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Select Committee on Australia's Food Processing Sector - 18/04/2012 - Australia's food processing sector

CLARKE, Mr Stuart Grant, Director, Food Industry Development, Department of Agriculture and Food, Western Australia

Committee met at 15:02

CHAIR ( Senator Colbeck ): I declare open this public hearing of the Senate Select Committee on Australia's Food Processing Section. This is the committee's seventh public hearing. There are further public hearings in Canberra on 11th and 15 May. The committee's proceedings today will follow the program as circulated. These are public proceedings.

The committee may agree to a request to have evidence heard in camera or may determine that certain evidence should be heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to the committee. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, the witness may request that the answer be given in camera. A witness called on to answer a question for the first time should state their full name and the capacity in which they appear and witnesses should speak clearly into the microphone to assist Hansard to record proceedings.

Welcome, Mr Stuart Clarke from the Western Australian Department of Agriculture and Food. Thank you for your submission to the inquiry, which is No. 23. I invite you to make a short opening statement before we move to questions from the committee.

Mr Clarke : Thank you very much for the opportunity to provide evidence to the committee. The written submission there is quite substantial, covering a broad range of issues in the food industry, and the food system as such. From our perspective the food industry and the food processing sector are worth support. We are very passionate about supporting them because they have such an implication right through the community. They provide employment, wealth and population health outcomes for our community and, in a lot of ways, countercyclical opportunities for the whole economy. We believe the food industry and the food processing sector are under a lot of pressure from various aspects such as the high Australian dollar, but if we can support those food businesses to get through these tough times we will have world beaters in the future as things change and opportunities. Without any further explanation I will invite the committee to ask questions or speak to the submission.

CHAIR: You have constructed your submission very much in the terms, and around the parameters of the National Food Plan.

Mr Clarke : That is correct

CHAIR: I see sense in you doing that from a Western Australian government perspective. I appreciate that. I would just like to look at a couple of issues that you have listed, and perhaps the others will be asking questions in that context as well. You look at improving the long-term profitability of the agriculture and food sector, and I think that underpins what we are looking at in respect of long-term viability of the food processing sector. But from the government perspective here, and one of the things that have been major issues for us and have been discussed a lot during the inquiry, is the stated intention of the supermarkets to harvest a margin out of the supply chain, which will apply pressures back down through the system. What do you see from a Commonwealth perspective that we can look at and that can deal with some of those issues—obviously state governments have their own levers that they can pull to deal with some of those things—but from a Commonwealth perspective, what do you see are the mechanisms that we may be able to use to deal with that?

Mr Clarke : A significant pressure that the food processing sector operates under is the very concentrated retail market. By all measures the retail food market in Australia is one of the most concentrated in the world. That has certain implications. The logic of having a department responsible for agriculture and food was recognised back in 2006 and that logic really saw the development support that a government could provide flowing all the way through a chain. That meant all the way from agriculture through to retail. As we have operated more and more beyond the farm gate, the department has understood a lot more about the food system and the food chain and the players within it, and started to work more closely with those players to provide support, encouragement and incentive to develop a local food industry. One of the examples of that is the local program we run, the Buy West Eat Best branding program. That has allowed us to have conversations and work joint-venture projects together with retailers, food processors and agricultural producers, which we did not have before. It is promoting our local produce to local consumers. In a similar way, the Commonwealth could do that on a national scale. It could work very closely with players beyond the farm gate, all the way through to and including the supermarkets, to provide those support mechanisms at various points in the chain. From the consumer end it could promote local products for local consumers to get the market pull. That would go some way to removing constraints from the chain so that the margins enjoyed by those further down the chain can be improved, notwithstanding the pricing power that the supermarkets do have. I think what you are alluding to in your question is what can we do about that pricing power that concentrated retail players ultimately have. We have been working in WA on a project called Pathways to Market. That is to provide local producers and local food processors with alternatives to the retail market. If you take the retail market as a given, and if you take the power that the current players have in that market as a given, then you need to find alternatives to that retail market—and this is what a lot of progressive food businesses are actually doing. We have been providing support for the local food processors to pursue non-retail sources of market—the catering industry, for instance, in the Western Australian economy. Obviously the mining and petroleum industry is drawing a lot of demand for catering product. Several of the local food processing businesses have geared themselves and shifted their business to take advantage of that, and they have expanded and become very successful as a result—to the point where they have reduced or even completely removed their retail or export offerings. That for us is an example of an alternative path to market that has prospects and prosperity for local producers.

