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Standing Committee on Economics
18/08/2011

CARNELL, Ms Kate, Chief Executive Officer, Australian Food and Grocery Council

MAHAR, Mr Tony, Director of Sustainable Development, Australian Food and Grocery Council

[10:48]

ACTING CHAIR: I welcome the representatives from the Australian Food and Grocery Council to this hearing. I remind you that, although the committee does not require you to give evidence under oath, the hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House or the Senate. The giving of false or misleading evidence is a serious matter and may be regarded as contempt of parliament. Would you care to make an opening statement before we proceed to questions?

Ms Carnell : Mr Mahar will make a short statement and then we would be pleased to answer questions.

Mr Mahar : We would like to thank the committee for the opportunity to talk to the Food Standards Amendment (Truth in Labelling—Palm Oil) Bill. The comments that we make here today should be seen in co-operation with the submission to the Senate Community Affairs Legislation Committee. In short, the AFGC requests that the House of Representatives Economics Committee recommend that the bill not be passed on the grounds contained in our submission, which I will briefly touch on this morning. Unfortunately, the issue of palm oil is often framed through a simplified dichotomy between orangutan and the palm oil industry. Unfortunately, this is a simplification which is often picked up by public and NGOs, but in reality the issues are far more complex, as I think the committee has touched on this morning.

It is our view that the Food Standard Amendment (Truth in Labelling—Palm Oil) Bill 2011 is an unworkable, unenforceable piece of legislation and tends to override existing well-established processes for developing and implementing legislation. Further to that, we are not clear about the intent or objective of the bill, specifically in relation to health and sustainability, as I think the committee touched on this morning and in previous hearings. Certainly from a consumer health point of view, the consumers do have access to information relating to health and safety from a sustainability point of view. I think, as has been touched on, the bill has been amended to remove references to sustainability. So we are a little concerned and a little unclear about the actual objectives of the bill, and we do think some serious issues and concerns are posed around enforcement and costs to industry as a result of this legislation, which, I suppose, is unnecessary, largely because industry is very much aware of the issue of palm oil and has taken steps voluntarily to improve the sustainable production and use of palm oil. This will continue. It is early days as far as infrastructure is concerned and as conditions improve for the production and supply of palm oil, and there is certainly a recognition that industry will continue to sustainably source palm oil. I will leave my opening comments there, unless Kate would like to say something.

Ms Carnell : I will just follow on from that. Mr Mahar made the comment that we are just not confident what the bill is for at the moment. If it is not about the environment, and we have heard that, and it cannot be about health, because the level of saturated fat is already on the label, it then must be a consumer right-to-know issue. I cannot work out why a consumer right-to-know issue is in a food standard amendment bill. I could understand why it might be in an ACCC space—there is an amendment along those lines—but the bill itself amends the food standards amendment, truth in labelling, whatever, so that a consumer right-to-know issue in that bill is inappropriate. It is quite contrary to the reason that FSANZ is set up, the whole process that we have in this country to achieve labelling requirements for food products, remember, with regard to the contents of products, the safety and so on.

FSANZ is set up for a particular purpose. There is a particular and quite in-depth process to ensure that we have good food labelling laws in this country underpinned by good science, regulatory impact statements, with a capacity for the outcomes of FSANZ's codes to be picked up by adoption by, or reference to, states and to New Zealand as well. We understand that is how the FSANZ situation works.

This is not, as you have said, about health, because it could not be, and it is not about the environment, as you have said, so it must be about consumer right to know. So why is it in this bill at all? If it is about consumer right to know, then why just palm oil? There are lots of other oils that we use. There are some that are more saturated, some that are less saturated, some that would be regarded as less healthy, some more healthy, some which may have different environmental outcomes. There are a whole range of reasons why you would choose to possibly perceive consumers have a right to know what is in the vegetable oil line on a label. Palm oil is just one oil. We cannot quite get our head around this: if it is not about the environment and it is about consumer right to know, why it is in this bill at all? And again, why just palm oil?

ACTING CHAIR: Thank you. With respect to industry costs and the concern about the impact on industry, your evidence is that there is a level of industry awareness already, obviously about some consumer push-back about palm oil, about specific initiatives that industry has taken with respect to identifying the inclusion of palm oil, sustainable palm oil, and further what industry's preferred option is with respect to enabling consumers to delineate between sustainable palm oil and other forms of palm oil.

