Monday, 11 November 2019
Protecting Australian Dairy Bill 2019; Second Reading
The Protecting Australian Dairy Bill 2019 has one overarching purpose, and that is to save Australia's dairy industry. To all the dairy farmers watching this debate today: my heart goes out to you. I know the hardship, the loss and the trauma that you are going through—the loss of your properties and your cattle—and I know that you will be watching this debate with interest.
The bill introduces three measures. The first is to task the ACCC with establishing a minimum price for the milk fat and protein content of milk produced on the farm in specified areas of milk regions. I circulated an amendment this morning to that effect. The second is to legislate a mandatory code of conduct to be established for the food and grocery industry. This will include the dairy industry and the first purchaser of milk from the producer. The third measure is to make a referral to the Productivity Commission to make recommendations on a divestiture power for the ACCC.
It's disappointing and telling if it is the case that the government will not support this bill. In meetings, the government has been unable to explain how dairy farmers will be disadvantaged by setting a minimum base price for milk. It knows milk has been sold below the cost of water on supermarket shelves and that milk has been sold below the cost of production, and yet the government sits like a spectator watching supermarkets—Coles and Woolworths—together with a handful of milk processors use their market power to control the supply chain and destroy dairy farmers and rural Australia.
As the dairy industry, like other farming sectors, becomes concentrated in the hands of large corporates, often foreign owned, we are seeing family owned farms driven out of business. When they go, the rural communities that support and depend on them are weakened and may die. If this bill is not passed, then we move one step closer to reliance on imported long-life milk.
This bill is not about taxpayers' subsidies, because there will be no subsidies from the government. The bill does not affect dairy exports or free trade agreements. All the bill asks of the government is to put in place some rules that will work against business models based on anticompetitive practices. It means we will pay a little bit more for milk, but that payment means we can continue in the long term to buy fresh milk. I know the Australian people are quite happy to pay a bit extra for Australian milk and support our dairy farmers.
Coles began the milk war in January 2011, and was quickly followed by Woolworths and others. Coles is on record as saying that dollar milk has established them as the best value supermarket in Australia, and it seems they are happy to profit by sending their suppliers out of business.
My bill, the Protecting Australian Dairy Bill 2019, is not just about helping dairy farmers; it is about maintaining and growing the rural communities that support and depend on farms. It is about food security, because we have a need to be self-sufficient in dairy products, including fresh milk.
It's a poor reflection on the government today that it is One Nation that has had to take the lead on this matter. The Nationals are no longer the party of the bush. The Nationals can make amends and start to rebuild their reputation in the bush by crossing the floor to support this bill. If they don't cross the floor, if they don't support this bill, then it is a clear indication to the Australian people of where they stand in supporting the farmers. I will not stand by and be accused of taking their policies when they've sat on this for so long and did not bring in the mandatory code of conduct before the last parliament when I pushed for it to happen.
I want to tell you a true story, which involves a hardworking dairy farm near Gympie. This is only one story, but it's replicated across the country. In the last financial year, these dairy farmers had a turnover of $600,000, and all that money was spent in the local community. The husband and wife are exhausted because they are actually doing the work of four people because they cannot afford to employ other workers. These farmers are under pressure to sign a new contract with French-owned company Lactalis Australia, formerly Parmalat. If they sign the contract, then every litre of the one million litres they can produce will be sold below the cost of production. They rightly ask why the government is not helping people who help themselves.
They are not the only dairy farm at risk. These family owned dairy businesses are not asking for subsidies from the taxpayer, unlike wind and solar electricity projects. They simply ask the government to ensure they are not driven out of business by large businesses whose business model is based on anticompetitive practices. Let us be clear: supermarkets, foreign owned multinational milk processors and megadairies are doing very nicely financially out of the misery of dairy farmers.
The dairy farmers near Gympie are listening to this debate today, and they are holding off the decision to send their productive herd to the meat packers on the outcome of today's debate and vote. They want to know why the supermarket rebate from the big supermarkets only applies to sales of one-litre bottles of home brand milk. This means they receive a rebate of 3.8 cents a litre and not the 10 cents. The $700 a fortnight they received last financial year from the Farm Household Allowance needs to be repaid because, when they did their tax return, they discovered the principal component of their mortgage counts as income and, on that basis, they owe all the money back to the government. They will not be entitled to the farm household allowance this year, because the sale of one-third of their herd will count as income, even though it is being used to feed the remaining herd.