In a similar way, at a national level, if the Australian government continued to focus on an export market and did as much as it possibly could to support food processing exports, you would start to give food processors alternatives to the local concentrated retail market—that is, if you assume and take as a given the concentrated market and the power that those players have within that market. If you do not take that as a given, if you want to do something about that—and I do not want to be providing policy advice and choices—there are obviously ways that you can make sure that market mechanism is working as well as it possibly can given the power of the players in the retail sector.

CHAIR: I might take you up on the export alternatives. I think that is a good point. It is obviously a very viable alternative given the projected global food demand and supply over the next 20, 30 or 40 years. From a Western Australian perspective, what are the inhibitors? What might we be able to do in relation to encouraging or assisting with export as an alternative path to market? Bear in mind that WA market is almost distinct from the eastern states. To a certain extent, there are some linkages that come out of here to international markets that are not necessarily recognised or all that visible for some people in the eastern states—and perhaps some lessons could be learnt from your experience over here.

Mr Clarke : It is a good distinction because many food processors in WA consider their local market to be to the north, rather than being in Perth or to the east. The opportunities, by all accounts and by all the trends that we have looked at, are definitely there. The expanding population and the expanding middle class, particularly in China and India, are going to be drawing that demand. We can take as a first principle that there is going to be that demand for Australian food processed product. There is also a continuing swing and move in the international market to trusted food suppliers. Obviously the recent scares and examples of contaminated product around the world allow Western Australian and Australian produce to stand out as being distinct in that sense as well. So I do think we do some advantages there.

What do we have to do to take up those opportunities? What are the enablers to reach that market? How do you actually make your food industry thrive in a market that has such strong international competition? internationally there are far larger scale operators than we have in Australia, and certainly in Western Australia we have relatively small operators. What is it that you have to do in the market to beat those international competitors? First of all, you need an enabling environment: an operating environment that is as low-cost as you can possibly make it. That is something that all governments in Australia can do, to provide support to their local processors. Those enablers include low-cost regulation, support for infrastructure, support for logistics in particular and the like. That is a kitbag, in a way, of levers that can be pulled to lower the cost of doing business. One of the big ones that is clearly the responsibility of the Commonwealth is the export licensing. We have heard recently from several food processors that that is actually getting quite costly, simply to get the—

CHAIR: Export fees and charges.

Mr Clarke : Export fees and charges, yes—and they have recently gone up. That does not help things, obviously. It is a clear discouragement and a business cost, and one that sets the intent to invest back. So, regardless of the Australian dollar being so high, and international competition, if we have an enabling environment we are sending a signal to food processors that this is going to be a high-cost venture and one that is going to continue to increase from government cost. That is not a signal to invest for food processors in the export market. That is something that can be addressed.

CHAIR: So, particularly for a small operator in a market the size of this, if it is $10,000 or $15,000 just to register an export premise—

Mr Clarke : Those are the example, yes.

CHAIR: And to maintain that. That provides a significant inhibitor to getting into the market.

Mr Clarke : Yes. It is the bottom line impact of that, but it is also the signal that it sends. A food business has to gear themselves up; they have to become accredited. They have to change their food premises and invest in new facilities, new equipment to become export accredited. They are not going to do that if they get a signal that this is going to be a high-cost venture and an increasing cost for that particular market. They will do that. They will bear that cost if they get a signal that they can confidently invest and that there is a government that is there supportive to try and reduce those costs. If that is the signal that government can send in all its forms, so there is not just the export licensing, but many costs of doing business that are government related, then a business will make that investment.