Mr Mahar : The Roundtable on Sustainable Palm Oil is the organisation that has been set up by, I think the originators were, Unilever and WWF, among others. That is the body or the mechanism of which other companies, the major palm oil users in Australia and globally, are members, to try to develop the infrastructure that is required to actually source sustainable palm oil. There are some issues there around sourcing and appropriate infrastructure to make sure that the products are differentiated in the supply chain.

In terms of consumer awareness or consumer wanting to know, I think that there is a little ambiguity around that. Certainly a proportion of the population is concerned around palm oil. As we have heard this morning, some companies are choosing to label their products that contain palm oil. I suppose our issue is that we would rather that be on a voluntary basis. Industry is making these attempts to make improvements to the sourcing of their product, and they have that flexibility to use palm oil or other oils, if appropriate to their products. But it is on a voluntary basis. I suppose those companies that do label their products, like some of those that have been demonstrated this morning, do so on a voluntary basis.

Ms Carnell : Maybe I can take it a bit further. What is the purpose of labelling in our system generally? The Blewett inquiry looked at that in depth and at length and came up with an approach—I think it is recommendation 2; it is one of the recommendations—that all the states and territories, industry and government, and I think everyone who has looked at it, actually support. Fundamentally what the Blewett inquiry has determined is that there should be a hierarchy of labelling, starting at food safety at one end, which should be mandatory—nobody doubts that—going through preventative health, new technology and to social issues. The view is that social issues should be voluntary.

There are things that must be on a label and things that can be on a label, based upon social issues, community concerns, a company's interest in putting that forward, fundamentally because it does not affect the health, safety or whatever of the product. So there are things like, you could argue, palm oil. You could also argue a number of fair trade issues, animal welfare issues, all the way down to the methods of production of the product. The reason that Blewett has gone down that path is that fundamentally you cannot put everything on a label if you want a label to be vaguely useful to a consumer. There are all sorts of groups of people who would like their thing on the label. With that hierarchy, we are saying that at one end the things that matter to food safety are what is in the product. With issues such as peanuts, it is really important for the safety of the products that those things must be mandated, down to areas that should not be mandated. That should be about whether a company chooses to make that information available to a consumer who believes that it is in the company's and consumers' best interest to put that there.

It is also important to note that there are a chunk of companies that have determined to label palm oil—there are some that have not—but if you have a look at websites or get on product help lines, if you really want to know, lots of people do care about various things, not just palm oil, but various things. They can ring the help line and find out immediately.

ACTING CHAIR: Do you concede that there are some companies for whom the inclusion of palm oil in their ingredients list is something best brushed over? In a marketing sense, they are, because of cost pressures or otherwise, not inclined to use, I would assume, a more expensive and sustainable form of palm oil. How does the Australian Food and Grocery Council view the way in which, as policy makers, we would best enable and encourage a framework that ensures that those who are doing the right thing, for lack of a better term, are not subject to cost pressures as a result of a bill like this versus those who are doing the wrong thing and who can continue to enjoy the benefits of that because we are not introducing something like this?

Ms Carnell : This industry is called a 'consumer goods industry' for a purpose, because fundamentally companies respond to consumer pressure. That is what it is like. If the consumer pressure is such that the company perceives that labelling palm oil or, for that matter sustainable palm oil, is what the consumers want, that is what they will do. It is absolutely true that at this stage sustainably produced palm oil is more expensive but, more importantly, there is not an awful lot of it available at this stage. It is important to remember that the Roundtable for Sustainable Palm Oil has now 500 members, something like 160 members from the consumer good manufacturing space, including the major companies in the world, the major companies using palm oil in Australia—the Nestles, the Unilevers, the Kellogg's, the Fonterras, the list goes on. They are already there. They have already made the commitment. So you come back again to saying, 'What are you trying to achieve with this bill that is not available already?' Any consumer can ring up and find out whether there is palm oil in the product. Some companies have determined that, because they have determined that their consumers want this information, they will do it. What is the purpose of making it mandatory?

Mr Mahar : To add to that as well, as Kate says, these companies are already committed to this mechanism that is driving sustainable production and supply of palm oil. There are some issues around some of the integrity of the existing supply chains. Some of those larger companies have made commitments to source sustainable palm oil by 2015, at which point they think the supply chain will be developed enough so that they can actually have more faith in and more dependence on those existing supply chains.