The Protecting Australian Dairy Bill 2019 is vital to protect Australian dairy farmers, to bring sense back into the pricing and sales mechanisms in place for this stable food, milk, and to safeguard Australians generally by providing good quality Australian milk. I have also been told that the Centre Alliance doesn't intend to actually vote for this, based on approximately 130 dairy farmers in their state and that it's about export. It's not about the export market. This is about protecting our own industry here in Australia. We have to stand up for all the dairy farmers. We've gone from 22,000 to under 6,000 dairy farmers at the moment. So if you want to buy imported milk, you'll be looking at New Zealand, or, who knows, possibly even China, who were exporting the milk from our country back to their country. And do you know what? The Chinese don't even want their powdered milk, so what sort of future are we going to have in our country?
I call on everyone in this parliament: represent the people of this nation—the dairy farmers, who are on their knees and going under. All they want is a fair price for their milk, and the public will pay for it.
It is an honour and a privilege to serve in the Australian parliament. It is particularly an honour and a privilege to serve and represent the agricultural industry and farmers of Australia, but that is not a privilege that I take lightly. Too often I have had complaints of the amount of regulation and legislation that is choking this country, and one of the reasons that I stand here is to not be a part of that overregulation.
There is no more important industry in Australia than agriculture in growing the food and fibre that feeds the nation and feeds a good part of the world. Dairy is indeed an important part of that industry. They are doing it as tough as anybody at this moment—as tough as pork producers, as tough as feed lotters and as tough as anybody who is having to pay a dollar a kilo for feed, who are struggling to get water in the face of a deep drought. But these are not things that can or should be solved by this legislation.
I want to recognise Senator Hanson's well-placed passion and support for this industry and for these farmers who are, as we've already talked about, doing it tough. But, as I've already said, this legislation will not protect farmers. It will not protect farmers from unconscionable buying habits from supermarkets. It will not protect farmers from the actions of industry practice, of trading milk swaps and of not paying a fair price.
I cannot believe that the Labor Party is going to support this legislation. How tragic it is that there is only a handful of them here in the parliament to hear this debate and to make up their own minds about what is appropriate and what is right for our very important dairy industry.
Despite being Australia's third-largest agricultural industry, dairy faces significant challenges. This government knows that, if left unchecked, these challenges will threaten the long-term viability of dairy production in this country. The fact is that raw milk pricing is determined by processors and incorporated into supply contracts entered into with farmers. These contracts aren't uniform; they depend on milk quality, volume supply, timing of supply and the premiums attached to the length of a supply contract. The reality is that it is challenging to compare milk supply agreements and contracts. That is why we're acting on the ACCC's recommendation to introduce the dairy code of conduct. Right now, industry has the opportunity to have a say. Consultation closes on 22 November. We're seeking feedback on the best form of contractual terms and pricing, too.
The other issue that I am most concerned about is that, less than one month ago, Senator Hanson launched a Senate inquiry which sought to assess the performance of the dairy industry since deregulation. This inquiry was to give farmers an opportunity to provide their evidence. It was an opportunity for dairy organisations who, I believe, have not been deeply consulted on this and an opportunity to come and publicly explain the issues that they have, and yet we are rushing ahead with legislation which is not complete. We have had amendments to this legislation this morning. I cannot support legislation that is drafted so hastily, with unintended consequences that could potentially affect dairy farmers more adversely than the problem we are seeking to solve. The inquiry even goes so far as to specifically address alternative approaches to supporting a viable dairy industry and the merits of tasking the ACCC to investigate how it can regulate the price of milk per litre paid by processors to farmers.
As a Queenslander I strongly support dairy in my state of Queensland. Whether it be on the tablelands or in the south-east, this is an industry that is under enormous pressure. But this bill is premature. It lacks support from industry. It is not based on fact. I particularly disagree with the comments that the National Party is not standing and fighting for farmers right across this nation. As a party, we live in regional areas. We come from these regional areas and we speak, daily, to farmers and processors and producers, who are all part of the agricultural supply chain. Can we do better for the industry? Of course we can. Senator Hanson named one processor in particular who I agree is not doing the right thing for its farmers, and it should be called out for it. But it has to be said that Norco as a co-op and a genuine representative of their farmers is doing a very good job at increasing prices, taking supermarkets to task and increasing the amount that they are being paid for their farmers.
I cannot support this legislation. It is not well thought through. I agree completely that there are dairy farmers who are on their knees, who are considering the ultimate solution. That is appalling and tragic, and I will fight every day for them. But this will not solve their problems and, what's worst of all, it gives them hope when it will not provide it.