CHAIR: So what about access to the markets and assistance and market intel, if you like, in accessing those markets?

Mr Clarke : Again, taking the principles that we have used in the Pathways to Market project, it is about government providing that first step non-competitive, in a way intel, to be able to lower the cost of search and entry for businesses in certain markets. There is a great network: Austrade does provide that international network, but I think the real trick there—and as we have engaged with Austrade and we have WA trade officers around the world as well—to provide intel that is specific to the business. The size of business and the type of offer that they gave needs to be tailored to the market opportunities that are out there. Making that connection between the two is something difficult. It is something that as a state government agency we are trying to provide. We are trying to provide the intel of the supply offer that is here, ready and waiting, to be connected to the market opportunity. That connection is sometimes a mismatch, where the market opportunity is often too great, out of the reach of the scale of those that are operating here and out of the knowledge base as well. One of the things that can overcome that is an inward investment, so investment in local production that also brings a market with it. That is another opportunity as well. It is not just a trade attraction; it is also trade and investment attraction that brings the market opportunity along with the investment in capital.

CHAIR: So, in a sense, you have to first have an understanding of what is in your own backyard so you can identify what the potential opportunities are?

Mr Clarke : Correct.

CHAIR: And then create some of the linkages that might work for those having a sense of capacity to actually deliver into those particular markets. That is the role that your Western Australian based trade people deal with?

Now you have mentioned Austrade. That is a pet topic of a colleague of mine sitting to my right and I am sure he will want to talk to you about it a bit further once I have finished. How do you interact with those agencies to ensure that the service offerings actually work together, or is it that you are forming part of a network that feeds information from Western Australia on a local offering and then you are seeking out what the opportunities might be in the various markets in different countries?

Mr Clarke : It is at a few different levels. There is the broad market scanning that all Austrade officers do and provide—so what are the trends and is this a prospective market in the first place? So that is the first step. The second step is getting deeper into the market and disaggregating it into those areas or sectors that are most prospective. That actually takes a lot more of a one-to-one relationship. We have a group within the Department of Agriculture and Food called the Trade Development Group and they make that connection with Austrade officers and Western Australian trade officers. One step deeper than that is that in the past we have actually placed personnel within those Austrade offices, and linked them up with WA trade offices as well, specifically tasked with food and agriculture market analysis and networking and making connections. Obviously, Austrade officers cover all trade and all products and often food and agriculture opportunities and the specific analysis that we need get lost, so this is one way of drilling even deeper into those markets and working to figure out who are the likely market partners with likely market opportunities to connect up with a local capability. Again, that is about building a relationship and building an information flow that allows us to get to our local suppliers with something that is real, something that (1) they can reach and (2) they can build a relationship with and ultimately a deal as well. The deeper you go the more investment you will need to make those connections and lower the cost of search and linkage between the market opportunity and the supply offer.

CHAIR: So how does a business plug into that?

Mr Clarke : By various programs. We go by market and we go by product as well within the department. First of all, they will come to us and say, 'Look, we're looking to expand to the export market so what are the opportunities and where are the prospective markets for our type of product?' and the discussion then channels where their effort might be put and then we link them up with the programs that we have running. They can be programs linked to trade shows—so they are stepping stones. Trade shows of their own accord are great, but it is about the relationship before and after that you build that makes the deal. Also there are the other delegations, being inward and outward delegations, and the market analysis that they are doing while they are being on those trade delegations.

CHAIR: So what about cost to access?

Mr Clarke : That is a really good point. We try to aggregate those projects as much as possible to share the costs across. For instance, with trade shows it is about working with a group that actually makes its way over there, rather than individual businesses. So, again, that is a principle that we go by. The cost is borne in large part by our Trade Development Group through the investment that we make there. But, ultimately, the closer you get to a commercial deal the more the cost is borne by the business itself—again a principle that we go by.

