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  4. 28 February 2001

Dairy Industry Deregulation

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About this Item
SpeakersStoner Mr Andrew; Amery Mr Richard; George Mr Thomas; Hickey Mr Kerry
BusinessMatter of Public Importance


    DAIRY INDUSTRY DEREGULATION
Page: 12041

    Matter of Public Importance

    Mr STONER (Oxley) [11.46 a.m.]: On this the second day of sittings in the House for 2001, it is important to review what has happened to the New South Wales dairy industry since this Government deregulated that industry on 1 July last year. Numerous farmers and other industry representatives in my electorate and beyond tell me that the Carr Government has walked away from its responsibilities after it deregulated the dairy industry and has virtually thrown New South Wales dairy farmers to the wolves: in this case, the supermarkets and some processors. I have been asked why no rural impact statement was produced before the decision was taken. Unfortunately, the answer is that there was no rural impact statement: a committee is examining the issue only after the event. The Government has provided no substantive assistance since the deregulation of the New South Wales dairy industry, despite the fact that New South Wales farmers were affected more adversely than those in other States.

    A recent report from the Australian Bureau of Agricultural and Resource Economics [ABARE] revealed that New South Wales farmers have suffered a 29 per cent cut in milk prices compared with those in South Australia, who have suffered a 14 per cent cut, those in Tasmania, who have suffered a 7 per cent cut and those in Victoria, who have suffered only a 3 per cent cut. The report also showed that the average New South Wales dairy farmer has suffered a drop in income of $53,000 per annum compared with the next worse-off State, Queensland, with a drop of $43,000 per annum. It also revealed that 200 dairy farmers in New South Wales left the industry in the six months following deregulation. The only assistance provided so far by the Government has been a counselling program funded by the industry. The Minister for Local Government, Minister for Regional Development, and Minister for Rural Affairs recently announced the allocation of $500,000 under the regional economic transition scheme, which is a drop in a bucket.

    The Dairy Deregulation Impact and Assessment Committee came about only as a result of sustained pressure applied by the Coalition, particularly the National Party. In evading the question of State-based assistance for New South Wales dairy farmers, the Minister has claimed that the taxpayer should not pay twice. That statement is patently untrue: the Federal Government package was funded not by the taxpayer but by a retail levy on the price of milk. Consumers are still getting cheaper milk despite this retail levy. The sad fact is that even with the Federal dairy structural adjustment package New South Wales dairy farmers are getting less for their milk. Their income has dropped drastically.

    The refusal by the State Government to assist the New South Wales dairy industry comes despite national competition policy payments to the State of around $160 million from the Federal Government in 1999-2000 and over $200 million in 2000-2001. The Western Australian Government has acknowledged its responsibility to help its farmers by providing a $20 million package. There is an even greater need for assistance to New South Wales farmers, as indicated by the ABARE report. I quote a Dairy Farmers Association [DFA] position paper dated 16 November 2001 regarding this issue:
        State Governments have repeatedly refused to provide additional assistance or compensation aside from some targeted programs. This includes the NSW Government despite some heavy lobbying by industry and the NSW Coalition Opposition at the time of the Legislation debate. The Opposition allowed the deregulation legislation, without State compensation, only on the urgings of the industry to avoid a collapse in the Federal Government's Dairy Adjustment Scheme. The NSW Government maintains its firm opposition to financial aid.
    The issue of reduced incomes to New South Wales dairy farmers has been partially addressed by the federally co-ordinated dairy structural adjustment program, but it has not been sufficiently addressed. The DFA paper to which I referred seeks an extension of the Australian Competition and Consumer Commission authorisation powers to allow farmer organisations to negotiate prices with processors and supermarkets on behalf of all farmers in the State with a view to achieving an immediate lift of 5¢ or more a litre for market milk. Any thinking or caring person would agree that that is a reasonable request.

    Mr Fraser: The Minister would agree with that.

