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Thursday, 4 June 1970

Mr SPEAKER - There being no objection, that course will be followed.

Dr PATTERSON(Dawson) [10.481- - The Opposition supports the 6 Bills.

These Bills are principally a combination of machinery and policy measures. The proposition which has been advanced is badly needed in the dairying industry today in view, firstly, of over-production and its effect on equalisation and, secondly, of what one might term big businesses starting to enter the dairying industry. The equalisation scheme, which has been in operation since 1934, is based on a system of voluntary agreements between those manufacturers who participate in the equalisation scheme and the Commonwealth Dairy Produce Equalisation Committee Ltd. Apparently the voluntary principle of the equalisation scheme has worked well. One of the main weaknesses in the equalisation scheme is the dependence on its being voluntary. As a layman, one can interpret the term 'voluntary' to mean that by law there is nothing to stop the manufacturers pulling out of the scheme al any time they like. Although this might be an extreme point it is, nevertheless, the usual definition of the term voluntary' as opposed to the term compulsory'.

The equalisation principle has been the backbone of the dairy pricing system for a long time, lt is becoming obvious that the rapid increase in dairy production in Australia is causing some equalisation pressures. It is not difficult to understand the actual pricing system itself. In simple terms it is a weighting between the export realisations and the domestic realisations and if one is greater than the other in terms of a proportion or a weight that particular one must influence the average price. If the export percentage is higher than the domestic percentage and the export price is lower than the domestic price then, of course, there will be a downward trend in the actual realisations paid to the grower as production increases. This, in fact, is what is happening, and happening at an alarming rate.

The production estimates, as given to us by the Minister for Primary Industry (Mr Anthony), for the level of production in 1970-71 indicate that it could be as high as 230,000 tons. If this happens, every additional pound of butter has to be either sold on the export market or stored. Stocks are increasing. The level of stocks is estimated at 5,000 tons in this season and 15,000 tons if the level of production reaches 230,000 tons, giving a total in almost 12 months time of something like 20,000 ions.

There is a wide gap between the domestic price and the export price and this is the basis of the equalisation price. With the domestic price on a basis of approximately 47c per lb and an average export price of 20c per lb it is clear that when the average is weighted we will get a decided bias in favour of the lower export price. If this export proportion continues and the Government honours the undertaking to underwrite the returns for commercial butter to 34c per lb this, as has been explained, could involve the Australian taxpayer in something like $20m on top of the S27m per annum under the stabilisation plan. This is getting into the realms of big finance.

I said last night, and it might be worth repeating, that there are only 2 answers to this problem - either we have to find more markets at satisfactory prices or we have to reduce production. It is obvious that the dairy industry itself and others have not been successful in finding markets at satisfactory prices to take account of the increased production which is threatening, one might say, the industry today. The only alternative is to reduce dairy production in order that the equalised price will be higher simply because there is a reduction in the total amount of butter sold for export. But the main point is: How are we to reduce production when most of the increase is coming from Victoria? I point out that 80% of butter exports today are from Victoria and 64% or 65% of total production is from Victoria. It seems to me that the attitude of the Victorian Government towards the dairy industry is that it could not care less. At least that seems to be the attitude of the Premier of Victoria, even if it is not necessarily the attitude of all his Ministers. All that is being achieved by the Victorian Premier encouraging more land to be cleared and more water to be used for the dairying industry, despite its efficiency, is an average equalised price throughout the rest of Australia, including of course Victoria. But the burden is falling more on other States. This is a situation which cannot be tolerated. On the other hand, the policy with regard to production levels is entirely a matter within the sovereign right of the State.

Because I made most of my points last night in the debate on the Marginal Dairy Farms Agreements Bill I wish to refer only to a tendency which is developing in Australia today of big business entering into fields which previously were foreign to it. I have seen this trend in America with respect to meat. The supermarkets have come into the beef industry as big buyers and have had a tremendous influence on the cattle sales and the final price of beef. In Australia there would be nothing to stop chain stores, monopolies or oligopolies deciding to enter the field of butter manufacture or dairy products manufacture and to tie up dairy farmers by offering specialised prices, in the end having the producers at the mercy of big business. This is the sort of thing against which this Bill will safeguard.

The Labor Opposition has always subscribed to orderly marketing and has always subscribed to stability. If there is one way to wreck the stability of any industry it is to allow an instance like this - big business suddenly to come in and take control of manufacturing processes such as butter factories and then to dangle the carrot before the dairy farmer as we know has happened in other industries. Before long this brings about a breakdown of equalisation or stabilisation. The main purpose of this Bill is, if events like this happen, to allow the Government to have the power, or the various statutory committees to have the power, to be able to counter the situation immediately. This compulsory scheme will stop practices of this type. As I have said before, it is essential that this type of practice be stopped. I instance the case of what could happen in the beef industry in Australia and I warn the industry to watch its step because of the growing power of chain stores like G. J. Coles and Co. Ltd and Woolworths Ltd. Once the chain stores get power it will be the end of the little butcher shops, particularly in provincial cities where already they are finding the situation quite difficult. If the chain store can send a representative to the saleyards and buy, say, 500 or 1,000 bullocks at a time, day in and day out, week in and week out, it will not be long before it has a very sizable grip on the market. This has happened in the United States.

The great power of monopolies and oligopolies has reached right into the cattle market and eventually has forced down prices. Eventually it is the farmer who pays. He is the one who suffers. Big firms like these work on the principle of turnover. Their profit margin is small, whether they are dealing with beef or dairy products. While working on a small profit margin they are out to cut the price so that before long cut throat competition is entering into the business.

Debate interrupted.

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