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Tuesday, 20 October 1970

Dr PATTERSON (Dawson) - The principal objective of the Bill before the House, which is a machinery Bill, is to amend the Processed Milk Products Bounty Act in order to make provision for payment of an export bounty of $3,379,000 on non-fat milk products - that is, an export bounty on skim milk powder, dried buttermilk and casein. It would appear that the decision to pay the bounty on non-fat milk products is part of an agreement between the Commonwealth and the industry, whereby the Commonwealth has undertaken to support a final payment of 34c per lb, commercial butter equivalent, at the factory door to producers if the industry limits its production to 220,000 tons of butter and 70,000 tons of cheese. As has been stated, at this level of production the bounty will entail total payments by the Commonwealth of $42,882,000. This additional bounty to the manufacturers of these products will entaila total payment of $3,379,000. It should be made quite clear that these payments in relation to this export bounty relate only to 1970-71.

This decision is important to the producers because the bounty constitutes a significant proportion of the returns of dairy farmers and of course of the manufacturers of these processed products. The payment of this bounty will make a counter allowance for the previous allowances paid to butter factories for solids not fat in milk at the 1969-70 level, and in actual fact the payments for these solids not fat are a reflection of the amount of devaluation compensation paid in ' respect of this type of product. So it is quite clear that what the Government has done is to enter into an arrangement with the industry to limit production to 220,000 tons of butter and 70,000 tons of cheese, and in return to underwrite or to guarantee under equalisation an average of 34c per lb commercial butter equivalent and at the same time to allow this export bounty in lieu of devaluation compensation. That is the crux of this machinery Bill.

One might ask: How important are these non-fat products? They are quite important because they really are by-products of butter itself and their production has continued to increase in the last 12 months. The production of skim milk powder has increased to 91,000 tons and production of casein has increased to 31,500 tons. These are quite significant increases in the last 12 months over the figures for the previous 12 months. Not only are we producing increasing amounts of non-fat processed milk products, but we are also increasing our exports of non-fat milk products. Exports of bulk skim milk powder continued their upward trend in 1969-70 to reach 52,800 tons, which was an increase of 16 per cent over the previous year. Exports of casein also continued to climb to 30,000 tons, which again represented an increase of 16 per cent over the previous year. So in actual fact the production and manufacture of non-fat products have increased. In regard to the value of sales of these products, which I suggest is a most important point, the value of the overseas sales of bulk skim milk powder increased by 37 per cent, to $8,390,000, and the value of the sales of casein rose by 14 per cent over the value for the preceding year, to $12.5m. The production, export and value of sales of non-fat products, as represented by dried buttermilk, casein and skim milk products, have increased all round.

One other point which I should like to make regarding this Bill is that a significant change seems to be taking place in the policies of Asian countries, particularly in the tropical and sub-tropical areas, which are importing some of our non-fat products and our fat products also. The policy of these countries is to import the basic raw materials, which are essentially anhydrous milk fat and skim milk powder, and then to manufacture the anhydrous skim milk fat and milk, powder into products of their own choice. Some of these tropical and subtropical countries are introducing policies which seem to impose tariffs or special licensing provisions which, of course, can have the effect only of increasing the price of Australian products in these countries. In the future this could well be quite a serious blow to Australia.

As we know, various commercial reconstitution plants - and there are some 27 of these in operation - would be placed in a rather awkward position if the price of the basic raw materia) is increased. This is something at which the Australian Government will have to look closely, in conjunction or in consultation with the tropical and sub-tropical countries, particularly in Asia. As I sard before, this is really a machinery Bill in the sense that it provides for an export bounty on non-fat products, whereas before, solid non-fat components in milk attracted devaluation compensation payments, lt is important to note that devaluation payments will cease after 1970-71. It is not known what will happen after that, but it would seem that the export bounty will be substituted, at least on a temporary basis, for devaluation compensation payments.

The only other point I should like to make is that this procedure follows the same pattern with respect to other milk products containing butterfat, in that the bounty is paid to the producers of the product. That is the important point. Taken by and large, the Opposition has no argument with the machinery process of substituting an export bounty for devaluation compensation. The only question one could ask is: What is going to happen after 30th June 1971? Are we to have a continuation of the export bounty, or are we to have a reintroduction or devaluation compensation. The Minister for Primary Industry has said that he cannot commit the Government and cannot make announcements on this, but it would seem that if industry does limit production to the figures that have been promised - 220,000 tons of butter and 70,000 tons of cheese - then they could look forward to an underwriting by equalisation of 34c per lb commercial butterfat equivalent and a continuation of an export bounty for the non-fat production of skimmed milk, dried butter milk and casein.

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