    Mr STONER: He probably would. The medical and legal professions have schedule fees. They have strong associations that set a price for their services. Trade unions collectively bargain for wages for their members. Why should there not be such a system for farmers. Yesterday in this House we were talking about Grainco and arrangements for collective bargaining and payment to grain farmers. Increasing the price for farmers is supported by the New South Wales National Party on the grounds of wider public benefit: the retaining of income and jobs in the regions. The dairy industry would have to be the perfect example of a decentralised industry. It is outside metropolitan areas providing income and work and sustaining communities outside the cities, which are growing at a frightening rate at the expense of country areas. Not enough has been done with regard to regional development by the Government. There is a continuing population drift and continuing social disadvantage in country areas. It is worsening under this city-centric Labor Government.

    Assistance and support should be provided to the dairy industry, which is the perfect example of a strong, decentralised, regional industry which is providing income and jobs and hope for country people. When the Government repealed sections of the Dairy Industry Act last year it resulted in a drastic cut to milk prices and was tantamount to putting a red line through the milk quota assets of farmers. In the past farmers bought and built up quota assets. They worked hard to establish the assets to guarantee a future income. Many farmers regarded their quota assets as their superannuation. As soon as deregulation happened last year the value of the quota asset went and the value of the farm dropped dramatically.

    In the past governments of both persuasions were happy to collect stamp duty on the total value of farms, including the value of the quota asset. Now the quota has been removed without any discussion about compensation. Farm values have dropped significantly. For the benefit of the Minister I will refer to a couple of people in my electorate. Mr Hugh Aitken of Tewinga, which is near Macksville, three years ago had a contract on his property, a working dairy farm, for $780, 000. This included a quota value of $132,000. Since that time because of the drop in income the person on the property decided to get out of dairying and the dairying operation has effectively closed down.

    Mr Aitken recently had the property valued at $280,000. So there has been a drop in the asset of half a million dollars. Mr Colin Sheather of Hannam Vale, which is towards the south of my electorate, in April 1996 had a contract for $640,000 on his property. The sale later fell through. A valuation in September 2000 was for $480,000. So there has been a drop in valuation of $160,000. Hannam Vale would be the most beautiful farming country anywhere. If the Minister is ever up on the mid North Coast he should turn left at Johns River and head up to Hannam Vale to have a look.

    Mr ACTING-SPEAKER (Mr Mills): Order! The honourable member for Oxley has the call. The honourable member for Coffs Harbour and the Minister for Agriculture will cease interjecting.

    Mr STONER: The value of Mr Sheather's property has dropped only $160,000 because Hannam Vale is the best land around. There has been no suggestion of compensation for the lost asset despite the urgings of the National Party and the Dairy Farmers Association and the strong protests of the Australian Milk Producers Association, AMPA. We have been able to get a concession from the Government, and that is the establishment of the Dairy Deregulation Impact and Assessment Committee chaired by the fine former member of the Legislative Council Richard Bull. It was established at the end of June 2000. Only this month have there been meetings on the North Coast—at Lismore, Coffs Harbour and Wauchope.

    The meetings were welcome but why has it taken eight months for any action to be taken? The issue is important to country New South Wales. There is a world outside Sydney and this issue should be addressed urgently. I am told that the committee will report to Parliament in October this year—15 months after deregulation. All sorts of devastation is occurring. People are leaving farms. People are depressed and in financial trouble. Last year dairy farmers suicided. We cannot let people remain out on a limb without assistance other than counselling.

    There is only one counsellor for the whole North Coast and that is not sufficient. The fact that 15 months went by without tangible support being provided to the New South Wales dairy industry indicates an uncaring attitude to country areas by this city-centric Government. Despite the rhetoric of its rural faction, the Government has changed a good system without a rural socioeconomic impact statement, without financial assistance similar to that given to the forestry and egg industries and without compensation for loss of assets. The Government is only assessing the impact after the event because of pressure by the Coalition, and it has dragged on for 15 months. People are walking off farms and families are breaking down and becoming dysfunctional. New South Wales is dragging the chain. This matter is important because the Carr Government must fast-track the deliberations of the Dairy Deregulation Impact and Assessment Committee and must deliver on its recommendations to help our struggling dairy farmers.