CHAIR: The day before yesterday, I think, we were talking to an operator in South Australia who is a bit unique as a business. They are a fairly large business and they do export but they are actually a partnership. So, because they do not have an incorporated corporate structure, they fall outside the parameters of a lot of, if not all, government programs. How do you approach that as part of your business and/or market development here? It is something that we might have to have a look at in a broader sense as part of what we are doing from a Commonwealth perspective, and we understand that. Do you have those sorts of parameters around the way that you work with businesses here?

Mr Clarke : Just so I am clear about what you are asking: qualifying—

Senator EDWARDS: Sole traders as part of the—

Mr Clarke : Being a qualifying criteria for—

Senator EDWARDS: Yes.

Mr Clarke : Yes—cooperatives.

CHAIR: A cooperative is a corporate structure—

Senator MADIGAN: They are excluded.

CHAIR: But are they excluded from any government grants? I do not think they are. We will consider that as part of the whole deal as well. But, from a Commonwealth perspective, a sole trader or a partnership cannot receive a government grant program, and we will put a set of brackets around 'cooperatives'. I think Murray-Goulburn might kill that one off. Anyway, that is worth investigating.

Mr Clarke : From our perspective, we do not differentiate between corporate structures. To be clear, we do not offer export grants as such. Ours is a service and a networking offer rather than a grant. That may distinguish us from other states as well quite significantly.

CHAIR: The qualification was probably more about the Commonwealth. We have not had the conversation at the state level, but it was an opportunity to explore an issue that was raised with us in South Australia earlier in the week.

Mr Clarke : As far as a corporate structure goes, you mentioned the cooperative corporate structure. It is something that we have a capability to involve ourselves in as well, as far as providing advice and investigation into the type of structure that is appropriate for the business is concerned. For instance, if there is a need to aggregate product across a range of seasonal locations or a range of businesses, then a cooperative or collective structure may be most appropriate for that, particularly when you are talking about export markets. When you look at the supply expectation of the export markets, it is all year round, it is high-volume in a lot of cases, and it will likely overstretch a single business operator. So I can see the logic of limiting the criteria for Commonwealth grants to those corporate structures that are likely to be capable of reaching those export markets with the capital depth that they would have, but I could also see the logic of offering some kind of collective opportunity as well—several sole traders or partnerships gathering together into a structure that allows them to collectivise their effort and hit an export market together. I can imagine a regional collection of that as well—through consolidators would be a good example of that.

Senator EDWARDS: You say that your department has been operating since 2006. Has there been an increase or a decrease in manufacturers and processors since that time?

Mr Clarke : Since 2006 we gained the 'and Food' name to our department. The minister gained the responsibility for food manufacturing. During that time, I believe we have had an increase in the number of food businesses, but it is at the smaller end of the scale. The proliferation of food businesses in Western Australia has increased. The last time I checked, there was a slight increase in the total turnover and value of the food processing sector in Western Australia during that time as well.

Senator EDWARDS: What do you contribute that to: the rising fortunes of Western Australia, through the activity of bringing people into Western Australia to support the mining economy? Is that what we are looking at?

Mr Clarke : That is a big market pool for those businesses. The newer businesses that have arisen have taken advantage of the significant wealth in the economy. They are delivering to and supplying the likes of major coffeehouses and cafe networks. That has been a significant driver for those new businesses. I can think of one in particular. There is also the fact that channels are opening up for them as well. There is the catering industry, for instance. There has been an explosion in capability as a result of the market pool that has been there.

Senator EDWARDS: You have not seen a consolidation of processes in line with retail outlets. You have not seen a consolidation of processes where processors and manufacturers have also got bigger and the smaller ones are being pushed out by virtue of that. Have you seen a proliferation of growth in that market?

Mr Clarke : That is a good point. Since 2006, several of the larger food processors in Western Australia have gone to the wall for various reasons. Those that have been exposed and are reliant upon the export market have had some real difficulties.