One of the other issues that I think it is important to realise is that companies like Unilever and Nestle and others have made a commitment to this mechanism. Anything else that is running parallel to that runs the risk of distracting their commitment to these voluntary arrangements, that they may well divert some of their attention to labelling or other mandatory requirements, and that can risk minimising or reducing their attention to or support for voluntary arrangements that are actually already working.

Ms Carnell : You did ask a question before about costs and why, in our submission, we can see some issues about costs. Labelling changes are not as simple as putting 'palm oil' in brackets after 'vegetable oil' or somewhere on a label. First of all, fairly obviously, there are artwork issues, there are new plate issues. In some cases it will fit and in some cases it will not. There are a range of issues and costs that need to be put in place.

The other thing that is a bit bemusing about the legislation that is on the table is this: as you obviously know very well, the ACCC amendment that broadened the bill to include all products, not just food products, meant that there were a chunk of products that have very long shelf lives in this space. I am acutely aware that the bill only requires labelling for products manufactured 12 months after the bill enacts, but there is going to be an awful lot of product, particularly in the non-food space, that is going to be on the shelf for years and years, potentially, that has really quite a long shelf life. It is a bit confusing for consumers from that perspective. Is a product with palm oil on the label really different from one without it? Both products will be absolutely legal under the bill that you have in front of you, because shelf life is long for those products.

Firstly, for people to change their labels, the costs range from about $5,000 for a minor change to about $15,000 for a major change. In many cases this could be a minor change, depending on the size of the label, how much you have to rejig it, all that sort of stuff. Of the 30,000 products on supermarket shelves in Australia, a very large percentage has palm oil. Some already are labelled, some are not. We do not have the figures on exactly how many are and how many are not, but it is a new cost. It really does come down to this: there is a new cost to industry. What is the consumer benefit that they do not currently have? Is there any benefit to the environment? You said that is not the point to the bill. Are there any health issues? You really do come down to saying at $5,000, even at the bottom end of changing labels, that is a really significant new cost to industry for broad-based benefit that seems a little difficult to work out.

Ms SMYTH: I have some inquiries about the submission that you put in. I would ask you to expand on that in regard to the scope for potential challenge, as you see it.

Mr Mahar : We think there is a little concern around the detection or analysis of palm oil or its derivatives in products, because the actual fatty acids or molecules that are in at that level can come from a range of different sources. In regard to actually analysing the product and detecting a particular fatty acid, it is difficult, if not impossible, as I understand, to determine whether that has come from palm oil, from coconut oil, from a range of other sources. I am actually wondering about the enforcement of the bill in any case. That, again, from a company perspective, raises a whole level of uncertainty, which is never good for business.

Ms Carnell : The other issue, as the bill states, is that either palm oil is in the product or palm oil has been used in the production of the product. That could be interpreted as if palm oil was used in the production of the emulsifier, which makes up 0.02 per cent of the final product. The emulsifier was produced out of Taiwan, because almost all of those additives are not produced in Australia. We have a very small production capacity in that space. In regard potentially to flavourings, colourings or whatever, palm oil was used in the production of those. They are a really small percentage of the product.

The unworkability starts to become clear, as there is no baseline here in this. It is at any level, as it says in the bill. At any level, if palm oil was used in the production, it could be in the tiny weenie bit of that colouring or that flavouring or whatever, it is very hard for the ACCC to get their head around how you enforce that, apart from just to ask, I suppose. You could ask the company and I suspect you will get a real answer. But if ACCC wanted to go down to another level, I have no comprehension, unless they are going to spend a lot of time in factories in various parts of the world trying to look at a chain of custody, of how they will be trying to assess whether the chain of custody is right in that emulsifying or flavour factory out of China or Taiwan or somewhere or other. Again, I believe the information they would get from the company would be right. But if they felt a need to go to some other level, it is absolutely impossible.

Mr BILLSON: Thank you for your presentation. You have sustained our hope about this. In regard to the issue about why you do it, you explain very eloquently why it is in the self-interest of industry to do it, in responding to their consumers. That seemed pretty clear to you. Do you accept that consumers are also citizens and that driver for industry to do it under their own volition does not just stop with industry, they might actually want their legislators to embrace that concept as well?

Ms Carnell : Absolutely.

Mr BILLSON: I was confused why you could see it so clearly from a self-industry activation and then be blinded or not able to see that those same citizens might approach members of parliament about those same concerns.