    Mr AMERY (Mount Druitt—Minister for Agriculture, and Minister for Land and Water Conservation) [12.01 p.m.]: I am pleased to respond to this matter of public importance moved by the Opposition on what has been one of the most significant issues facing rural New South Wales in recent times—the massive restructure of the dairy industry. One must question the quality of the submission by the National Party. It was a jaundiced rehash of the history of the process of deregulation and only occasionally passed by the truth. I do not want to waste the time of the House by rehashing the debate we have had on the dairy industry during the past 18 months because that already appears in Hansard. The honourable member for Bega found out yesterday that the Government introduced dairy deregulation last year and he was excited about that.

    In the late 1980s all State governments were regulated and considerable pressure was brought to bear, particularly by the Jewell food chain, which flouted the law by stating that it would bring in Victorian milk at a lower price and undermine the regulated system in New South Wales. Through negotiation with the industry and the Federal Government, the Kerin plan was introduced, followed by the Crean plan, and that, in effect, brought in the Dairy Management Scheme [DMS]. That scheme kept Victorian milk in Victoria, not so much by regulation but by way of a levy system that favoured dairy farmers in Victoria and kept them there. That scheme came to an end last year.

    In 1994—unprovoked, unprompted and not forced by competition policy—the then Coalition Government in New South Wales moved to deregulate the dairy industry from the farm gate. Milk vendors in particular were severely affected by that deregulation. The then State Government did not provide a cash incentive to assist milk vendors, like the honourable member for Cessnock, who were put out of business as a result of the deregulation. However, an industry package was introduced with funds provided by the selling of regulated milk runs and so on. No State-funded assistance package was provided following the 1994 farm gate deregulation. The legislation took effect in 1994 and continued until 1998. During that period competition policy was introduced in Australia, which required all States to implement a competition policy review of all regulated systems and to apply a public benefits test.

    New South Wales undertook that review and resolved to have regulations in place for another five years. However, the Victorian Government carried out a competition policy review but resolved to do the opposite and deregulate its industry on 1 July 2000. With 64 per cent of the Australian dairy industry producing milk at a lower cost, one does not need to repeat the impact that had on the regulated farm-gate prices in all States of Australia. Industry was able to negotiate a $1.7 billion package, which has been the subject of many references to the Australian Bureau of Agricultural and Resource Economics [ABARE] report and public meetings with the State-established dairy industry report committee, which will report to Parliament this year.

    Questions have been asked as to whether the $1.7 billion package is enough, and when one considers the cuts to margins, some might say that it is not enough. Many farmers are going out of business at a rate far greater than even the most pessimistic industry representatives predicted. Who are the winners? Who pays for it? The National Party wants State taxpayers to pay for a top-up scheme. That is, New South Wales consumers and taxpayers will be paying again! One should ask whether New South Wales consumers, farmers and taxpayers are paying more than their fair share towards this Federal Government dairy deregulation assistance package.

    Mr Fraser: What are you doing with the $156 million you get?

    Mr AMERY: Let me tell you who will get what. The consumers of milk products in New South Wales will pay a levy of 11¢ a litre for eight years.

    Mr George: Why not tell the dairy farmers that?

    Mr AMERY: I have told them. They know that. It is, by law, a consumer levy. There is no other description for it, although it is fair to argue that that is being paid at the expense of the dairy farmers. Most consumers would agree to wearing that cost for eight years if it helped dairy farmers. However, New South Wales consumers are paying $506 million towards this package but only $330 million of it goes to New South Wales dairy farmers.

    Mr Fraser: You signed off on the agreement.

    Mr AMERY: We had no choice on that one, buster. The other $200 million subsidises Victorian dairy farmers and dairy farmers in other States. Yet the National Party wants taxpayers to pay more. Let us consider what the Federal Government is getting out of this. Warren Truss, the Federal Minister for Agriculture, Fisheries and Forestry said that the Federal Government has done everything for the dairy industry and State governments have done nothing. The Federal Government should introduce a similar scheme for every agricultural industry in Australia, because it is the big winner. When the dairy farmers committee visited the North Coast and Bega before Christmas dairy farmers told the committee that the money they are receiving from the Federal Government by way of the dairy assistance package is fully taxed.

