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Thursday, 25 October 1973
Page: 2753

Mr LLOYD (Murray) - I wish to concentrate my remarks on the dairying industry and I do so because the Murray electorate is the largest producer of dairy products in Australia. It produces more than either Queens land or Western Australia, and New South Wales, South Australia and Tasmania must be looking over their shoulders at this one electorate for production total at the present time. To begin with, I commend the then Minister for Secondary Industry and Trade (Dr J. F. Cairns) on a statement he made at the New Zealand-Australia trade relations talks in May. He stated:

However, both governments are aware of the need to avoid disruptive competition in our exports of primary products, both in each other's domestic markets and in international trade.

At that point the Minister was referring to dairy trade. I hope that this good sense between the two major dairy exporters of the world, Australia and New Zealand, which is included in that statement is continued by this Government. I wish to refer to some of the dangers of trying to predict what world trade will be because the short term outlook for dairying is the brightest it probably ever has been. According to 'Agra Europe' of 3 October, European Economic Community stocks are less than they were a year ago. There are probably problems for the EEC as a result of a sale of 200,000 tons of butter to Russia. The EEC stocks probably will not be sufficient. Russia, with its failure in socialised agriculture, as it changed the whole outlook for coarse grains and ordinary grains in the world from a situation of over supply to a shortage, is doing the same for dairy products at present.

In the United States of America for the first time butter soon will have to be imported. In an article in 'Agra Europe' of 10 October 1973 the following appears:

In view of the continuing decline in US butter production since 1971 while per capita consumption has remained steady at 2.2 kg per annum, market experts are now expecting the US Government to open a new butter import quota to maintain home market supplies. ...

EEC merchants are now waiting for the announcement of a new US butter tender. Some firms have already shipped large quantities over the Atlantic into bonded warehouses in case licences are granted on a first come, first served' basis.

If this happens it will repeat what happened recently in the United States, with mammoth sales of skim milk powder to that country. Murray-Goulburn Co-operative Co. Ltd, the largest dairy co-operative in Australia, did exactly the same thing by anticipating a skim milk powder shortage. It shipped several thousand tons of skim milk powder ahead of the release of import quotas and stored them in bond in America. The day before yesterday at a conference of the Australian Farmers Federation in Canberra the Prime Minister, in referring to the dairy bounty, said:

These bounties have done nothing to solve the industry's major problem - the adjustment of farm production levels to realistic local and overseas demand.

At present the major dairy companies in Australia are already sold out of their total production for the year ahead and the Prime Minister was saying, and meaning it the other way, that somehow or other we have a surplus of dairy production in Australia. In the March issue of the United States magazine 'Foreign Agriculture', which is produced by the United States Department of Agriculture, an article concerned with dairying states:

Ample supplies and relatively low world prices for dairy products will continue to 1985.

Six months ago the United States Department of Agriculture said that there would be an over supply of dairy products for 13 years, yet 6 months later there is a world shortage and a shortage in the United States itself. This makes it all the more essential that there be stabilisation programs for agricultural production because of the unpredictability of what will happen in world markets. Such programs also are essential if one is to help overcome the present world food shortage because more than anything else food producers and food producing countries need stability and the ability to plan ahead to produce the food the world needs. In this regard the phasing out of the dairy subsidy is most dangerous because it will lead to the possible breakdown of the cornerstone of stability in the dairying industry - equalisation. At present threats are being made in certain States and by certain companies to withdraw from equalisation. While the subsidy applied they were held in check.

In reply to a recent question concerning whether the voluntary equalisation scheme would be changed to a compulsory one as a result of the referendum of growers held some time ago, Dr Patterson said that this matter was being considered at present. I hope that the Government does more than consider it. I hope it invokes it because if equalisation breaks down the stability that was so bard fought and hard won for the dairy industry over the last 40 years will be lost and the industry will be reduced to the same situation which is now facing the canned fruit industry. The canneries are short of liquid assets. They are forced to sell on the local market for less than they need to sell. There are no minimum price requirements. Quite often the Reserve Sank is forcing the canneries to sell because of its requirements for credit

There could be a canned fruit industry situation in the dairying industry and this, in the long term, will cost far more than the subsidy would ever cost. If anyone suggests that the subsidy has not helped the dairying industry, that person has not bothered to read the statistics. In the annual report of the Dairy Produce Board reference is made to the transfer of dairy holdings from the less efficient areas of Australia to the more efficient areas - within States as well as across State borders. The program provided for the orderly transfer over a period of 20 years. This has made Australia now equal with New Zealand, as the most efficient dairy producer in the world. That program has done a great service for Australia. This has been done at a time and in an industry in which ordinary social service entitlements do not apply. If one likes to apply to the dairy industry the principles of social welfare which apply in secondary industry it would be seen that the dairy subsidy has been far cheaper than would have been the equivalent social welfare payments.

At the present time, the price for dairy products is very high. I believe that instead of the Government's saying that it will end the dairy subsidy it should have said that it would temporarily suspend it. If world dairy prices then declined below a certain level some of the money saved in those years when the subsidy was suspended could be applied back to the dairy industry to maintain minimum incomes at a reasonable level. This would have saved money for the Government, safeguarded the industry and the incomes of the producers and, more than anything else, safeguarded the future stability of the industry. If there is not stabilisation, the problems of primary industry are such that without ordinary social security benefits that do not apply, there must, in justice, be some sort of negative income tax applied to farmers. But with all the weaknesses of commodity stabilisation, with stabilisation based on the commodity rather than on income adjustments for individuals, the former is still preferred to the latter course. If income adjustments had been applied to the dairy industry instead of a subsidy, the more efficient sectors of the industry would have been retarded more than they have been because this would have encouraged the less efficient dairy producers to stay in production.

In the brief time remaining to me, I wish to state that the dairy industry is doing much to help itself with innovation. Gouda cheese is an example. One area in which the dairying industry should be doing more is in the spreadability of butter because this is a major consumer demand. At the present time, we have increased butter spreadability but not enough. We have a fat fractionisation process in Australia but not yet at a commercial level. New Zealand has a surface active agent process which is commercially viable. I do not know why we are not using it in Australia. I do not know why our equalisation system is not more flexible and why incentives required for marketing innovation and flexibility are not widened so that such things as butter spreadability are taken more into account in pricing our dairy products. The Australian dairy industry is a great industry. It is efficient by world standards and efficient by our own standards because the price of dairy products has risen by less than one-third of the rate of the increase in the average income during the last 10 years. Do not knock it and do not kill it.

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