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Thursday, 4 June 1970

Mr GILES (Angas) -! do not altogether share the undue optimism of the honourable member for Riverina (Mr

Grassby), who has just resumed his seat, but I do take note of the fact that he suggests - 1 am not aware whether on behalf of his Party or not - that we should try to sell dairy produce to Communist China. The list of major countries to which we export butter - the butter sector of the dairy industry is the one with the terrifying prospect - still shows a very great dependence on Great Britain, namely, to the tune of 85%. That situation has not altered from 1956 to 1969. The countries in respect of which there is a more favourable trend are Japan and Hong Kong. The Singapore market is approximately the same. The Ceylon market is approximately the same, lt is very small. Germany and Italy were once markets but are no longer markets.

What 1 want to do tonight is carry on from what I said on the Marginal Dairy Farms Agreements Bill last night. If my memory serves me rightly, I referred lo that Bill as one factor in the reconstruction of the dairy industry. Most of my suggestions tonight will fall directly under the legislation dealing with equalisation. I start by pointing out the different patterns in production between some States and others in order to see whether there is something the Federal Government can do to encourage certain trends. We have known for very many years now that we must do something to discourage the manufacture of buller, lt is quite apparent, from figures that I will read in a minute, that per capita consumption is falling. The reason is not all due to the increased price of butter; nor is it all due to any intrusion into the market by margarine. There are other factors.

We are faced with this position: In South Australia we are producing 17,000 tons of cheese a year and only 7,000 tons of butter. In Victoria the pattern is precisely the opposite. lt is producing 29,000 tons of cheese a year and 136,000 tons of butter. It does not take much of a genius to realise 1 ha on those production figures South Australia is a net importer of butter. If the position of every State approximated the South Australian position, we would not be faced wilh the terrifying prospect in terms of surplus production to which other honourable members have referred tonight. That is the first point that I would like to make. The pattern is probably traditional. South Australia has always been a State that has produced a lot of cheese, but the comparisons are quite ridiculous. South Australia produces about 2i times as much cheese as butter, and Victoria produces about 5 times as much butter as cheese. I wish to give a few more statistics in respect of butter because I believe that they are important. Australian butter production in 1969-70 was in the region of 220,000 tons. The average production over the previous 5 years was 200,000 tons. The expectation for 1970-71 is 230,000 tons. The return to the producers on that production is estimated to be in the region of 30c per lb of commercial butter. Earlier I referred to the per capital consumption of butter. I believe that the following figures have some importance: In 19SS-S9 the per capita consumption was 27.2 lb; in 1965-66, 21.7 lb; in 1966-67, 21.8 lb; in 1967-68, 21.6 lb; in 1968-69, 21.1 lb; and in 1969-70, 20.6 lb. That pattern shows the inability of the home market to absorb the estimated increased production of butter.

This is not the pattern wilh city milk. I will not produce any figures on this matter because I think all honourable members have probably absorbed to one degree or another the facts. Two separate projections show that on the average there has been a fairly healthy increase in the production of milk- But even this commodity is subject to competition from alternative types of production. We do not know, for instance, whether in 20 years time the commodity that is sold at the back door as milk today may be constituted of something quite different. Already one can see the problems that are being created by reconstituted milk and its variations. Some of those dairy farmers who are in economic areas at current prices are being deprived of the livelihood that they used to have. I am referring of course to city milk areas.

I look on the Marginal Dairy Farms Agreement Bill, which we debated last night, as a very important factor in dairy reconstruction. The second point I have mentioned is whether dairy reconstruction in the States can be encouraged along the lines of what is happening in South Australia. I believe that in the short term we will have to register dairy farms. I believe that in the short term we will have to strike some form of equality. If we do it will overcome a temporary situation. There are valid reasons, which I will not discuss now, why this Bill should not be setting the status quo with probably a misallocation of resources in the long term. The third point I would refer to is a long term one. The honourable member for Braddon (Mr Davies) mentioned this in his very detailed and very lengthy speech which he concluded a few minutes ago. He referred to the fact that there was nothing in the Government's Bills at this stage or in any other action that tended to limit production. I suggest that there is, and that is that in time sheer returns to dairy farmers will probably limit production. They are doing so in at least 2 States now. I agree with this point and I think that something needs to be done.