    The honourable member for Oxley, the honourable member for Coffs Harbour and the honourable member for Lismore accused the State Government of receiving a windfall for some fictitious stamp duty that it would collect from this industry package. There was no stamp duty and the State Government made no money at all from the assistance package. However, the Federal Government had a windfall. The Dairy Farmers Association representative told me today that the Federal Government coffers will rake in $350 million. The Federal Government is not only not putting any money into the scheme, it is making a $350 million profit. Yet the Opposition has piously said that the State Government is gaining some benefit from this.

    I call on the Federal Government—because it has the power to do so under Federal legislation—to declare this a tax-free grant to enable the dairy industry to receive full benefit from the package. That point has not been emphasised enough. The Federal Government has not provided any cash towards the package yet it will receive a profit of $350 million. There has been talk in the media about Howard receiving $400 million from an excise on petrol, but the hidden gain is the amount it is receiving from dairy farmers via the consumer. Honourable members opposite should lobby their Federal colleagues to make this assistance package tax free, because that is what it should be.

    I believe that consumers who are paying a levy of 11¢ a litre are unaware that 4¢ of that levy goes to the Federal Government as taxation. Most would think that 11¢ per litre goes to the dairy farmers. This grab for money by Canberra should be highlighted and brought to public attention. There has been a lot of talk about the petrol excise. The Federal Government has been lucky. It has been getting a lot of bad publicity about the petrol excise but no-one has mentioned the $350 million it will make at the expense of dairy farmers who are going through the most difficult time of any agricultural industry in our State's history.

    In relation to the point raised by the honourable member for Oxley about the committee possibly reporting this month, I cannot give an exact date on which the committee will complete its report. What I can tell the honourable member is that my own chief of staff is a member of the committee. The former shadow Minister for Agriculture is the chair of the committee and a former Liberal Minister in the Coalition Government is a member of that committee. There has been no Labor Party stacking in that regard. Milton Morris and Richard Bull are also members of the committee. This is not something that the Opposition would do. Labor did not load the committee with members from its own party; it appointed people it thought could best do the job.

    They provide the Government with an update after every meeting. There is nothing hidden about these meetings. They are public and people attend them. There can be no suggestion that the Government is sitting on a report about the impact of dairy deregulation after 10 months. Let us not forget that in the initial stages of the impact of dairy deregulation the Australian Bureau of Agricultural and Resource Economics [ABARE] provided us with a quite substantial and, I believe, good report on the impact of dairy deregulation. I certainly acknowledge the work the bureau did in examining the impacts of dairy deregulation.

    As I said in public recently, it is an irony because organisations such as ABARE and the Productivity Commission have been arguing for deregulation for some time. Having been given the job of looking at the impact of deregulation, they have been forced to tell the truth—that is, that it hurt farmers greatly. I believe that the honourable member for Oxley may have referred to the committee also giving farmers some ability to obtain a fair price for their product. That is what farmers really need. Honourable members can forget all the politics about State-based assistance packages and compensation for this, that and the other. What farmers need is a reasonable price for their product and it is fair to say that they are not getting it.

    I understand that the Queensland industry received a tick-off from the Australian Competition and Consumer Commission [ACCC] to organise a collective bargaining arrangement. I propose now to look at that, and I give an assurance to the House that we are going to work with the dairy industry in this State. We are going to help the industry put together a case to try to get a system, unnamed at this stage—some collective bargaining arrangement with regard to obtaining a fairer price for their product.

    I would make the point that I am having some discussions, although this is not necessarily the way it will go. In Great Britain when dairy deregulation took place, dairy farmers got together and established an organisation called MilkMark. That organisation has been disbanded because it was challenged by the British equivalent of the Competition Council. But that should not be a disincentive to farmers considering a similar arrangement here. It should be looked at here, despite its failure in Great Britain, because when I spoke to the people associated with the British industry I was told that MilkMark failed because in Great Britain a monopoly is regarded as any structure that has 25 per cent market power.