It is a sad indictment of the Morrison government that this bill needs to be debated in the Senate today. It's an admission that the Liberal-National government has failed Australia's dairy industry miserably. Today government senators will stand up in the Senate to, essentially, pat themselves on the back. They will show no contrition or regret that, as a third-term government, they have been slow to act and have hidden behind reviews and inquiries as an excuse for not acting. The real test today is for the Nationals senators—those once proud Country Party representatives, who are far from that now—particularly Senator McDonald, Senator Davey and Senator McMahon. Will you stand with dairy farmers and vote for this bill? I think you've made it pretty clear that you won't. Unfortunately, you're going to roll over like doormats, once again, and follow the Liberals blindly.
The fact is that the dairy crisis occurred not just last week, last month or even last year. It is important to put the critical facts on the table about the current state of the dairy industry. There is a significantly smaller national herd, reduced farmer confidence and ongoing price pressures. Dairy Australia's initial forecast for 2019-20 anticipates a further drop of milk supply, between three and five per cent, to about 8.1 to 8.3 billion litres. It is important that the Senate understand just how tough circumstances have been for our dairy farmers for some time now. For too long our dairy farmers have been caught in a cost-price squeeze, and their plight has now been compounded by the shocking drought.
The coalition government turned its back on our dairy farmers when Murray Goulburn, back in April 2016, cut farmgate milk prices and backdated the clawback of the price to July 2015. A week later—and remember this was 2016, when Mr Barnaby Joyce, the member for New England, was agriculture minister—Fonterra did the same thing. It was estimated that the clawbacks created average debts of about $120,000 for each dairy farmer.
On 24 May 2016 the shadow minister for agriculture, the member for Hunter, wrote to the then minister asking him to join him in a bipartisan manner to put pressure on Murray Goulburn to deviate from its profit-sharing mechanisms. The member for New England ignored that request and essentially ignored the plight of our dairy farmers.
The reckless actions and failed capital raising structure by Murray Goulburn fell disproportionately upon dairy farming families and it was not fair. Murray Goulburn could have suspended the direct link between milk prices and money it pays to investors. They could have directed funds back to higher milk prices for farmers to provide a significant cashflow boost to farmers. But there was no pressure from the then agriculture minister for Murray Goulburn to do the right thing. This is the same man who stands up grandstanding for his own self-interest. He wants the top job back and all of you over there know that. We over here know that.
Liberal and National senators will say that in response to the Murray Goulburn debacle, dairy farmers were given access to farm household allowance and concessional loans, but they are missing the point. It should never have come to that. Dairy farmers need a fair farmgate price, transparent contracting and effective dispute resolution mechanisms. All senators in this place already know that there have been a number of inquiries supporting the fact that the dairy industry is facing a number of challenges and a crisis situation.
The Senate also noted back in 2016 that the Australian dairy industry is facing an unprecedented crisis with the retail cost of bottled milk per litre often less than the retail cost of bottled water. Australian milk production since deregulation over 15 years has decreased from approximately 11 billion litres per year to nine billion litres per year—that's a 20 per cent decrease—while New Zealand milk production has almost doubled.
In 2011 a report to the Senate Economics References Committee recommended that:
… producers' contracts with farmers should offer a clear, consistent formula for milk pricing with unambiguous conditions.
Five years later the livelihoods of up to 40 per cent of Australian dairy farmers are under threat because of imposed retrospective debt helped by unclear, inconsistent milk pricing contracts with ambiguous conditions. The committee also noted that:
Despite being Australia's third largest agricultural industry, the dairy industry faces a number of significant challenges which, if left unaddressed, have the potential to threaten the long term viability of dairy production. The industry is not homogenous and varies with distinct challenges across different geographical regions. Challenges also arise due to the inherent and interconnected relationships between farmers and end consumers. For many farmers, the challenges they were already facing were exacerbated by the retrospective price step-downs of May 2016.
Sadly, the issues facing the dairy industry have been left unaddressed and it's most likely why government members, during the previous sittings and on 17 October of this year, voted against another inquiry into the dairy industry by the Senate. Fortunately, the motion was successful even without government senators.