Ms Carnell : Absolutely. Groups of consumers, I am sure, do approach you every day on these issues, whether it is GM, nanotechnology, animal husbandry, fair trade or agricultural techniques. There are a whole range of these, absolutely. Those consumers, those voters, have every right to be lobbying you to put that on the label, because to them it is really important. The issue here is not that and is not their right to do that. The issue is to say, 'What are labels for and what do you put on them?' Is it based upon how loud the group is, or is it based upon some good, solid policy on what should be mandatorily on a label and what should be voluntarily put on a label or, for that matter, a co-regulatory put on the label? There is a lot of co-regulation in this space too, particularly in the preventative health space. We will not get to that at the moment.

What we are saying is that what Blewett has said and what government, industry or state governments have said in the past is that things that mandatorily have to go on a label for the consumer are things about safety, health ingredients.

Mr BILLSON: As it relates to food standards, yes.

Ms Carnell : This bill suggests that that is the case.

Mr BILLSON: I will come back to that in a minute. Sorry.

Ms Carnell : That is very much the case. In that case, that is what must be on a label. The things that voluntarily should be on a label are things that relate to social issues. I suppose what consumers, groups of consumers, might like to see on a label is detail about safety, appropriateness, allergies or whatever. I think the problem you have here is that you have stepped into a space which fundamentally says that every time there is a group of consumers who would like something on a label, for a whole rage of reasons that have nothing to do with the efficacy of the product itself, it should be on the label. This is not about the product, it is about something else.

Palm oil in that product, whether it be a food or a non-food product, is no different as an oil than coconut oil, tallow, whatever. They have somewhat different properties, but in terms of the product itself and its efficacy in a non-food or a food product, there is no difference at all. The issue is where it comes from. You can see the difference.

Mr BILLSON: I understand your argument. I just think it is an incredibly weak argument because you have started off saying that this is so horrendous but industry is doing it anyway.

Ms Carnell : No, that is not what I said.

Mr BILLSON: You have then said that you have done this because industry responds to consumers; yet it is difficult to see that those consumers are citizens. You then said, 'Why have you picked out palm oil?' I would say to you, 'Why have you picked out palm oil?' It is rather a circular argument.

Ms Carnell : Actually I do not agree at all.

Mr BILLSON: Is there a sustainable labelling for coconut oil? Is anyone in industry doing that? No. So palm oil has been picked out for the effort that is going in voluntarily—a lot of effort, a lot of label changing, a lot of regulatory stuff. Your industry has pulled out palm oil and then you come here and tell us how outrageous it is that the parliament has picked out palm oil, like there is some parallel universe. I am looking for a little consistency in the advocacy for something so virtuous the industry would do it on its own, but if everyone was asked to do the same thing that is horrendous.

Ms Carnell : No. Sorry, that is—

Mr BILLSON: There is more to come. You make your point. I am just saying that it is quite interesting how it is so important that some industries would do this themselves voluntarily because they see an advantage in doing it—

Ms Carnell : That is right.

Mr BILLSON: But, if the parliament seeks to have everybody respond to the consumer interest at a less demanding level than your industry is already voluntarily doing it, that is somehow horrendous. We will consider that evidence and see whether that is appropriate or not.

Ms Carnell : Sorry, I have to respond to that. I have to respond to that because that is not our argument. Our argument, quite clearly, is the difference between what should be mandatorily on labels and what should be voluntarily placed upon labels, and where the line is. It is already quite clear, as I said, from Blewett and in the FSANZ space, but even more broadly in the ACCC space, what we are suggesting here is that, absolutely, companies will choose to put things on labels, for a range of reasons. We talked before about halal. There are a whole range of reasons people will label voluntarily because they are responding to consumer need. That is exactly what they should do.

At the other end, what is mandatory, we need to have some really solid rules around, otherwise you guys will not have one speck of time in your life to yourselves because you will have people on your back the whole time on what must be mandatorily put on labels. That is the reason the Blewett inquiry happened, because there is so much pressure in this area to label mandatorily. So trying to put a line in the sand between mandatory and voluntary is something that is fundamentally important. I think what you have done here is that you have really fuzzied that up.