Senator EDWARDS: Which businesses specifically, which industries?

Mr Clarke : Challenge Dairy is one example. Those larger businesses have had to weather the pressure of the retail market and the export market, which has been very difficult for them.

Senator EDWARDS: The export dollars nailed them—and we cannot do much about.

Mr Clarke : Correct. And if they have not been able to adjust to a domestic supply quickly enough and rationalise and consolidate, then they have had some real difficulties.

Senator EDWARDS: How do you measure the success of your department? You are effectively an enabler for businesses—from primary producers through to food processors?

Mr Clarke : Correct—all the way through.

Senator EDWARDS: How do you measure your success as a department?

Mr Clarke : That is a very good question. We measure our success with the projects that we execute and the business outcomes that we achieve as a result. We get direct feedback from the businesses that are involved in our various programs and we check with them at every step: 'Is this working for you? Is this giving you a bottom line benefit or not?'

Senator EDWARDS: And how are you going?

Mr Clarke : I think we are going okay. We are learning as we go, for sure, because it is about understanding those businesses as well as we possibly can. They are starting to become a lot more open with us. As an industry—and you will hear from the Chamber of Commerce and Industry in a moment—they are also getting their act together and understanding that they as a sector in the economy really need to collectivise their voice as much as anything and work together with government to overcome the many issues and constraints that they are facing.

Senator EDWARDS: In your submission you talk about government regulation and the complexity of modern regulation constraints—high direct and indirect costs for food and agricultural companies to comply with regulations. These things are obviously from other reports, but you have included them so you obviously think they have some credibility.

Mr Clarke : We do.

Senator EDWARDS: You say these outdated regulations are no longer relevant to the current economic environment or social situation. You are a government department. Are you having a crack at this?

Mr Clarke : Yes, we are.

Senator EDWARDS: What are you doing? This is wholly within your bounds. You have the ear of the minister. You say: 'We have put this in a submission to a Senate review on this issue. We think it is serious enough.' They are going to ask us why we have not done anything about it.

Mr Clarke : This is dear to my heart because there are constraints on business that can be overcome by government and, at the same time, that regulation can also enable those businesses. We have the rule of law and we have secure government. That is tradable. It is a tangible, investable benefit of the current system of government that we have. At the same time it seems that the burden of our regulation continues to mount up. As a department, we actually have very few regulations that we have direct responsibility over for food processing in particular and through the supply chain generally. But what we do have is an influence at the officer level and the CEO level between departments to try and reduce that burden. We have worked on specific projects—for instance, feedlots—where we have gone to those departments and worked with proponents to lower the cost. For feedlots the approvals process has gone from 18 months down to six weeks, without changing a single piece of legislation. So it is not about removing the legislation, it is not about supplanting the policy outcomes that those pieces of legislation are trying to achieve; it is about making them work better. First of all, it involves providing some support and information to the proponents to understand what the legislation is all about. It involves investigating the process, stripping out the duplication and packaging the information. It is all practical, doable stuff.

Senator EDWARDS: You are talking about the red and green tape the Prime Minister talks about?

Mr Clarke : I am not familiar with the term.

Senator EDWARDS: You are talking about getting rid of different processes; the word you have used is 'enabling'. Have you had a look at the quality assurance system that processors have to go through? Do you have a view on that?

Mr Clarke : Yes, we do. We actually had a PhD student from Curtin University investigate the impact, uptake and business outcomes of quality assurance systems by food businesses of various sizes and various types. The result was that food businesses that wholeheartedly understand what quality assurance can do for the business take it on as a business practice. Those businesses that invest properly, accurately and cleverly in quality assurance get good business outcomes and market advantage as a result. Those that do not understand the advantage and do not incorporate it as part of their business end up with a very high cost burden from quality assurance.

Senator EDWARDS: Can I just take you to a different aspect of it. QA assessment and audits are now a business in their own right, aren't they?

