price of a product they will also be required to state the total price as a single figure, to the extent that it is known and quantifiable at the time the representation is made. 

This Bill does not prohibit component pricing; businesses can continue to list components of a price.  What this Bill will do is ensure that wherever it is quantifiable, a total single price must also be provided; and in general, it must be displayed at least as prominently as the most prominent of any component of price.

Currently the law may allow a business to state, for example, a price of $200.  Then in the associated fine print it states that there are also taxes, fees and charges of $99.  This could even be the case even when the taxes, fees and charges are compulsory.

So the real cost of those goods is $200 plus $99 - $299—this is the minimum amount that a consumer could pay for that product.

This government believes that the total the consumer will pay must be prominently stated.  Not just lost somewhere in a footnote, but in most cases, as prominently as the headline price that is advertised.  This means that if a consumer is drawn to the $200 price, the actual price, $299, is also abundantly clear.

When this is the case the consumer will know the true cost of the goods right from the start giving effect to the original intention of section 53C.

Consumer detriment

This is an important issue, which has a real impact on Australian consumers.

We are all familiar with the consternation that is caused when compulsory elements of a price are not included in representations to consumers.  Advertising of cheap airfares is probably the most widely recognised form of component price advertising.  It is not appropriate that additional compulsory fees and charges are disclosed in fine print disclaimers, particularly when those additional compulsory charges may be significantly larger than the component price that is highlighted. 

There is evidence that consumers are frequently concerned by the misapprehensions that component pricing can create.  The Australian Competition and Consumer Commission, the ACCC, has informed me that during 2007-08, they have received around 430 complaints relating to component pricing.  In addition, during the current year to date, I understand that Consumer Affairs Victoria has also received around 250 complaints about component pricing.  I am sure that the seven other offices of fair trading have received similar complaints.  No doubt there are many other consumers who have been confused by the absence of a clear total price and did not complain to a regulator at all. 

This government wants to make sure that these consumers’ concerns are addressed by enacting a new provision which ensures that the total price is prominently stated wherever possible and not buried in the fine print. 

Provisions of the Bill

This Bill will replace the existing section 53C—and its associated criminal offence provision, section 75AZF—of the Trade Practices Act. 

The new provision will apply to all representations about price made by a business to consumers.  Where a representation is directed towards consumers and businesses, it will be within the scope of the provision.  However, the provision will not apply to representations made exclusively between businesses.

The Bill requires disclosure of a single figure minimum total price, to the extent that it is quantifiable at the time of the representation concerned.  In practice, the total price that a consumer will pay may depend on optional extras or bundled products that the consumer chooses to purchase—clearly, these decisions cannot be known by a business in advance.  Where there are a range of compulsory but varying charges which the consumer can choose from a disclosure of the type, ‘from $500’ will remain an acceptable representation of price.

The total minimum quantifiable price must be stated as prominently as the most prominent of any other price amounts relating to the purchase.  This prominence requirement does not only apply to written price representations.  The total price must be as prominent in relation to television or radio advertisements where the price might be spoken as well as, or instead of, a written figure. 

There is one exception to this prominence requirement in the Bill, in the case of contracts for services which provide for periodic payment. In this case the total cost of the services over the life of the contract must be stated, prominently, but does not have to be as prominent as the periodic component price. 

For example, a company offering a one-year contract for services with monthly payments of $29.  This Bill will require the business to state in a prominent way that the total payable is $348 for a year; however the monthly figure of $29 may be more prominent in this case.  This still allows consumers to see how much that service is really costing them.  It allows them to ask themselves if that’s really what they want to spend that money on.  In this regard the Bill can help foster competition between substitutable goods and services by making the true cost more clearly known.

Business considerations

While the objective of these amendments is to prevent consumer detriment, there are a number of practical considerations that have been incorporated to assist business in complying with the new provisions. 

First, businesses are only required to state the minimum quantifiable consideration for supply.  This means that if a business genuinely cannot determine what the taxes—or some other component of the price—on a purchase will be when they make a price representation, they would not be required to state them in the total price.  Of course businesses still have to comply with other sections of the Trade Practices Act.  They would still have to make it clear what type of additional charges would be incurred. 

Second, the Bill provides an exemption for charges relating to sending the goods from the supplier to the customer.  Such charges, which include genuine postage and handling charges, need not be included in the single figure total price, although they may be included if the business wishes to do so.  However, where the only way the goods can be purchased is by delivery, and the costs are known, those costs must either be included in the total or disclosed in the representation as a separate amount. 

Third, financial services will not be covered by this Bill.  Currently, section 12DD of the Australian Securities and Investments Act 2001 mirrors section 53C of the Trade Practices Act.  The Government does not propose to amend the ASIC Act.  This will allow the current disclosure regime for the financial services sector to continue.  Given the extensive disclosure regimes that apply specifically in relation to financial services, the Government believes that amendments to section 12DD of the ASIC Act would create uncertainty for business about their disclosure requirements, without providing any significant benefit to consumers.

Fourth, this new provision will not apply to representations which are exclusively between bodies corporate.  Generally, business customers are less likely to rely on headline prices than general consumers.  Any benefits associated with clearer pricing practices would be likely to be outweighed by reduced flexibility in businesses’ ability to determine the most appropriate format for representing prices.

So, this is a balanced measure from a Government which understands the regulatory burden and seeks to minimise its impact on business wherever possible while delivering the best outcome for consumers. 

This Bill will ensure that consumers will know how much they are really going to be asked to pay when they see an advertisement in the newspaper, on television, or are given a quotation. 

This measure increases transparency in pricing and further empowers consumers to make the best purchasing choices possible.

Minor and technical amendments

The Bill also makes minor and technical amendments to correct previous drafting errors in the TPA.  These can be categorised into three types.

First, the Bill amends the extended application provisions at section 6 of the Trade Practices Act to cross reference the pyramid selling section provisions at Division 1AAA of Part V, rather than the repealed section 61.

Second, the Bill clarifies that breaches of product safety and information standards made under section 65E may be a criminal offence.

Third, the Bill amends section 75 of the Trade Practices Act to provide that State and Territory fair trading laws equivalent to Part VC operate concurrently with the TPA.

Ordered that further consideration of the second reading of these bills be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.