Mr BILLSON: Given there is a consumer response that industry has and there may be a consumer response that a parliament might have as well, you touched on two issues. Just so the audience and the committee are clear, there are two separate issues here. There is the FSANZ issue, which your industry does and will continue to activate because it is in a position to do so, a food standards process. That can be proposed by any of your members and it can be proposed by your organisation. Do you think that it is unreasonable that the parliament might propose one too, or is the parliament not of sufficient standing to ask FSANZ to do some work that Harry in the street can ask FSANZ to do?

Ms Carnell : You can, absolutely. Obviously you have the legislative power to do so. FSANZ, as you would be aware, has already looked at this issue and determined that it was outside their purview and so determined not to have a standard for palm oil, because it was not about food safety or health issues. You can say to FSANZ, 'You have to do it anyway,' and if the legislation is passed that is fine and they will do it. They will put it on their website. End of deal.

Mr BILLSON: Some of the questioners were suggesting that states and territories and New Zealand can put it to FSANZ—wisdom that is certainly not available to me—but some seem to have pre-judged how other jurisdictions will respond. Because the parliament of the Commonwealth of Australia activates the process, all of a sudden those other participants in this intergovernmental arrangement will flee the venue. Do you have any evidence to support that suggestion that it would lead to some unenforceability? I am not aware of it. I am just curious whether you are aware of any such predetermined positions.

Ms Carnell : I have some degree of knowledge about what happens at state and territory level when the Commonwealth steps into areas that states and territories perceive are in their domain.

Mr BILLSON: Your instincts would be in the spirit of letting the states dislike Canberra, whatever. You think there might be some push back on the Commonwealth activating the process that is available to every other citizen in Australia.

Ms Carnell : What you have not done is activated the process. What you have done is circumvented the process. The process is really quite clear in how the FSANZ process works in terms of FSANZ putting together, starting the process of, a standard. It has consulted. There are a whole range of processes that are gone through, including regulatory impact statements, which have not been done here. That then goes to a ministerial council. If it is passed, then, after there has been input—regulatory impacts, a whole range of things—the states and territories then, by the nature of that process, agree to adopt the standard by reference. The fact is, none of that has happened here. In fact, FSANZ has already looked at palm oil and determined that it was not appropriate for them to go down this path. You guys can tell them that it is, but that does not mean that the states and territories, who have not been consulted in this space—and the ones I have spoken to are not all that happy about it, I have to say—are in a position, necessarily, to do anything.

Mr BILLSON: If that provision was amended to amount to a parliamentary notification where the Commonwealth of Australia was acting no differently from any other citizen, you would be less troubled by that?

Ms Carnell : The states and territories have responsibility for labelling in this country. They could decide they did not think that was appropriate, but at this stage they do. We have got in place a pretty solid system to ensure that labelling, wherever possible, and that is mostly, is consistent, not just across Australia but across New Zealand as well.

What you have done with this bill, one way or another, is circumvented a system that has as part of it things like treaties between Australia and New Zealand to ensure there is consultation in place before this sort of thing happens. I think you have to say, 'Why is the system in place?' The system is in place to have consistency, to have good evidence, to have regulatory impact statements, and to ensure that there is consistency, that the states and territories have responsibility in this space.

Mr BILLSON: Are you against the Commonwealth activating any FSANZ-related activity because of that, or are you unhappy about the way the activation has taken place?

Ms Carnell : It is about the method. The Commonwealth, similar to AFGC or anybody else, can put in a request to FSANZ to get that process underway. There is a process. The states can do it. All sorts of people can do it.

Mr BILLSON: So the process was untidy but the concept that it was not unreasonable for the Commonwealth of Australia to ask FSANZ to do some work—

Ms Carnell : You have not asked. You are legislating to require the—

Mr BILLSON: No. I understand. You have made that point three times, and I am grateful for the repeated clarification. My point is: if the purpose was to have FSANZ activate a process, you are not of itself opposed to the Commonwealth doing what any regular citizen could do and get FSANZ to get cracking on the work, and then all of that wonderful gymnastics that sees things take forever can take their course; you would not be against that?

Ms Carnell : Everyone has a capacity to do that. FSANZ has already looked at palm oil—

Mr BILLSON: I understand that too.

Ms Carnell : What you have done now by legislating it is you have circumvented the system.

Mr BILLSON: I got that. Call me perceptive—I picked that up the first of the three times. Thank you for that. On the emulsifier example you provided, if there is an emulsifier which is 0.02 per cent of a food product and it contained palm oil, would the words 'vegetable oil' appear on the label as a direct consequence of that item only?