Senator Duniam was given the job of trying to explain why the government would not even support a Senate inquiry into the dairy industry, claiming that, 'The government does not support re-regulation via an ACCC investigation as regulation is not supported by the industry. As recommended by the ACCC we're implementing a mandatory code of conduct to increase fairness and transparency between dairy farmers and processors.' This is the government, not me, 'The code has been developed in consultation with industry and will help to address the imbalance in bargaining power between farmers and processors.' They also went on to say, 'Progress has been made to expedite the code and an exposure draft will be released shortly for industry feedback and is expected to be in place by 1 January next year. The government is also reviewing the rural research and development corporation system, with consultation currently open until 4 November 2019.' The rhetoric just doesn't stack up. A Senate inquiry does not have the power to re-regulate the dairy industry and the code of conduct can only do so much, if it ever gets implemented. Essentially, Senator Duniam was being loose with the truth, but most likely he was given that statement by none other than the agriculture minister, Senator McKenzie.
The Senate committee inquiry is seeking to ask and answer questions this government is just too scared to do. The inquiry motion begins:
That the following matter be referred to the Rural and Regional Affairs and Transport References Committee for inquiry and report by the third sitting day in March 2020 …
I won't go into the terms of reference, because time is limited, but I will say that we need to do this inquiry. Therefore, the question has to be asked: what are the government members and senators scared of? We know the Prime Minister is too scared to talk to dairy farmers. This was exposed when Shoalhaven dairy farmer Mr Robert Miller blocked the Prime Minister's car during the election campaign, telling him, 'Mr Prime Minister, it's cheaper to wash your car with milk than it is with water.' Sadly, Mr Miller was ushered away from the car, and the Prime Minister disappeared into the ether. What happened on that day in Nowra is another indictment of the Morrison government. Dairy farmers shouldn't be ignored, and the Prime Minister should have taken the time to talk to the farmers. Instead he was only there to open Warren Mundine's campaign office.
We know via media reports:
That's the Nats. They can't help themselves. They go straight to the papers to tell the world. Keep telling us. It was an extraordinary story by Rob Harris that ran on 24 October 2019 in The Sydney Morning Herald. It totally exposed Nationals MPs as being more concerned about their own self-interest than the interests of dairy farmers. It reports:
Two former Cabinet ministers—Darren Chester and Barnaby Joyce—were among a handful of MPs to voice their concerns over the Finance Minister's deals … claiming he had shown "a lack of respect" to the junior Coalition partner.
This is of real concern. We don't know who the other Nationals MPs or senators were, but I'm sure the member for New England is working on those numbers. Senator McKenzie and Mr McCormack are watching their backs. So far, we know that the list of disgruntled members includes Mr Joyce, Mr Chester, Mr Gillespie, Mr Pitt and Mr Hogan. Whilst Mr Gillespie has again voiced his concerns recently, the Senate should note that the member for Lyne has been frustrated with the Morrison-McCormack leadership team for quite some time. In the House of Representatives on 20 February 2019 the member for Lyne stated:
I've spoken before in this House about the crisis facing Australian dairy farmers. I met with representatives from Farmer Power, a dairy producers group from Victoria; and the South Australian farmer who recently exited the industry, Casey Treloar. My predictions are coming true.
Unfortunately, Mr Acting Deputy President Bernardi, time does not permit me to keep going, but I think you get it pretty clearly. We will see that, on that side over there, the once-mighty Country Party has disintegrated back to being doormats. I'm terribly sad that this is how you treat Australia's dairy farmers. We in Labor will be supporting you, Senator Hanson.
In 2016 milk prices were slashed, and farmers around Australia were devastated. Over the years I've heard many stories from farmers that were affected about the struggles that they are continuing to face, but I'd like to share a particular one from a dairy farmer from western Victoria, Karinjeet Singh-Mahil. She and her husband, Brian Schuler, were suppliers to Fonterra, and they faced enormous challenges when the prices were cut in 2016 even just in attempting to get some clarity and transparency about the sudden changes, let alone maintaining their dairy business. Ms Singh-Mahil said in a submission to the Senate in 2017:
In neither case has Fonterra been transparent about what the loan balance is, what the terms and conditions are etc. It is all bundled into the total milk price and we are unable to work out what our actual milk price is, what repayments are being deducted for the autumn offset and what interest is being deducted for the loans we didn't take.
They had a herd of 360 cows in 2016, and within a short period they'd cut it to 280, and they still ended up with a debt of over $100,000. They had to talk about what would happen if they lost the farm. Karinjeet has been brave in speaking publicly about the strains these challenges put on relationships and communities. She and her husband are still farming and are still concerned about what impacts processors have on the industry. They've been forced to diversify into other projects because of the enormous burden imposed on them by the sudden cuts.
