DEREGULATION OF THE MILK INDUSTRY
(Newcastle) [5.34 p.m.]: Last week the honourable member for Swansea brought to the attention of the House the disastrous impact on milk vendors in the Hunter of the flow-on of the deregulation of the milk industry that was legislated for by the former Government in 1993 under the then Minister for Agriculture, the present Leader of the National Party. The honourable member for Swansea pointed out that in 1994 a scheme was established to rationalise the distribution sector prior to the removal of vendor zoning and government price controls on the price of milk from the date of deregulation. That deregulation, in relation to vendors, will take effect from 1 July.
Since that time vendors in my electorate have approached me and shown me the disaster that will strike them in July, when the deal between Woolworths National Foods and P&O Cold Storage Freighters will control the milk sold by Woolworths throughout New South Wales. Some 80 million litres of milk a year will be involved. According to the arrangements, the benchmark delivery price will be 4.8¢ per litre. It will have a devastating impact on 120 New South Wales milk vendors.
My constituent Mr Gemmell, of 68 Frederick Street, Merewether, said that in November 1995 he paid $570,000 for the right to deliver approximately 42,000 litres of milk per week. That was the market price set by the industry. He did that as a result of attending seminars organised by the Milk Marketing Board, Dairy Corporation, Dairy Farmers and the Australian Milk Vendors Association, who painted a very glowing picture of what would occur and fended off any concerns that were raised about deregulation being an inhibition to the selling and buying trade. Mr Gemmell found that his business went very well between November 1995 and November 1997; the business grew. He introduced technology to improve efficiency. He had four full-time employees and at various times employed a further four casual staff from within the family. He set up the business to give his family some security of employment.
In November 1997 his average weekly litreage was 48,000 litres. Then some indications of crisis began to emerge. In January 1998 he was notified by Dairy Farmers that Woolworths had contracted its milk supplies to National Dairies. This will have a tremendous impact on him. From May to June 1998 he will still have three people working for him, delivering 51,000 litres of milk a week at 10.673¢ a litre. From 1 July he will be down to a work force of one, and will be delivering 33,500 litres. He will lose the Woolworths contract, which amounts to 17,500 litres, and his gross profit will be reduced to 65.3 per cent with that loss.
Dairy Farmers has stated that in September 1998 it will restructure the vendor delivery system in the Hunter with a delivery price of 4.8¢ for semi-trailer operation and 5.8¢ for bogie-wheel rigid operation. That means that in June 1998 the delivery prices will be 44.96 per cent of the industry benchmark. He says his business cannot withstand that sort of loss. He also says that Dairy Farmers intends to reduce its vendor numbers in the Hunter from 24 to three in deliveries to supermarkets - with
no compensation, no purchase of trade, no recognition of goodwill, and no provision for debt service. It means that this vendor will have three full-time employees and four casuals out of work. He has a capital outlay of $320,000, a total of 55.1 per cent of his present delivery fee. This will impact on his house and on his car. He now has a truck which is too large in capacity for his work.
Also, Mr Geoff Power purchased a milk run in 1989 for $70,000 and a new truck for $36,800. Until the end of June this year he will have an income of $2,000 a week. He will lose the Woolworths contract, and that will bring his income down to $170 a week, while he faces costs of $896. He obviously faces total loss of income and liquidity of his business. I am very concerned about milk vendors in the Hunter region. [Time expired
(Mount Druitt - Minister for Agriculture, and Minister for Land and Water Conservation) [5.39 p.m.]: I commend the honourable member for Newcastle and all other members who represent electorates in the Hunter region for their strong support for milk vendors. As the honourable member for Newcastle has pointed out, milk vendors are suffering the after-effects of the deregulation by the previous Government of the distribution side of the dairy industry. Unfortunately, many of the problems created by the deregulation are now coming home to roost. The delegation of milk vendors to my office today demonstrated the stress and the concern that has been highlighted by the honourable member for Newcastle. One could not help but be moved by the plight of the vendors, many of whom are under great financial stress, have high mortgages and face an uncertain future. The actions of Woolworths are probably typical and show what can happen to a small family business previously protected by regulation in a marketplace dominated by big business.
The power of the retail sector is often overlooked when a review or deregulation takes place. The actions taken by Woolworths to centrally warehouse its milk distribution in the Hunter region have had a great impact on milk vendors. We can only hope that the policy will not be repeated in Sydney and other parts of New South Wales. I have asked the Dairy Corporation to investigate all matters raised with me today, not only by the honourable member for Newcastle but also by other members who accompanied him on the delegation. I have asked the corporation to investigate all possible options, bearing in mind the limitations of the completely deregulated distribution system under which we will be operating from 1 July. I thank the honourable member for Newcastle for the very professional and compassionate way he has represented his constituents and the milk vendors of the Hunter. The Government will do all it can to help.