Sharman Stone (Murray, Liberal Party) Share this | Hansard source

The Primary Industries (Excise) Levies Amendment (Dairy Produce) Bill 2014 is a response to a request from Australian Dairy Farmers Ltd the national representative body for the dairy industry. It is, therefore, something we strongly support. I believe it should have bipartisan support, but I do note there is a fairly silly amendment that has been put up as a distraction to the real focus and intent of this dairy produce bill, and of course the coalition will simply ignore that.

The levies are payable by the producer and collected by the Commonwealth for redistribution to Animal Health Australia, which will help to respond to animal health and welfare matters. As Australian Dairy Farmers Ltd is a party to the Emergency Animal Disease Response Agreement, it will also assist in a quick and nationally cost-sharing response to a sudden and serious outbreak of disease—for example, blue tongue or anthrax or, heaven forbid, some other problem that at the moment we have managed to avoid.

These amendments do not change the levy rates; rather they increase the cap on the rate of the animal health council levy which may be payable by the dairy producer. Before there is any change in the levy rates, there would need to be comprehensive industry consultation and a vote of levy payers, leading to forwarding a proposal to the government for action on those recommendations. These would have come out of consultation and a vote. So this is very much a bill which serves the needs of the dairy industry as it has requested.

Australia can be proud of its dairy industry, which has evolved to be one of the most efficient in the world as well as being one of the most sustainable and natural. In particular our industry has avoided adopting whole-scale factory style farming where thousands of animals are corralled in feed lots or shedded, which brings with it lots of additional disease burden.

The Murray electorate, located in northern Victoria, is the home of one of the biggest dairy production regions in Australia. The dairy farms are interspersed with a range of manufacturers, both Australian owned and multinational, including companies like Bega-Tatura Milk, which makes and exports infant formula as well as its famous cheeses; Murray Goulburn, which makes cheeses and powders; Fonterra, which produces cheese powders and ghee; and Nestle, which makes the world's best condensed milk at its Tongala plant. There is also a new $40-million UHT plant in Shepparton established by ACM and Pactum Australia with the aim of exporting product to Asian markets. The milk processing adds some $2 billion to the Victorian economy annually. Milk powders continue to be one of the biggest export commodities out of Geelong and that is including during the 10 years of drought.

The recent Korea-Australia Free Trade Agreement contained some good news but also some real disappointments for the Australian dairy industry. This FTA has once again shone a spotlight on the huge inequities that exist in international food trade, which is one of the most corrupted, subsidised and protected sectors of any trade in produce or services in the world. When the quotas, tariffs, duties and non-phytosanitary barriers are added to the high Australian dollar, it is no wonder that some of our exporters of food have seen their export market penetration disappear altogether in the last several years. Their years of investment, of new product development and of export market development have simply gone out the window through no fault of their own.

Australia exports $80 million worth of dairy product annually to Korea despite punitive tariff levels. Cheese is our major dairy export and has had to contend with a 36 per cent tariff. Cheeses will immediately enjoy a duty free quota of over 4,500 tonnes, which can grow at three per cent annum, and this tonnage represents some 80 per cent of our cheese exports to Korea in 2013. However, for the remaining 20 per cent of exported cheeses—many of them coming from my electorate of Murray—there will be a progressive elimination of the 36 per cent tariff. But it will take 13 years for our cheddar to become tariff free, 18 years for cream cheese to be duty free, and for all other cheeses it will be 20 years before they have duty free status. So if you are a cheese maker do not hold your breath unless you can squeeze into that first 80 per cent proportion that will be tariff free. For our butter and dairy spread manufacturers, the Korea-Australia FTA will have an immediate duty free quota of 113 tonnes growing at two per cent per annum, but the duties of up to 89 per cent will not be gone until the 15th year.

Infant formula receives similar treatment, with an immediate quota of 470 tonnes to be duty free and the rest of the duties to come off some 15 years later. This is despite the huge demand for Australia's safe and nutritious infant formulas. The contaminated formulas sold in China are still leaving hundreds of parents grieving for the death and disabling of their babies. Australia's strict hygiene protocols mean our dairy products are amongst the safest in the world; however, it will still be 15 years before we have a free flow of trade into Korea of our clean and safe infant formula powders. We will presumably continue to see tourists from Korea as well as from China and other Asian countries take home as many boxes of our canned infant formula as the weight restrictions allow them to haul onto planes. The duties on milk, cream, ice-cream, yoghurt and whey will be eliminated, but that will take up to 20 years.

It is a great frustration that our milk powders and our great Nestle Tatura condensed milk, the choice of quality confectioners and chefs the world over, because it is made from whole milk not reconstituted milk, have been excluded from the Korea-Australia Free Trade Agreement all together. This is a great disappointment, given Australia long ago opened its doors to importers with zero or near zero tariffs on a whole range of products, but we have struggled for decades to see our generosity reciprocated.

This Korea-Australia Free Trade Agreement is a move in the right direction for the Australian dairy exporter. We thank the coalition government for moving it along after the six years of inaction from Labor. But the length of time before all tariffs are removed on those products and the exclusion of some key dairy products are a handbrake on the development of the Australian dairy exports industry.