Mr Clarke : Yes.

Senator EDWARDS: You talk about enabling, and we are talking about trying to sustain security of food processors in this country We have just left a processor. He has 12 audits. I will not bore you with who they are from, but they are all quite legitimate and they are all time consuming. He has to employ people to conduct them. They are non-productive, they eat into his profit margin and he no longer can afford to put people on the road to sell his product because he has got to have them in the factory telling people what to do. Are you doing anything about addressing the idea of a benchmark which everybody—whether it is a retailer, another processor, a catering company or a processor—has to accept? We need one standard, where we do not have to go through this procession of nonsense. I have a view on it; you might have picked that up.

Mr Clarke : Yes, I got that sense. We have not gone to that next step yet. We have done the investigation and we understand what the business impact is. We have not taken that next step and understood what it is that we can do to streamline, consolidate and rationalise those kinds of audit and QA costs. It is something that is on our radar; we have done the first step of the investigation. But it is a difficult field because, as I understand it, these are proprietary QA programs that each individual market is asking for. So that is a business relationship.

Senator EDWARDS: But you are the government; you can do anything.

Mr Clarke : As a government department, we can advise on it and see whether we can come up with a better system.

Senator EDWARDS: I understand that. It is a very big issue and it should be on your radar.

Senator URQUHART: In your submission you talked about labour shortages. We have heard from many food processors around the country who say that is a problem as well. The general view is that the industry is not sexy enough to encourage people to come into that industry. Some of the information we have received is that they are up against the wages and the pull of the mines in WA and Queensland. Can you elaborate a little bit more about that? We are here in WA and the mines are on your back doorstep. Do you have that same difficulty? Can you give us a bit more information about what you are trying to do to attract workers into that industry?

Mr Clarke : I am glad we got onto that subject because it is something we are doing something about. Nowhere suffers more than Western Australia from the influence of the mining and petroleum sector drawing labour and competing for labour with the processing industry. We have heard it from all different sectors—from agricultural producers right the way through the chain to food processors. Most recently we have worked with the baking and milling sector. Late last year they said to us, 'We need some sort of solution to this.' We investigated the options and came up with a few solutions. We recently had a workshop where we put in the same room access to pools of labour that the baking and milling businesses had not previously accessed before. These are recent migrants. We work with Communicare and other agencies who deal with recent migrants so that we can connect them up. There were lots of light bulb moments in the room, which was great, about how to access labour that would be appropriate for that particular business—people who are not likely to be pulling up stumps and taking off to the mining industry tomorrow because they have an interest in staying local with their community, an interest in building a relationship with their employer and a work ethic that is second to none. They are keen to be part of the community and to be gainfully employed. That is one solution for a particular type of labour, particularly unskilled labour in the food industry.

Senator URQUHART: Have you started to put any of that in place?

Mr Clarke : Yes, we have.

Senator URQUHART: What are the results?

Mr Clarke : The step that we are taking there is connecting those food businesses—the bakers and millers—with those agencies directly. They have been going through various other channels: labour hire companies and such. So it was an arm's length relationship or not a relationship at all. Those businesses are now liaising with those agencies to get that direct input. We held the workshop only a couple of months ago, so it is early days. In both cases, the businesses and the agencies were very keen to see how far they could go with that. It is to build an ongoing connection as well, understanding what the language support might be and what the initial training might be—making sure they come into the business with at least occupational health and safety training—and then building from that. We got the training providers involved in the meeting as well. The training council were there. They have a certain role to play also. It is several pieces of the puzzle, but the puzzle is coming together now.

Senator URQUHART: Good. Another issue you address in your submission is barriers to trade. One dot point refers to agriculture and food and the protectionist policy of trading partners. Are you talking about the trade agreements that we have got with other countries? Can you give me a bit more information on what you mean?

