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Tuesday, 26 March 1985
Page: 899

Mr KERIN (Minister for Primary Industry)(3.07) —The honourable member for Gwydir (Mr Hunt) deserves 10 out of 10 for acting. Even the dries of the Liberal Party of Australia, including the honourable member for Bennelong (Mr Howard), are not completely dry-eyed after that exposition. I am not going to comment particularly on headlines because the results of decisions taken by Governments are far more serious than some newspapers seek to interpret. I am disappointed in the Opposition for raising a matter of public importance that focuses on one State. The big problem for the Australian Government-the national Government-is to try to get in place a national dairy industry policy.

The problem that has bothered sequential Australian parliaments and governments-at least back to 1934 when I think the first meeting of the Australian Agricultural Council was held, where I think the second item on the agenda was the failure of the States to agree on dairying-has always been that we have had six separate dairy industries and that each State has acted to preserve its own dairy industry. I freely acknowledge that each dairying State has particular problems to service its own metropolitan markets year round with milk, but at no time due to the powerful and vested interests that have grown up in each State, have the States ever been prepared to look at this industry nationally. I am not going to come in here and say that one State has been particularly persecuted or that one State has made particular gains. I resent the Opposition's attack in terms of divisiveness. Dairy farmers in New South Wales and Queensland refer to Victorians as Mexicans. That is not a very constructive way to go about things. Today we have the Opposition perpetuating the reverse sort of division. The reality is that Victoria is the largest dairying State. It now produces nearly 60 per cent of the milk in Australia.

When the Leader of the National Party of Australia (Mr Sinclair) was the Minister for Primary Industry in 1977 he tried to get some sort of agreement between the States then. Again, it was Victoria that held out. It has been the Victorian Government which has held out throughout the negotiations and discussions since November 1983 when the most recent final report by the Industries Assistance Commission brought down its recommendations. One of the very big problems that the Australian dairy industry faces overall is the fact that the Victorian Liberal Party, when in government in that State, for so long constantly encouraged dairy production whatever the market reality was. The sad thing today is that Victoria and, to a lesser extent, Tasmania now produce over 90 per cent of the exports in this country. That is why the pressure is falling most heavily on Victoria. It will be so and would have been so if no action had been taken. It would have been so if the Government had moved for total deregulation. Victoria would have borne the pressure of adjustment if the Australian Dairy Industry Conference scheme had been put into place.

It is nothing new for dairy farmers to be dissatisfied, because there are fundamental problems with dairy industries in the developed countries throughout the world. When I was in the United Kingdom recently I ascertained that the dairy farmers in that country were virtually stoning the Minister of Agriculture, Fisheries and Food because the European Economic Community tried to introduce some sort of quota system. In the United States of America, which I also visited recently, the same sort of process is under way. There is too much milk and too many dairy products are stockpiled. There is a big problem in this regard throughout the world. Australia does not have the problem those countries have because those countries have subsidised their industries to the hilt and have further engaged in subsidies to get rid of the surpluses. I am afraid that as a reality we have to take into account the fact that we do not have the treasuries of North America and the EC.

I put it to the House that sometimes tough decisions have to be taken. What the Opposition will concentrate on, of course, is opposition to the Government's tough decision. It will not concentrate on the problems of the dairy industry or their solution. There is no sense in the Opposition's taking refuge in the Cain-ADIC scheme, if I can so describe it, because basically it was not a feasible scheme, and I will get to that in a moment. The Cabinet takes decisions. There is no sense in making allegations about lack of consultation. That is really a bit rich when the Australian Agricultural Council met five times, the Cabinet met five times, and either I or my Department had hundreds of meetings with the industry. At those five Agricultural Council meetings the Victorian Government opposed entitlements tooth and nail-if I had time I would read out the minutes from the various meetings-and then suddenly it believes it can turn around on this matter. It did get some agreement, and again if I had time I would get on to the area of agreement and the reason why the Cabinet rejected the proposition as unworkable and infeasible.

Surely by this time the Opposition, with all the experience it has had in government, might have come up with some substantive, constructive policies on this industry. The Liberal Party does not take primary industry or rural policy seriously. I guess basically it has a philosophy, a reaction. I heard a commentator say the other day that the Liberal Party had not changed its philosophies since 1908. The Liberal Party is not serious about rural policy in this House, but it certainly is in the Victorian and Tasmanian parliaments. The National Party, of course, is a user party. I guess I could recite the policy on dairying that the coalition agreed to at the time of the last election. God knows when the Liberal Party will take some interest in rural policy. We might get a bit more sense from the coalition then. This is the policy from the rural specialists:

the Liberal/National parties are determined to improve the efficiency and economic viability of the Australian dairy industry. This will be achieved by improving industry accountability and implementing realistic policies on domestic pricing, imports, exports, underwriting and stabilisation. Marketing research and product promotion will be increased.

That is lovely motherhood stuff, but it does not really bear down on the problems of the amount of production. It does not really bear down on the inherent problems in the structure of the dairy industry. Let us get down to the fine detail:

domestic pricing will be freed up to attract sufficient milk production to meet Australian domestic requirements on a year-round basis;

In the deepest of the deep droughts in this country there has never been any problem, any worry, about the dairy industry's capacity to supply the market. The policy continues:

we will continue the Joint Industry Consultation Group discussions with New Zealand.