The Australian dairy industry, like all Australian agribusiness, is one of the least government subsidised primary production sectors in the world. Only three per cent of the income of Australian farmers can be attributed to government support. The announcement of drought support for some today—and I commend and applaud that announcement—is tiny in comparison to the government assistance offered to the rest of the developed world's farmers when faced with any natural disaster. One of the major components of government support in Australia is a dollar-for-dollar offer for agribusiness research—and these funds are raised through industry levies. Even dealing with animal health and welfare, as you can see from this bill, is largely to be in the hands of Australian primary producers themselves. Norwegian farmers enjoy government support that makes up some 60 per cent of their total farm income. The average government support for farmers across the OECD is 20 per cent—and is not likely to come down anytime soon. To drive these comparisons home, a USA farmer is paid US$30,170 per annum and an EU farmer about four times that amount in government support.

In most countries there is an appreciation of the importance of a nation's capacity to feed itself, to contribute to its own food security. There is also the contribution of agribusiness to environmental services production—keeping soils, waterways, biodiversity and air quality in a good state for the rest of the nation. Most nations also understand the high risks faced by any industry of national significance, such as farming, which depends on weather or seasonal conditions—the boom-and-bust cycles that we see in Australia in particular. So it will come as a surprise that the small town of Tatura, a town of only 4,500 people, hosts one of Australia's premier dairy events—an event which is, in fact, second only in international importance to an event in Chicago, as it recognises dairy excellence and good genetic development.

The International Dairy Week of Tatura was established in 1990. Despite droughts and floods, each year it has continued to offer its prestigious awards to the best of the over 1,000 first-class dairy cattle shown there. Over 100 dairy companies and businesses annually display the latest products and technologies in this tiny town. It is an extraordinary achievement for, as I say, a very small population. The whole of the community comes out and makes this event possible each year, including the service clubs like Rotary and Lions. The City of Greater Shepparton is of course also a major contributor to the success of this international dairy show.

A decade of drought in northern Victoria took a very heavy toll on dairy farms. They were forced to buy in fodder and to sell their water to the Commonwealth Environmental Water Holder, which cruelly held out the offer of $2,400 per megalitre without really explaining the fact that that water would disappear out of food production forever. This took water out of northern Victoria to the extent that we lost half our dairy farms. To survive, many dairy farmers not only sold their water but sold their heifers to China. Others were forced to put their whole herds through the abattoirs, reflecting the fact that their capacity to borrow had run out. Where have all the dairies gone?, a report published in July 2010 by the Victorian Department of Primary Industries and the Northern Victorian Irrigation Renewal Project, said:

In 2010 at the end of the drought, an inspection by the Victorian Dept of Primary Industries and others found that over 45% of the once rich dairying country, or nearly 800,000 hectares across the GMID, was idle rural land.

I want to report the very good news that only 3½ years later, since July 2010, we have fought back. Despite half of the water being taken to the Environmental Water Holder and the fact that that water now sits in our storages at such volumes that irrigators cannot have their remaining allocation put down the system for their farms. We have had a major renewal of the dairy industry in our part of the world. Despite the terrible impact of the drought on the dairy industry where the century-old irrigation system failed for the first time, we are seeing a significant rebuilding of the herds with herd size and production approaching pre-drought levels. While sales of live dairy cattle to China continue with some 55,000 pedigree animals exported by the end of June last year and 36,450 dairy cattle exported in the first eight months of 2010, the industry is continuing to add to its herd size.

We are also seeing new dairy manufacturers like the UHT plant in Shepparton being established. This is despite the escalation in costs if you are trying to dairy. Feed costs have significantly increased. Many still carry significant debt from the years of drought. And the carbon tax, which we cannot get rid of until Labor cooperates, has significantly added to the cost of the power used to run a dairy, and the refrigerant gas tax has pushed up the cost of the cooling milk vats to unsustainable levels.

On top of that, when Labor insisted on three hours of minimum pay for casual milkers in dairies which had been modernised to take less than two hours to complete the milking, we saw real inefficiencies in the cost of labour. Of course, the price of irrigation water has gone through the roof. Unfortunately, the irrigation system in Victoria is owned by the state government. There are no other state governments still in charge of irrigation systems. In Victoria, they employ over 800 people and the state system is hugely in debt. They are trying to get out of that debt and their own inefficiencies by upping the fees and charges to their irrigators. We are just teetering at the point where the cost of water is beyond the productive capacity of farmers to make ends meet.

Data from Dairy Australia's regional forecast of milk production outcomes paint an interesting picture of the intentions of the Murray Dairy regional producers. I have already described the difficulties they face with the irrigation water costs, the loss of half of their irrigation entitlement when they were forced through drought circumstances to sell that water to the Commonwealth for the environment, which still has not seen the benefit of that environmental water held.

The Murray Dairy region's figures show that herd sizes have grown from 253 on average in 2012 to 282 on average in 2013. More interestingly, 48 per cent of Murray Dairy farmers felt positive about the future, second highest only to Tasmania where 50 per cent had a positive outlook for the future of the national dairy industry. The worrying thing is that, for an industry that is as important as dairying, this data shows us that in areas like western Victoria only 19 per cent had a plan to invest next year and only 46 per cent had a positive view about the dairy industry into the future. Gippslanders had even lower expectations for a positive future. The dairy industry needs a great deal of understanding and support in Australia. It is not an industry that needs a handout but it does need real Australian support.

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