    On my understanding we do not have that restriction in Australia. Had MilkMark been established here, at that time and in the same circumstances, I could probably hazard a guess that the organisation would still be operating. It brought all of the British farmer members under one collective—I suppose a good description of it would be a form of single desk—so that when the supermarkets and the processors wanted to buy milk in a particular part of England they had to go to MilkMark and buy the milk at the market price set by MilkMark, not at a price set by the processors, as happens here at the moment.

    I am not saying that is the solution to the problem, but I know that the industry, particularly the farmers side of the industry, is beginning to realise that we cannot deal with processors and supermarkets individually, or even one or two in combination. They have to get together in strength—the trade union way, you might say—but they have to make sure they do not in any way conflict with competition policy or competition rules that would prevent them from gaining too much market power, as silly as that may sound in the light of deregulation.

    There is a two-pronged suggestion from this side of the House in response to the motion moved by the Opposition. First, let us all get together to work with dairy farmers to try to get this collective bargaining entity established so that we can obtain a better price. Second, let us send a message to our colleagues in Canberra about the $1.7 billion dairy assistance package being tax free. I will talk to those on our side of politics in Canberra. I have said for some time that the Federal Government and Mr Truss have the luxury of this big package. We have always said that they have not putt any dollars in, but we have not highlighted enough the fact that the Federal Government will receive $350 million as a bonus.

    Mr Fraser: What about the $156 million you are getting?

    Mr AMERY: We will get nothing. By deregulating we have lost quite a lot. Let us call on the Federal Government to make this grant to dairy farmers tax free. All of this talk will be assisted by the fact that the dairy assistance package will be a net amount.

    Mr GEORGE (Lismore) [12.16 p.m.]: The Minister for Agriculture, and Minister for Land and Water Conservation has stated openly in this House that the New South Wales Government will get nothing as a result of the deregulation of dairy farming in this State. I cannot accept that.

    Mr Amery: We lost the reserve funding because we lost regulation. We are the net losers.

    Mr GEORGE: That is your responsibility. It is inaccurate for the Minister to say that the New South Wales Government has not benefited from deregulation in this State.

    Mr Amery: It has not. You are wrong. Come and talk to us about levies.

    Mr GEORGE: It is a bit like the stamp duty debate. I want to tell the Minister that dairy farmers along the North Coast of New South Wales have had the battle of their lives to stay afloat. That is not only because of dairy deregulation, but also as a result of what New South Wales Agriculture is doing to dairy farmers in my area in respect of tick control and the bovine Johne's disease [BJD] status in the area. I tell the Minister that they have been devastated and are lucky to stay alive.

    The Minister wants to take us back over history. I admit that dairy farmers on the North Coast of New South Wales became regulated in the 1970s under a Labor Government. In those days dairy farmers had to purchase quotas and were told they had no alternative but to update their dairies and herds or get out of the industry. During those years dairy farmers continued to purchase quotas. Even as late as the past three or four years people on the North Coast have bought quotas. Now they have been taken away from them.

    I agree with the Minister—and I told the parliamentary committee recently when it visited Lismore—that the dairy structural adjustment payments have created problems. I will place an incident on the record. One of my constituents had a quota worth $300,000 but it is worth nothing today. He will get a payment of $22,000 per annum for the next eight years, which has created a tax problem of an extra $6,000 a year to him. Furthermore, he has lost his family allowance payments. It has created problems and it needs to be addressed.

    It is incorrect for the Minister to state in this House that the Government has received no benefit from deregulation in New South Wales. This Government has received $156 million, as I understand it. Part of that is attributed to deregulation and the fact that dairy farmers who have lost their quotas received no compensation whatsoever. Adding to the problems in the north is the Norco situation. Norco has been critically affected by deregulation and, as a result, has had to close its cheese factory. That has had a flow on in that 37 staff have already gone, and it will have a further flow on to areas in country New South Wales and in regional areas.