Ms Carnell : Yes, it would. The issue here is that if ACCC gets a complaint, will it be reasonable or will it be perceived as okay for ACCC just to write to the company and say, 'Is there any palm oil in this product?' They say, 'No'. The ACCC says, 'Thank you very much'. Will the ACCC have to investigate?

Mr BILLSON: They have a range of tools available to them.

Ms Carnell : If they had to investigate, it would be incredibly difficult.

Mr BILLSON: They have a range of tools available to them relating to representations that are made to consumers—and you would be aware of those. Hopefully we will hear from them later about how they would approach such an issue. The point I am making is that the extent to which there would be some representation being made in the first place has a bearing on what that representation is and the accuracy of it. I am seeking to establish at what point a label in the example you offered—not me—would have some language saying 'vegetable oil' appear on a label that you were saying was so minuscule why would it appear? I am saying that, if it is so minuscule, would the term 'vegetable oil' appear anyway? If it were so minuscule that it did not trigger the need to list it anyway, you are making up a problem that does not exist. I am curious about how you would respond to that question.

Mr Mahar : It comes back to the issue we made about the actual analysis and determination of the fatty acid in the product and whether that comes from coconut oil or soy oil or some other oil which can be called 'vegetable oil'.

Mr BILLSON: I understand that. It was not my example—it was yours. I am trying to follow the logic of that.

Mr Mahar : At the moment it is oil. As we have said, it can come from a whole range of sources. Vegetable oil could be included on the label, but it does not necessarily mean that you can determine where that vegetable oil comes from—the source of that vegetable oil or those fatty acids.

Mr BILLSON: The extent of the burden that you were referring to is a burden that exists now anyway. You were pointing to the degree of specificity of the vegetable oil content being microscopic—which of itself might be a problem as it related to palm oil. I am trying to be clear on what your argument is.

Ms Carnell : It would be a problem for ACCC if ACCC were required to go and investigate whether the statements made on the label or the statements made by a company were right or not.

Mr BILLSON: I understand that. We will ask the ACCC about that. From the evidence you are providing on behalf of your industry, there would be an obligation to list it as vegetable oil anyway—on your 0.02 per cent argument that I understood to be your evidence. That is already there. On the issue of it being vegetable oil, palm oil, are you saying that it would be an extraordinarily additional burden on top of a burden that has you doing something about it anyway?

Ms Carnell : I am not sure where you would end up needing to have a vegetable oil label. We will send you some information on that.

Mr BILLSON: I would be grateful for that.

Ms Carnell : Most importantly, though, oils change. The sort of oil that is in a product, particularly back there at the 0.02 per cent level. What is used at what time may be different.

Mr BILLSON: Yes.

Ms Carnell : A requirement, say, for vegetable oil is a bit of a catch-all. The moment you require palm oil to be labelled separately, it is not a catch-all anymore. Trying to go back into the small ingredients space and have potentially a change of label based upon an oil change in an emulsifying factory somewhere or other is an issue.

Mr BILLSON: I understand that argument. I accept that. That is why the framework of evidence that sits around it matters and why the need for notification. I have used this example before. This is not a food product; that is why the second part of it relates to informing consumers. Clairol have found that it is advantageous for them to mention palm oil in this more recent version of their Herbal Essence shampoo, whereas in this one, which is a bit older, they did not.

Ms Carnell : It is still responding to consumers.

Mr BILLSON: Which brings us back to where we started: that we, as legislators, need to respond to constituents and citizens. Perhaps that is why we are here today. Your final point was about truth in legislative labelling. You were unhappy about the Greens' bill being titled the way it is when it ended up not looking that way. You would appreciate there were substantial amendments to the bill.

Ms Carnell : I do.

Mr BILLSON: That is why it looks different.

Ms Carnell : I understand why it looks different. But you come back to a scenario of amendments—I am not going to get into where bills should be redrafted totally and where they should not, because that is a matter for others. At the end of the day, the FSANZ bit of the bill is superfluous to the bill. The issue here is the ACCC and the right-to-know stuff. It seems to me—we do not support the bill—that the bill has a bit at the front, which is the core bill, that is superfluous to the bill because it does not do anything.

ACTING CHAIR: We might move on.

Mr BILLSON: I would be keen if you would; I am happy to move on.

