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Milk prices to drop -

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Reporter: Michael Edwards

ELEANOR HALL: The price of milk has just dropped by more than 10 cents a litre.

The fall is not because of declining economic conditions but because of the expiry of a levy that
was brought in to help dairy farmers adjust to the deregulation of the industry.

Most supermarkets are expected to pass the cut on to consumers.

But consumer advocates are asking why it took so long for the Federal Government to drop the levy.

Michael Edwards reports:

MICHAEL EDWARDS: After years of fighting drought and an ailing export market it seems dairy farmers
have finally been given a break.

The price of milk per litre is now 11 cents cheaper because of the expiry of the Government imposed
Dairy Adjustment Levy.

Graham Anderson is a dairy farmer from Denison in eastern Victoria. He says cheaper prices should
mean more milk is sold.

GRAHAM ANDERSON: So I believe now that what it's going to do is hopefully benefit the consumers of
our product and they might buy some more and drink some more and that would be the only way it
would benefit us.

MICHAEL EDWARDS: The Dairy Adjustment Levy was introduced at the start of the decade to help
farmers adjust with the deregulation of the dairy market.

Deregulation forced many producers across Australia out of the industry.

Graham Anderson says it was a hard adjustment period.

GRAHAM ANDERSON: Well in other states in Australia it was tough because a lot of their market of
their milk off the farm was sold as liquid milk and the liquid milk market was deregulated and when
that was deregulated they lost a considerable amount of revenue through that.

MICHAEL EDWARDS: Christopher Zinn is the spokesman for the consumer advocate group Choice. He says
the cut in price will help consumers during tough economic times.

CHRISTOPHER ZINN: Food inflation is back on the move again, about 5.6 per cent at the latest
figures, so the price of anything, especially a staple like milk which most families buy a
considerable amount of, to see that go down that will be welcome.

And as I said, while it doesn't make perhaps a huge difference to the individual on a weekly basis,
you work out in terms annually then that is a bit of a difference. And certainly when you aggregate
it up in terms of the whole population that's $250-million that is very handy in anyone's language.

MICHAEL EDWARDS: But Christopher Zinn does question why it took so long for the levy to be scrapped
given deregulation happened almost a decade ago.

CHRISTOPHER ZINN: It was originally at one stage extended to 2010 so we should be grateful that
it's actually ended in 2009 but I think it will come as a surprise to many consumers to know that
there was any levy on milk at all or indeed the reason would seem quite historic to most of them.

So look, it's raised about $2-billion apparently and that has helped provide payments to the dairy
businesses- that's fair enough, that was promised. But now thankfully we've got rid of it so that
really makes a difference.

ELEANOR HALL: That's Christopher Zinn from Choice ending Michael Edwards's report.