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Rural and Regional Affairs and Transport Legislation Committee
18/10/2016
Estimates
AGRICULTURE AND WATER RESOURCES PORTFOLIO
Dairy Australia

Dairy Australia

[16:49]

CHAIR: Mr Akers and your team, sincerely, thank you for allowing us that liberty. Out of a couple of hundred people, we have just made two happy! Senator Back, you have the call.

Mr Akers : We were not finished answering the questions Senator Lambie asked us.

CHAIR: Let us exhaust that if you want to, and then we will go to Senator Back.

Mr Akers : There are probably some more technical things, which Charlie can talk on if you like, about the difference between Australia and New Zealand.

Mr McElhone : Yes. Also, Senator, you had a question about what has changed and what has happened since the turn of the century with dairy production here in Australia. Geoff mentioned the seasons and the millennium drought, which was the biggest factor. We saw temporary prices in the irrigation zones up above $600 a megalitre. Particularly out of that region, we saw a lot of production leave as a result of low water availability, on top of just poor seasonal conditions elsewhere.

On top of that, we also had the Australian dollar. Obviously it was above parity; it was over US$1.05. We have the mining boom.

Senator LAMBIE: Mr McElhone, obviously this is going to be a really long reply, so if you like you can put that on notice, and then I can go away and cross-check that with what has gone on in New Zealand in the last 13 years.

Mr McElhone : Sure.

Senator LAMBIE: Then, when we come up to the inquiry, we can go back through that, because obviously this is going to go at length.

CHAIR: Thank you, Senator Lambie.

Senator BACK: Very briefly, the government has responded to the farm gate price cuts that you have mentioned by delivering $580 million in the dairy assistance package. Can you tell us where it has gone. How is it being expended?

Mr McElhone : With the $580 million, you are talking more about the concessional loans program, of which a portion was earmarked for dairy in terms of concessional loans across the affected dairy regions, particularly for Murray Goulburn and Fonterra suppliers, who were negatively affected by the step-downs.

Senator BACK: Being very parochial for 10 seconds, how have Western Australian dairy producers benefited, if at all, from this package?

Mr McElhone : That is also part of a drought concessional loans program. Any region across the country that is drought declared has access to the concessional loans program—not the dairy component. That depends on the drought declaration process across the country.

In terms of WA, though, for the dairy-specific package there are no Fonterra or Murray Goulburn suppliers in WA. Therefore, they are not eligible for that component.

Senator BACK: There are two or three who would be pouring milk down the tree at the moment as a result of Brownes. With the $2 million that has been committed for the milk price index, where will you expend those funds to try to help provide dairy producers with more and better information?

Mr Quinlivan : I think that is one for the department. We are still giving some thought to the best way to do that, and there are quite a few differences of view about what would be most useful for producers. One view is that there is already quite a lot of price information. What is missing is some more education products for producers to actually use that information, rather than the straightforward price index. So we are talking to stakeholders about that at present. The outcome 1 people can talk you through that when we get there.

Senator BACK: Okay, I will raise it then. This is my final question. Obviously the dairy industry has not been my industry as a veterinarian, but you can correct me if I am wrong. It has been put to me that internationally milk powder prices—dry milk prices—have been the real international indicator of what is happening to milk prices around the world. We all know what happened: Russia went on, Europe flooded China and we did not get a guernsey, et cetera. We were late with our free trade agreement with China and the Kiwis were in there earlier. That is part of the answer to your question. Tell me: is that the case and, if so—if powdered milk prices were dropping dramatically—why didn't you guys inform our dairy producers, or why didn't they know, if indeed it is such a clear and strong indicator of worldwide milk pricing?

Mr McElhone : I am happy to answer that. I would say that we release our situation and outlook report three times a year. We are very open and transparent about what is happening in the global market. We have an unprecedented amount of data about what is happening in the global market with global suppliers. We are very open and very clear about the fact that there was a glut of milk, particularly coming out of Europe and to a lesser extent the United States. We were very clear about the fact that there were Russian sanctions in place and that was creating some challenges with global commodity prices. On top of that, there is the global dairy trade auction, which does lend itself to a level of transparency around what is happening with global powder prices and other commodities. We invest quite heavily in trying to find market information.

Senator BACK: Are you telling me that dairy farmers should not have been surprised, then?

Mr McElhone : No. There are a range of sources that they get information from, whether it be from their companies, Dairy Australia, their banks, GDT or elsewhere. What I am saying is that Dairy Australia played a significant role in providing pretty open, transparent and fact-based information about what is happening in the global market to all our dairy farmers.

Senator BACK: And you would say you did that on this occasion, in the lead up to this collapse?

Mr McElhone : Absolutely. You mentioned the $550 million or $580 million program; a component of that was the funding that the federal government provided for tactics for tight times and taking stock. Those programs have been made available to the affected farmers in WA as well—I would like to reinforce that. It has been quite a prominent industry in terms of what is happening in WA at the moment, and our regional development program was very clear to make sure that those resources were also available to those affected farmers.