Mr Clarke : It is more the financial support, probably more so in agricultural produce than in food processing. The agricultural support mechanisms and financial support reduce the cost of production for overseas competitors way below what we can produce here. It ends up being a very difficult market to operate in; even though we may actually be internationally competitive and lowest cost as such, with that financial support for overseas producers it almost prices us out of the market. That is more the point that we are making.

Senator URQUHART: Thank you.

Senator MADIGAN: Further to what Senator Edwards was saying about QA et cetera, we heard an instance today of where a local council had conducted a food audit. As the chap said, there are different levels of QA auditing. Then he was visited on Holy Thursday, just before Easter, at one o'clock in the afternoon by a local council here in Western Australia, demanding to do an audit. That is one area, being local government here, where you could have some assistance for industry. We always hear about level playing fields, but there does not seem to be any level playing field on QA. If you have got a good, high standard, there should be one set of goalposts that people are kicking to, and that should cover everything. That would cut out a lot of red tape, wouldn't you think?

Mr Clarke : I agree.

Senator MADIGAN: We would have a true level playing field at least in one area of our own backyard.

Mr Clarke : Exactly. We would have a common standard that can be reached, taking the same principles that we have used with the feedlots. I imagine the way that we could approach that is to really get those many different layers of QA systems in the room, and agencies who have interpretations as well. It is not only the black-letter law, it is the interpretations of a standard that come to have an impact as well. That is something we found with the feedlot example.

Senator MADIGAN: I fail to see what role local government, the councils, have got in QA.

Senator STERLE: I would say, if I could help there, Senator Madigan, probably because there are so many shops and all that sort of stuff—market restaurants and so on—where they just all get grouped into one where common sense does not play a role—

CHAIR: I think there are areas where we could be looking to deal with that. This business has got a number of levels of food safety certification, from AQIS for export certification, and from Coles and Woolworths down, and yet to have imposed on them, at possibly the busiest moment in their entire year, a local council inspection, seems to me to be absolutely absurd when they are by nature required to comply with a whole series of higher level standards. It comes back to (a) I suppose, a certain level of common sense, but (b) a recognition of the governance line that this business would quite probably be regularly inspected by AQIS for its export certification. It would be regularly inspected by Coles and Woolworths for its supply certification—the list that they gave us—and yet for a local council to do a food safety inspection, an unannounced compulsory spot audit on Easter Thursday, seems to me to be climbing over the bar a little bit. Why you would pick on a business with that level of compliance built into its DNA, effectively, is a bit beyond us all.

Senator EDWARDS: And threatened with police intervention if they did not comply.

Senator MADIGAN: That is right.

Mr Clarke : It does sound an extreme example. The point that you are making there is a really good one, because seafood is classified as one of the high-risk food products. It has that level of regulation already built into it and, as you say, any food business in those high-risk product lines has to have it. Clearly, meat, dairy and seafood are examples. All I can say there is that the mutual recognition issue has been investigated, as I understand it, by the Department of Agriculture, Fisheries and Forestry to try to get that recognition of audit and QA systems from one to the other so that the auditing can be done once for many systems. They have had several years investigation of that. I am not sure how far they have got recently, but I know that they did investigate that. It is something that does burden businesses enormously and, as I said, we have taken a first step investigating that for the various sizes of business. We could use the same principle that we have used in the past for the likes of the feedlot—the regulation burden reduction project that we used.

CHAIR: Senator Edwards made a point to me a moment ago that we can spend a lot of time looking at the stuff—the usual response: we will look into it. But the reality is that what business is telling us quite desperately is that they do not want us to look into stuff; they want us to do something about it. The example that we have had given to us today, and cited to you, would be the classic example of where the recognition of what is happening up the food chain or the supply chain or the governance scale indicates that there needs to be some common sense and some recognition given to those levels of compliance that are imposed on the business.

Mr Clarke, we need to finish it there. Thank you very much for your evidence. We appreciate both your submission and your evidence here this afternoon. We are on a pretty tight timeframe today so thank you very much, Mr Clarke.