Since that crisis in 2016, we have had the 2017 Senate economics committee report, which I participated in, and the 2018 ACCC report on the same set of issues, which was provided to government in September last year. But despite all the inquiries and reports, farmers are still struggling. There are farmers who are still paying off the debts that they were saddled with when processors cut prices in 2016—retrospectively cut prices, let me say. That's why we called for a ban on retrospective price changes in 2016. But the government has only just recently released its exposure draft for a mandatory code of conduct. Better late than never! But it is far, far later than it should have been and there is far less action than there needs to be.
Delays in responding to this crisis make it harder for farmers to negotiate with processors, to operate their farms and to deal with drought and the impact of our climate crisis. In turn, that impacts rural communities right across the country. The Greens support rural communities as a vital part of Australian society. We know that sustainable agriculture cannot be delivered without thriving, resilient rural communities, and we know that sustainable agriculture is fundamental to food security.
But despite how important rural and regional communities are for Australia, dairy farmers struggle when it comes to negotiating with the dairy processors. In turn, the processors struggle when it comes to negotiating with the supermarkets. To quote the ACCC there are
… significant imbalances in bargaining power at each level of the dairy supply chain. This begins with the relationships between retailers and dairy processors, and progresses down to the relationship between processors and farmers.
The ACCC continued:
… most dairy farmers have little bargaining power and limited scope to reposition their businesses or switch to a different farm enterprise to mitigate this.
Right back in 2011, Australian Greens' Senator Christine Milne, with other crossbench senators, made recommendations as part of an inquiry into the dairy sector. A key recommendation was that the federal government develop a mandatory industry code of conduct dealing with relationships between industry participants along the supermarket supply chain. We made that recommendation again in 2017, and in 2018 the ACCC confirmed that a mandatory code of conduct was needed to deal with the relationships between dairy farmers and dairy processors.
In this respect, the views of the dairy farmers and their peak bodies seem to be universally supportive. Some think that it doesn't go far enough, but we've yet to hear from anybody who thinks that the mandatory code of conduct is a bad idea. So it's astonishing how much this government have dragged their feet, having only just released their exposure draft. We need to take action, which is why we're here speaking in support of this part of this bill, at the very least.
But while all stakeholders support a mandatory code of conduct, their views on the proposal for a price floor are much more mixed. The peak organisation, Australian Dairy Farmers, is not supportive, reflecting the fact that industry supported deregulation 20 years ago. And in our conversations with farmers we've heard a range of things; some have fears about how a price floor may impact their ability to compete with farmers in New Zealand. But there is one consistent theme in all of our conversations, and that's that something needs to be done. Australian dairy farmers recognise that dairy farmers are doing it tough, with sustained high input costs and flat farmgate returns leading to increasing numbers of farmers exiting the industry. Similarly, we spoke to those farmers who were still paying off their debts years after the 2016 price drop. There is a range of views, but nobody thinks that the current approach is working.
Given this range of views, we believe that the best approach is actually not to go to a full price floor immediately but to adopt a price notification scheme. This is an approach where the ACCC would monitor prices, and if a relevant entity wanted to change its price then it would have to notify the ACCC. The ACCC could then object or allow the price to change. Price notification schemes are currently in place for services provided by Australia Post, by Airservices Australia and by Sydney airport. We think that, with slight modifications, it's a very useful model for dairy processors. Dairy processors would have to notify the ACCC if they wanted to cut prices below the prices that they had paid over the last 12 months. That would create a role for the ACCC in monitoring and, if need be, intervening on prices while being less drastic than suddenly imposing a price floor. Most importantly, it would ensure that a sudden and unconscionable price drop, like that in 2016, would never happen again. If the situation was repeated, the dairy processors would have notified the ACCC of their intent to decrease prices and there would be an opportunity to object, to intervene and to prevent the tragedy that occurred in 2016.
I foreshadow that, at the committee stage of this bill, I'm going to move amendments to put in a price notification scheme rather than a price floor. In moving these amendments and supporting dairy farmers, we are continuing our advocacy for policies that make a real difference for farming communities. We went to the 2013 election with a full suite of policies to tackle the supermarket duopoly and provide an effective set of competition policy laws, as well as back in increased powers for the ACCC and put in place laws and better legislation, standing up for small business and supporting farmers. Our 2013 policy explicitly mentioned the need to end unfair contract protections to farmers in business-to-business dealings.
In 2016 new laws were implemented to extend unfair contract dealings to protect farmers. In 2017, having campaigned on it for four years, we worked with the National Party and the Liberal Party to bring in what was one of the most revolutionary changes to competition policy in this country in a decade, which was an effects test. But for dairy farmers there have been enough reports, enough studies and enough recommendations. Rural communities are a vital part of Australian society. For a fair go for dairy farmers, to protect the weak from the strong, it's essential that this government, this parliament, acts and acts now.