Ms SMYTH: We heard from you quite a lot about the need for an orderly process in regulatory reform. I want to extend that a bit and ask what your impression is of the mood of the industry that you represent and the consequences—in terms of its willingness and preparedness to engage in detailed consultations around regulatory reform in the future—of having things sprung upon it, so to speak, or raised outside that context. What does it do for the industry as a whole?

Ms Carnell : There are probably going to be a few groans when I make the comments that I am going to make. It would be no surprise to any of you that Australian manufacturing is under a lot of pressure at the moment. The Australian dollar is a significant issue. Input costs are going up. The margins that manufacturers are making in Australia have never been lower. So anything that impacts upon cost structure in the Australian manufacturing space at the moment is impacting significantly more than it has in the past simply because margins are so much lower. That said, the industry has been working really closely with government with regard to the Blewett report. We have a significant response. It is certainly not the case that industry is not willing to work through an established process to ensure that an outcome in the interests of consumers, voters and everybody else is put in place.

In this case we had what seemed like an orderly process—a Senate inquiry into the palm oil bill, where it was determined that the bill should not be passed. Two weeks later—or not terribly long after—it is passed, with no real input from industry. You could suggest that this is a bit of a sob story. It is not. This is the state of the industry at the moment. We need to be involved in a proper process where costs are going to be affected if we are going to have a robust industry into the future.

Mr BUCHHOLZ: Could I bring your attention to the part of the submission that is contrary to government process? It follows the theme of your other witnesses, who came before you. Can you run through for me why the bill fails to comply with the COAG agreement on the process of the development of policy and regulation through the Australia New Zealand Food Regulation Ministerial Council? How is that a blockage? How is that a pain?

Mr Mahar : As Kate was saying, industry is completely supportive of the existing processes around legislation development and implementation. We are of the view that this circumvents that and does not go through the established processes. Certainly from a food standards/ food safety point of view we think it undermines and does not follow the established procedures that we have outlined in that submission.

Ms Carnell : Let us be fair. There is a recommendation with regard to palm oil and other oils in the Blewett process. It is under way. It is subject to lots of consultation at the moment. It is there. Why not let the process run?

Mr BUCHHOLZ: Can you expand on the part of your submission that speaks to the issue that this is unworkable? You mentioned before that, even if it did get a run, it would get parked or end up as an email—it would sit on the web page of FSANZ. Why is it so difficult for the federal government—forget it is palm oil; let us focus on food labelling or any bill—to influence change? I take the point that the states are in charge of food labelling. Why is it so hard for the federal government to influence change there?

Mr Mahar : On this point, food standards are all about food safety. With regard to this bill, we do not think it is a food safety issue. It is not a sustainability issue. It is a consumer right-to-know issue. Food standards and food legislation in the states are all about food safety. It is outside their remit. If it is a consumer awareness or consumer right-to-know issue, as the bill says, it is in the Corporations Act. So it is about the Commonwealth trying to influence or have an objective for a particular reason, and it is outside food safety, which the states have responsibility for.

Mr BUCHHOLZ: With reference to the states and territories being in charge of food labelling, do any of your members, that you are aware of, produce a product for the international market and the domestic market that they would have to label differently for each of the states' differing food standards?

Ms Carnell : No.

Mr BUCHHOLZ: So they are fairly consistent—the states and territories?

Ms Carnell : We have had some scenarios from time to time where different states have interpreted food standards differently to other states. That is the reason that part of the government's current reform approach with regard to regulation reform has given FSANZ an interpretation part of their remit; so they can give states and territories advice on the interpretation of the standard. The issues in the past have been interpretive. One state interpreted a particular product, inulin, as to whether it was a fibre or a nutritive substance. It gets to that stage. A mechanism has been put in place by the government to overcome that sort of issue. Generally, the system in place has FSANZ, which sits under Commonwealth control to do the regulatory impact, to do what the evidence looks like, and put together the standard, and then there is a process to bring the states and territories and New Zealand on board along with the ministerial. The process is there to allow everybody to have a say—the Commonwealth and the states and territories and New Zealand.

Mr BUCHHOLZ: Given that the states normally agree and have fairly standardised food labelling—

Ms Carnell : They have lots of arguments before they agree.

Mr BUCHHOLZ: Of course they can. That is great. That is just democracy. I was trying to establish the point: are there vast differences between the states? Or, on the whole, all things being equal, is there a consistency through the states' food and labelling system? I bring it back to the question: would a producer or manufacturer have to label differently for each state if they were competing, sending to the global market and the domestic market?