That is another nice motherhood one. God knows what the coalition means when it says:

the Liberal/National parties believe the Australian dairy industry should make the best use of economic production and minimum transport costs.

This is the really confusing bit:

Underwriting will be pursued to reflect established production patterns and market prices.

Underwriting is not pursued to reflect that; underwriting is pursued to take account of a sudden drop in the international price. The crusader who is now the spokesman for the Opposition on rural matters, the honourable member for Gwydir, has had one policy statement and he believes that I should have convened a meeting. I did, so I suppose his policy has been implemented. Let us make it clear: The Government's policy is for a long term viable Australian dairy industry. I and many of my colleagues were members of this Parliament during the mid 1970s and we, in this Government, do not want to see the pain of that time repeated. There is no sense in pointing to dairy decline in terms of simple numbers. The number of dairy farmers has dropped from something like 47,000 in 1969 to something like 18,600 today. It is fewer than 20,000, but we will not argue about the figures.

The big problem with dairying world wide is productivity and productivity increase. The increase in dairy production in this country from 5.181 billion litres in 1980-81 to something in excess of 6 billion litres now has been basically due to on-farm productivity increase and the policies of sequential Victorian Liberal governments. International markets are corrupted. If the honourable member for Gwydir, the primary industry spokesman for the Opposition parties, really believes that the EEC is fair dinkum about cutting down production and if he really believes Michel Rocard's statement on this matter I think he really has another think coming. The EEC put forward some quota cuts in production across the board in its last Budget. Only the United Kingdom has really set out to implement them and this has caused all sorts of problems for the British Government. Hardly anything has taken place in the other areas. There was a cut in price support of 3.6 per cent in the recent EEC Budget. However, by the time one puts that into the national currencies of EEC members, that represented an increase of about 1.4 per cent.

When I was recently in the United States of America I was told by scientists, agricultural policy people and economists that in the dairy industry pipeline is a potential productivity increase per cow of something like 20 to 30 per cent due to bio-technological techniques. We have the fundamental problem that the dairy industry can continue to produce. People are already mixing up their arguments. I heard the argument being put most eloquently but confusedly by the President of the United Dairyfarmers of Victoria that on the one hand we were not going to have enough product to meet our quota export markets and that on the other hand we were not going to have enough product to supply our local consumption. That has never been the problem. The dairy plan that we put before the industry guarantees that if the international price picks up at all dairy farmers will be well placed to meet it. What the dairy industry is doing in terms of its immediate reaction to the plan is to look at the existing plan. It is not comparing like with like.

We have to adjust to some market reality. We are an open economy. If we did not do that in other areas we would have many more blacksmiths than people who at present make computer chips. There has to be adjustment in our sort of economy. We do not want a system which will give one farmer 12c to 13c a litre for milk which, due to the export market, is going into product valued at 5c a litre while another farmer, producing an identical product, is receiving 28c to 30c a litre for milk going into product being sold to the Australian public for 66c to 71c a litre. That is the divisive system we have at present. This is the system that the coalition brought in in 1977-78. Admittedly, it did not foresee the results. But this is the system in respect of which we have to take some sort of national approach.

There is not any debate about the need for or the inevitability of adjustment in this industry. There is debate about how we can put in place measures that will facilitate sensible adjustment. Time does not allow me to go into all the complications of the present system, except to say that if we are to have some sort of national system, if we are to have some system which gives some justice to Australian dairy farmers in the longer haul so that we do not have to go through a painful shakeout every seven, eight or 10 years, whatever it is, we have to put in place arrangements which are simple, efficient, equitable and stable. The present system is inherently complex. I have yet to meet many rank and file farmers, let alone State Ministers for agriculture, who understand the system. With respect to manufactured products, the protesters ignore one very fundamental point; that is, that all we are talking about in terms of marketing arrangements are manufactured products, five prescribed products as there have been, and products for export. The States still have total control over their own market milk arrangements and their regulations and, of course, the market controls all those products outside of prescribed products.

We have to understand how bad the present system is. It is inefficient because it has induced overproduction. The poor old farmer gets only a chit, a slip of paper, with his payment for 12c or 13c a litre, not knowing that the last litre going into the last kilogram of cheese is worth only 5c. The manufacturer has no incentive to go out and get the better market, because it is all pooled and equalised through a very complicated system. There is no inherent incentive in the whole system for farmers to get any market signal. They have no capacity to get a market signal, nor does the manufacturer have to meet the market in any way, shape or form. That is why we have four milk trucks chasing up and down a road. Factories compete with each other for milk because they do not share the result of the sale or their products.

The present arrangements are inefficient. They can produce bad decisions on stockholding, marketing and the production mix. That is the effect of the domestic value for levy purposes mechanism, of allowances and of export pooling. They reduce the incentive to develop better export markets, discourage consumption and benefit imports. Whether we like it or not, we are one of the most open markets for cheese in the world because we have a highly priced-

Madam DEPUTY SPEAKER (Mrs Child) —Order! The Minister's time has expired.