When I read in the paper that Senator Hanson had garnered the support of Labor to put this bill before the Senate today, I did what I do every time a relevant piece of legislation comes before me, I hit the phones, not to the Liberal Party, as contested by Senator Sterle and Senator Hanson, but to farmers, real dairy farmers, the farmers I know and the farmers they put me in touch with and others, because I wanted to know what the real dairy farmers think. Most of them said: 'We're writing our submission. Don't worry. We're going to let Senator Hanson know exactly what we think.' They were unaware that, despite the fact that submissions to the inquiry into the dairy industry have not even closed, Senator Hanson has determined that she is going ahead with this bill. They were horrified to think that the process of the Senate was being ignored and that their ability to contribute to our democracy was being undermined.
When I look at the history of regulation, I see that it dates back to the 1930s. Some people in this place look back with rose coloured glasses and say, 'That was Utopia,' but it was not. In the history of dairy regulation, there were allegations of corruption within regulating bodies. Multiple reform plans were put forward and refuted by industry and others. Then, in the 1990s, the industry commission found that Australian consumers were paying around $280 million more for fresh milk, and they recommended that the state controls be removed.
As a result, there was considerable commercial consolidation even before deregulation. From the 1940s to the 1990s, we saw our dairy herd fall by almost half, so to blame deregulation for all of the ills of the industry is rewriting history. As quite rightly put by Senator Rice, the catalyst of where we are now occurred 16 years after dairy deregulation. It was when Murray Goulburn dairy shocked the sector by announcing it would slash its farmgate milk price to below the cost of production. That was a devastating time. I live in one of the key dairy regions that provide Murray Goulburn and Fonterra with their milk in Australia. I watched friends, farmer against farmer. I watched friends who'd gone from being positive and planning on-farm investment to—overnight—facing huge debt and having to consolidate. But then I saw resolve. That move by Murray Goulburn shocked farmers, who were traditionally loyal to the core to their processors. After that, farmers realised that processors had no loyalty—therefore, why should they? And many started exercising their choice.
The result has been, since 2016, that farmers realise they can negotiate. It is not perfect yet, but that is why farmers support a mandatory code of conduct, and that is why the National Party have worked hard with the dairy industry to develop that code of conduct. It is the recommendation of the ACCC that we are following and it is the call by industry.
When I was talking to the farmers I wanted to explore the range of opinions. I spoke to farmers from my area, in the Murray dairy region; in the northern Riverina, around Wagga; in the Bega Valley; in Gippsland; and in Western Australia and other states. Not one of the farmers I spoke to said they wanted a floor price. They all said they want a fair price. That's not a floor price. A floor price is not a prerequisite to a fair price. The fear for many dairy farmers I spoke to is the impact the floor price will have on the market. If the floor price is set too high, Australia will become a net importer of cheap foreign milk products. And that would devastate our industry. On the flipside, if the floor price is set too low, there will be no requirement for processors to negotiate, no requirement for processors to pay any more, and it would effectively prevent farmers from being able to negotiate a price that suits their business.
The other thing is that Senator Hanson's bill does not include a change to the definition of a processor. So non-processing businesses, like Coles and Woolworths, that purchase milk from farmers would still not be covered by the bill. It also doesn't deal with the issue of the different arrangements in place with processors regarding fat, bacteria and the protein content of their milk. It is not clear how the ACCC will determine a standard composition for milk, for each region, given the variability in operations.
I am told by dairy farmers across the board that they are all different. They all have different business models and they need the flexibility to negotiate a price that suits their business model. Therefore, a proposal by One Nation to set a minimum farmgate price is not in line with industry recommendations as outlined by either the Australian Dairy Farmers or the National Farmers Federation, nor is it in line with any individual dairy farmer I have spoken to. This proposed bill would set a minimum farmgate price that would not take into account that variability. It would allow processors to become lazy in their dealings with farmers, and it would not resolve the key issue. The key issue for dairy farmers is input costs. Energy prices are crippling. The cost of fodder during this drought is crippling and, for irrigated dairy farmers, the cost of water on the temporary market is crippling. None of these issues will be addressed by this bill.
That is why the Nationals, who are committed to the dairy industry and who do want to work with our dairy industry to ensure their continued success, are committed to passing today's 'big stick' legislation to bring down power price bills. That is why we are committed to bringing in this mandatory code of conduct, so that dairy processors and dairy farmers know where they stand. And maybe the Nationals are prepared to look at the Food and Grocery Code of Conduct, which is currently voluntary, to see if we need to get tougher with the retailers, to make sure they pay a fair price for our food. We in the National Party do stand by our dairy farmers. We believe in them and we want them to succeed. We will not force on them a bad policy that they do not want.