Ms Carnell : There is consistency in Australia at the moment.

Mr Mahar : Absolutely. There may not be internationally, with perhaps some other countries—and we are talking about New Zealand specifically—but across the states of Australia no difference.

Mr BUCHHOLZ: In your submission, is COAG the body that would create that consistency for the states and the territories?

Ms Carnell : No. The FSANZ process does that. The reason COAG is in there is that the Blewett review is actually a COAG review. COAG was the entity that asked for the Blewett review under the government's deregulation or regulation streamlining policy. The point of the Blewett review is to look at streamlining labelling to get a better sense of what labelling was for, what the rules were, the hierarchy I talked about earlier, and to address a number of the issues that float around regarding what should and should not be on a label. It came out of COAG, although normally it would be out of the food ministers.

Mr BUCHHOLZ: Final question: is the Australian Food and Grocery Council happy with the labelling standards that are in place at the moment or would you like to see changes there?

Ms Carnell : We always have things that we would like changes on.

Mr BUCHHOLZ: We would like to talk to you in the future, then.

Ms Carnell : That is all right.

Mr BILLSON: I have one last question. If your argument is that these issues are better pursued through the framework advocated in the Blewett report, how long do you think that will take to bear fruit, and how does that timing relate to the 12-month lead-in from date of manufacture that the bill here talks about?

Ms Carnell : What is supposed to happen from here with Blewett is that the states and territories and Commonwealth are putting together a joint response to Blewett; I think it is taking a lot of time and effort to get everybody around the same table and so on. I understand that that joint approach will go to the food ministers in December, and that will go on to COAG at probably the first meeting next year, whether it is May or whatever. I do not know what would be accepted and what would not be. There is a process in place. I suspect that our view on the palm oil recommendation and others' views would be different. But there is a process, and everybody has an opportunity to have an input. We did not have an opportunity to have an input on this.

Mr BILLSON: We can talk about that later.

Ms Carnell : We have.

Mr BILLSON: If the 12-month phase-in were two years, could we be confident that the Blewett machinations would kick in before two years, and then the two years would say to the producers that if the Blewett thing does not kick in there is a default in place?

Ms Carnell : I cannot make a comment on what the outcome of Blewett will be. It is a matter for others.

Mr BILLSON: The final question concerns the European Parliament, the European Commission decision, on the compromise agreement on food information for consumers. I respect and admire your industry members who seek to export. I know how hard the future is with the carbon tax and all they have to face, and the cost pressures. But if your industry participants export to Europe, will they not be putting labelling on to meet European requirements that are more demanding than what is proposed in this bill? Would the Australian consumers think, 'Why are Australian manufacturers telling Europeans more about what is in their stuff when we cannot get it in our own?'

Ms Carnell : Absolutely. That would be on a cost-benefit analysis. Is it worth the cost to the benefit of putting your product into a new market? That is the voluntary approach that we are talking about.

Mr BILLSON: So the prospect of putting in 'palm oil' rather than 'vegetable oil' might turn a decision about whether to export food to Europe?

Ms Carnell : I am saying that the extra costs of getting into a particular market—that is labelling, regulatory and all sorts of things—are the things that are taken on board by a company on whether they export into a market or not.

Ms O'DWYER: You have talked quite a bit about costs and the voluntary scheme already in place and the impost that it will have on the businesses that you represent. By all accounts it sounds significant. I want to ask one question regarding regulation. Already a number of your businesses would be weighed down by significant regulation. Have you done some studies already, or can you provide us with some information, about the significant weight of regulation that your businesses are experiencing?

Ms Carnell : We are doing a piece of work right now, having a look at the various costs—the cost differential between manufacturing in Australia and our competitors. Regulation is obviously part of that, along with other costs. That work will be finished certainly by October. It is obviously a real issue at the moment, along with the Australian dollar and wages and energy and everything else.

Ms O'DWYER: We would have a very strong interest in exploring that further.

CHAIR: Thank you for your attendance here today. You have been asked to provide a number of further documents. If they could be sent through to the secretariat as soon as possible, that would be most appreciated. A transcript from Hansard will be available. If there are any errors or omissions, could you please forward them to us as quickly as you could. Thank you again for your attendance.

Ms Carnell : Thank you.