Senator BACK: Thank you.

Senator LAMBIE: Since we went into the ChAFTA very quickly—whether you have a free trade agreement or not, it is all about market access. Accordingly, New Zealand was on the ground to obtain that market access. Have you been to China and tried to get that market access over the years so that we could get milk into there?

Mr McElhone : Absolutely. I have been to China on a number of occasions. I look after the trade program within Dairy Australia and work very closely with a lot of the exporters. I am not sure of the nature of your question. Even if we look at the last year alone, our exports into China have gone from $300 million to over $600 million in value. Is that all about the China-Australia Free Trade Agreement? No, it is not. But has the China-Australia Free Trade Agreement assisted in increasing the impetus toward investment going into supporting and supplying that market, with the prospects of those tariffs—which are currently between five and 15 per cent—going down to zero over 10 years? Absolutely. It is playing a not insignificant role.

Senator LAMBIE: We have established that your partner is on the board of Murray Goulburn. Could that not be seen as the reason you have not questioned Barnaby Joyce whether the clawback is illegal or not? I want to make sure this is quite clear: are you yet to go in to speak to Barnaby Joyce about the clawback? I believe that is going to have a significant impact on your research and development, especially with the money that is coming in from the farmers. Why have you not gone into discussions?

Mr Akers : We would see it as a role for the Australian Dairy Farmers Federation to negotiate with the minister on those sorts of issues. I know that, even at the symposium, the ADF asked Barnaby if he would be prepared to make up the difference in the loss of research dollars coming in to DA over the next couple of years as a result of this clawback. Certainly I do not think any of the RDCs—other than perhaps one—would be going to Barnaby Joyce asking those sorts of questions. They would be considered political questions.

Senator LAMBIE: Your members pay you money for research and development. I am sure they would want to know what future that contains for them. If that clawback, because of the amount of money they are losing, is going to have a significant impact on the amount of money that you are receiving for research and development, would you not want to have a few words with Barnaby Joyce about that?

Mr Akers : The industry structure is such that that—as I said, the ADF are the political lobby arm of the industry and have had those discussions with the minister.

Senator LAMBIE: I want to make this quite clear: you do not believe it is a conflict of interest with your wife being on the Murray Goulburn board?

CHAIR: This is an R&D group, not a—

Mr Akers : Yes, that is right.

Senator LAMBIE: That was a fair question, Chair.

Senator BACK: Of course it was—it was a fair question.

Senator LAMBIE: You still don't think that is a problem?

Senator BACK: There isn't. They are in totally different spaces.

Mr Akers : No, I don't—I don't think it is a conflict.

Senator RICE: I have some questions that I have been asking of all the RDCs. How many staff do you have?

Mr Joblin : We have about 94 full-time staff at the moment, plus the RPDs that have been referred to are on our payroll—we administer them through our payroll. That has been in place for about 12 months. So it is about 130 all up.

Senator RICE: Where are your offices?

Mr Joblin : 60 City Road, Southbank, Melbourne.

Mr Akers : We also have regional offices around Australia, with the regional development programs—

Senator RICE: Where else do you have offices then?

Mr Akers : In each of the eight dairy regions—northern Victoria, western Victoria, Gippsland, South Australia—it is probably done out of home, I think—and New South Wales.

Senator RICE: Of those 130 staff how many do you have based in Melbourne and how many are in regional offices?

Mr Akers : Ninety are based in Melbourne and 30-odd regionally.

Senator RICE: Could you take it on notice to give us the breakdown of where your staff are. Have you at any stage considered decentralising operations completely to a regional centre?

Mr Akers : It is a discussion that we have. We think we are in the most appropriate place to service the dairy industry in Melbourne. We are in the centre of 65 per cent of the dairy production in Victoria. We have access to airports and that type of thing, for others, as well as for competent staff to travel in.

Senator RICE: There are those benefits. Would you see that there would be disadvantages if you were relocated to a regional centre other than where you are?

Mr Akers : We would obviously have to consider that. There would be issues around staff.

Senator RICE: So you have considered in the past—

Mr Akers : We have never done a full study of it.

Senator RICE: So there would be issues with staff not wanting to move, presumably?

Mr Akers : We know that, yes.

CHAIR: Thank you for your attendance. I pay tribute to Senators Sterle and Rice as our schedule is under serious pressure and we have agreement to the extent that they have an interest with the following agencies they will put the questions on notice. The agencies we are releasing now are Animal Health Australia, Plant Health Australia, The Australian Fisheries Management Authority, Meat & Livestock Australia, Australian Livestock Export Corporation Ltd, the Australian Bureau of Agricultural and Resource Economics, and 19-Water policy. To avoid any confusion, we are retaining what was on the schedule in front of you: 15-Corporate matters; 17-Outcome of 1 divisions; and 18-Outcome of 2 divisions—managing biosecurity.