    Furthermore, dairy farmers had shares that had a value in Norco. Today, sadly, those shares do not have any value because of deregulation, and, yes, there have been other problems. Honourable members should remember that during debate on deregulation a rosy picture was painted for dairy farmers. They were told by the Dairy Farmers Association and this Government that the figures were calculated on a 35¢ to 37¢ payment for their milk. Today payment is down to as low as 22¢ in my area, and that has been the problem. Honourable members should remember three events: in May 2000 three major processors submitted tenders to Woolworths. In June 2000, prior to deregulation—and I would like to know why these figures were not published prior to the deregulation—Woolworths went back three times to the processors to determine whether that was a sustainable price. Woolworths was assured by the processors.

    Mr Amery: I think that happened since deregulation.

    Mr GEORGE: No, it happened in June. They copped deregulation, lost the 11¢, and then in August a new price was awarded to Woolworths by the processors. Deregulation of the milk industry has resulted in a significant erosion of the farm base and the ability of small processors to maintain their existence.

    Mr HICKEY (Cessnock) [12.21 p.m.]: Clearly, I have a fair amount of empathy with dairy farmers. I come from a milk vending sector, and the honourable member for Coffs Harbour was a party to its deregulation. It has received no package of assistance—nothing. Deregulation of the dairy industry is something about which we are all concerned. Members of Country Labor were concerned when this matter was first raised.

    Mr Fraser: Why didn't you vote against deregulation?

    Mr HICKEY: The honourable member for Coffs Harbour asked me why I did not vote against deregulation. It was the Federal Coalition which put up the $1.7 billion, and if we had voted against it, that $1.7 billion package would have been in jeopardy.

    Mr Fraser: No they did not put it up; the consumers did.

    Mr HICKEY: As the honourable member for Coffs Harbour said, the Federal Government did not put up the package, the consumer put it there. The consumers pay 11¢ for every carton of milk purchased, which goes towards a fund. That equates to the $1.7 billion package, and the Federal Government, in putting packages together, gets a $350 million windfall. The State Coalition has complained that this Government is hypocritical. Consumers are not aware that the Federal Government is double dipping. I am sure that after today's debate the Minister will issue a press release outlining that fact. The New South Wales Government's Dairy Deregulation Impact and Assessment Committee is travelling around New South Wales and is listening to the concerns of dairy farmers.

    The committee is putting packages together and, as the honourable member for Coffs Harbour said, it is a slow job. The Minister, who is concerned about this, will be given an interim report to enable him to address some issues in the short term. The committee found that the federally funded industry adjustment scheme is creating its own problems. Farmers have to pay interest on their outstanding loans because of the length of time they have to wait for adjustment payments, and are also charged income tax by the Federal Government. Farmers have told the committee that because the adjustment payments are regarded as income they lose one-third of their payments to the Taxation Office.

    The New South Wales Government should send a clear message to the Federal Government that that is totally wrong. The Federal Government could make adjustments to the payments, free of income tax, but it has chosen not to do so. It is happy to sit back and reap $350 million. Compare that to the far more productive work of the New South Wales Government. Last year Country Labor, through the Minister, put forward a plan calling for a floor price on milk, something that the State and Federal Coalition scoffed at. However, we are all screaming for that now, and the Coalition is saying that that is what is needed. The Carr Government is implementing valuable on-the-ground work for dairy farmers in the form of advice for dairy families and communities, counselling services, business management, farm planning advice and other practical industry information.

    The Minister for Regional Development, and Minister for Rural Affairs has provided an additional $500,000 to help communities to adapt to new industries. Of course, the dairy deregulation committee is listening to farmers' concerns and meeting with prominent dairy industries. We are not hindering farmers, not charging them $350 million in income tax, but helping them where we can. The State Opposition should support the New South Wales Government and condemn the Federal Coalition for its appalling handling of the situation. Instead, the Opposition says that the Government is not doing enough. It is happy to put the blame back on the State Government. This is a Federal issue and we should all aim our sights at the Federal Government and stop this imposing tax.

    [Debate interrupted.]

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