Centre Alliance will not be supporting this bill. I want to make sure people understand and don't misconstrue this. It's not because we agree with the government or because the government has performed poorly; it's simply because it's not the right solution. I understand what Senator Hanson is trying to do. I am sympathetic to her cause, but it is not the right solution.
There are a number of things that need to be solved in order to help our dairy farmers. I will go through some of those. The first is price perception. The fact is that most people around this country think that a litre of milk is worth about a dollar, and that is just not correct. It's a perception created by organisations like Coles and Woolies, for their own purposes, that has led Australians to think that the cost of milk is less than the cost of water—and that is hugely problematic. Back in 2011, the Senate held an inquiry into the impacts of supermarket price decisions on the dairy industry, so this problem has been understood for some considerable period of time and, yet, not much has been done. In fact, there has been some progress, in that section 46 of the Competition and Consumer Act has been modified to deal with misuse of market power. Today, I invite people, when considering the 'big stick' legislation, to support the amendment that Centre Alliance will move that seeks to have divestiture right across all sectors of the economy. Once you accept that divestiture is a useful tool for controlling conduct in the retail electricity market, then it's reasonable to suggest that it's a remedy that is applicable right across the economy. That would help us deal with large corporations who exercise market power in an egregious fashion, as is the case in respect of $1 milk with Coles and Woolies.
The second is the farmer-processor imbalance, which has been talked about by a number of senators prior to me. It is good that we are now seeing a move to get an agreement or code of conduct in place. I point out that, along with the ACCC inquiry, in 2017 the Senate Committee on Economics conducted another inquiry into the dairy industry, with a report titled Australia's dairy industry: rebuilding trust and a fair market for farmers. The Senate examined that in the face of the Murray Goulburn farmgate price cuts. Do you know what? That was tabled in 2017 and the government still hasn't responded to it. Once again, I advise we're not supporting this bill, and it's not because we're supporting the government. The government has done very little in this space. The Nationals need to be poking their coalition partners in the side and getting a hurry-on in respect of some of these changes.
Water prices are another area of concern. Senator Davey mentioned input costs. The cost of water has increased considerably. We're now looking at things like water trading to see how we can fix that, but it's not just the drought; we've had matter mismanagement across the Murray-Darling Basin for as long as I can remember. It is not just the drought that is causing the problems we see with dairy farmers being unable to compete and pay for water. We've also got feed costs, which in some sense are related to the drought, but, again, that also goes back to proper river management. We see situations where the government is reacting. The pressure's coming on. Senator Hanson's put a lot of pressure on in relation to the code of conduct and the timing of that, so the government reacts. We have all sorts of problems on the Murray-Darling, and the government get reactive about them instead of being proactive, which is where they need to be playing.
For as long as the coalition have been in power, since they took over from the Rudd-Gillard-Rudd government, energy prices have been high. I, as a South Australian, know that only too well because we, unfortunately, have the highest energy costs in the country, but Victoria's creeping up. There are a lot of dairy farmers in Victoria who are going to end up experiencing extremely high power prices as a result of a failure to deal with policy properly. So I agree with Senator Davey that this bill doesn't address the core problems, but we must also recognise that the government hasn't been addressing those core input cost problems either.
Finally, I know senators around the chamber will have an affinity with what I'm about to say—that is, as a senator, you have the honour of being able to pick up the phone and talk to just about anyone in the country. That is a huge honour. We are able to contact people—experts in their field—and, in relation to this bill, that's exactly what I did. I contacted the South Australian Dairyfarmers Association and I asked them for their considered opinion on this bill. They do not want it. As a South Australian senator, I have to listen to what my constituents say. The experts in South Australia—the people who are producing milk in South Australia—do not want this, and it is for that reason that Centre Alliance will not support the bill.
The Protecting Australian Dairy Bill 2019 is a classic example of wedge politics in action. One Nation now wants bureaucrats to regulate the price of milk whilst, at the same time, it is calling for bureaucrats not to regulate water in the Murray-Darling Basin. If you don't like the way bureaucrats are regulating water, what makes you think they'll be any better at regulating milk? Talk about flip-flopping.