I intended tonight to go very fully into the 2 tier system. I would suggest if 1 may, with respect to the Minister for Primary Industry (Mr Anthony), that he and his officials should have a very careful look at a long term scheme such as this and if necessary introduce transferable quotas that will cause some limitation of production over the years whilst ensuring that at least some proportion of the farmer's income is based on firm sales on a home market. The next point I would like to mention is the one of merchandising and other processing and distributing sector problems. In 1968 the Australian Dairy Industry Council held a seminar. Apart from 11 papers on technological subjects many papers were presented on marketing and promotional problems. Not one of these papers, some of them of great importance to the dairy industry, has seen the light of day. I suspect that the answer is not that they give information to competitors such as the margarine industry. I suspect that there is reason to suppose that some of these reports would be too worrying and too costly for the manufacturing -sector of the industry to put into practice. I regret saying that, but I have a strong suspicion that I am correct in so saying.

My next point is a major one. I think governments, members of parliament and dairy farmers need to be aware of it. With the concurrence of honourable members, I incorporate in Hansard the following table which compares manufacturing costs per ton of butter fat in Australia and New Zealand:


Factory Statistics Related to Above


The factory costs in Australia are derived from a sample (22) of Australian butter factories, with an average production of 2,287 tons annually, the aggregate production or the 22 factories in the sample being equal to 26.09% of total factory output in Australia. Although it is not officially admitted, the above cost figures are significantly inflated above a true average owing to the refusal of large, and hence low-cost, factories to participate in the costing sample. In 1964-65 the 40 factories in the sample produced 40.45% of total Australian output.


The factory costs in New Zealand are the average costs of all butler factories in the Dominion, with an average production of 3,304 tons annually.

The implication of these figures, if we ignore the breakdown of them, is that in New Zealand manufacturing costs per lb of butter are 2.8c. The manufacturing cost in Australia is 4.91c. The difference is not due entirely to the fact that dense cattle populations surround the factories in New Zealand. I would suggest to the House that these figures are borne out by a look at the details. The difference is not due entirely to the fact that lower wages are paid to employees in New Zealand, either. I suggest to the House that in Australia - and I refer to the north coast of New South Wales and areas of South Australia in particular - there is no room today for factories which do not have enough volume of through-put ever to be viable. We are up against the fact that ail sorts of parochial and loyal interests are maintaining these factories in their present uneconomic condition. Some of them exist purely for parochial reasons.

The dried fruit industry and the apple industry in my electorate are quite similar in that so many small towns have, for better or for worse, a factory which they loyally support regardless of the cost of production and, naturally, regardless of the effect that the use of that factory has on the total cost of production. I do not believe that the dairy industry is at a stage where it can afford to support factories which are uneconomic. I can think of one area where every 2 or 3 miles there is a dairy factory. Not one of these factories is economic. Not one utilises its plant to the fullest extent. Several of them have siro-type cheddar masters working a minimum number of hours a day although these are designed for continuous process. This is the general pattern which applies throughout these factories. I can think of cartoning plants in some areas which are not utilised.

I am in a quandry in regard to this legislation. I support the Bills which are before the House. I think we have to support them if we are to give the dairy industry any chance of climbing out of the rut it is in. But I do suspect that hidden in the equalisation figures is the fact that many of the processing and manufacturing plants on which the dairy industry depends have lost track of competition and are not competing against each other. Co-operatives, which operate at a great advantage because of the taxation benefits which accrue to them, are not proving to be the competitive forces that they should be to other proprietary firms. I am horrified at their lack of ability to meet the changing conditions. I think that this is a problem of which honourable members should be made well aware. Honourable members on both sides of the House should be prepared to go to the people in these areas and point out that every time there is an increase in the price of butter by far the majority of it goes to the manufacturing sector. Nobody would mind an increase in the price if an efficient job were being done, but I very much suspect that this is not true. I do not think that the industry is getting the productivity that it should be getting for the number of reasons I have tried to explain to the House tonight. I make these suggestions because they form part of the contructive changes which are necessary in the dairy industry. I believe that we have to face up to the fact that we must get tough with the industry itself in our negotiations.

I have in front of me a paper which, I think it is true to say, has been presented by the Minister for Primary Industry on behalf of the Australian Dairy Industry Council. Some of the conditions and some of the requests to which it refers are, to my mind, quite stupid. I am speaking as a man who has had experience in the dairy industry. Somehow or other we have to prevail on the industry to meet the changing conditions, not to be frightened to do a bit of experimenting and to use some imagination in the production of new products and the marketing of them. I am very serious about this matter. I would like to take a lot more time to develop my suggestions in depth, but as the hour is late I shall resume my seat. 1 support the Bills which are before the House.

Question resolved in the affirmative.

Bill read a second lime.

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