Like the Murray-Darling, our dairy industry is complex and varies significantly by state. Trying to determine a price for milk that will keep everyone happy is an impossible dream and only goes to show how out of touch One Nation are. So let me say this: a base milk price will not be effective, because of regional variations in dairy farming and the difference in domestic and export prices. If a base price is set by a state, the processors will just buy milk from the state with the lowest base price, thus sending dairy farmers in other states, like Queensland, broke.
Not once have I heard One Nation or Labor actually name their price. It's all very well saying you want a floor price. That's the easy part. But has anyone actually done a sensitivity analysis on the different impacts of different base prices? I doubt it. I haven't heard anyone talk about the detail here—that is, if you believe, like those opposite us, that bureaucrats should set prices.
Once upon a time, the government set a floor price for the wool industry. Do you know how that turned out? It destroyed the industry for the best part of a decade as a result of oversupply. Why? Because farmers were guaranteed a fixed price regardless of demand. They didn't have any incentive to rein in supply when demand was slowing. Ultimately, this led to a massive wool stockpile that crushed the wool price and the industry with it.
My childhood was spent in the sheep yards and shearing sheds mustering, yarding, pressing wool and working alongside my first great love—the Australian working dog. Not many of you may be familiar with what happened to the wool industry, but I am. I had to watch my parents struggle to make ends meet when the industry crashed, and they did. My parents, like so many others, don't bother complaining. They accept that the world isn't perfect, and they adapt to prevailing conditions. It's a pity, though, that the world didn't listen. My father hated the floor price. He hated governments regulating prices, period. He knew it was going to crash the industry, and he was proven right.
The devil is in the detail, so let's go there. I think you will soon agree that, like myself, Senator Hanson is sadly lacking any commercial acumen whatsoever—lots of rhetoric but no solutions. Are we talking about the narrow definition of milk or the wider definition? This matters because milk only constitutes 27 per cent of dairy products sold. The largest product sold is cheese, at 36 per cent, followed by milk, at 27 per cent, and butter, at 23 per cent, with yoghurt and ice cream making up the remaining balance. In Senator Hanson's proposed bill, she wants the ACCC to set a base price for milk. The main condition on this is that the ACCC, when settling on this price, must have regard to the cost of collecting, processing and selling dairy products, to the long-term food security of Australia and to the commercial viability of dairy farms and processors. That's about as clear as mud, isn't it. How many bureaucrats are we going to have to employ to work all this out? Sounds like a great waste of taxpayers' dollars to me.
Tell me: is this base price meant to be the same for each state, or is there going to be a different price for every state? This matters because the average expense of milk solids varies significantly, state by state. In Tasmania it's $4.36 per kilogram and in Queensland it's $6.63 per kilogram. In other words it's almost 50 per cent more expensive to produce milk in Queensland than in Tasmania. Processors already pay more for Queensland milk than they do for milk from other states. That's right: Queensland receives $7.84 per kilogram of milk, while Victoria only sees $5.87 per kilogram of milk solid. Effectively, by introducing a base price for milk, One Nation is going to throw Queensland dairy farmers under the bus, since they are already the highest-paid dairy farmers in Australia. And, if the price is set by state, how does the bill prevent processors from buying milk from the cheapest producing states?
I'll make a couple of other points before I conclude. The preamble to this bill says that dairy farmers have been leaving the industry since it was deregulated in 2000. This is not the full picture. As a matter of fact, more dairy farmers left the industry in the 20 years before deregulation than after it. It's also worth noting that farmers who left the industry after deregulation would more than likely have been part of a transition package funded by the consumer, who had to pay an 11c-per-litre levy for milk for eight years after deregulation, a deregulation that the dairy farmers asked for and that the state governments—not the federal government—agreed to. It should be remembered that much of the land in Queensland that was once dairy farms has now been subdivided into acreage. Many dairy farmers who got out of the industry did so by subdividing and taking profit from rezoning agricultural land into residential land.
What the coalition government is going to do is give our dairy farmers greater control over their destiny by bringing in a mandatory code of conduct that will ensure dairy farmers can fairly bargain with processors so they can receive a fair price for their milk and related products. We will continue to fight for lower water charges, Australian ownership of water, lower power prices, strong enforcement of anti-dumping laws and—most importantly of all—higher taxes on profits sent offshore by foreign owned companies, which most of the major processors are. That's something that I would be working on right now if it weren't for this desperate, attention-seeking stunt.
I will always be a fierce defender of our agricultural industry and way of life. But the best way to ensure we maintain our high standard of living and vibrant agricultural industry is to ensure that we continue to drive productivity. Our freedoms are the child of affluence. If we don't constantly improve our productivity, we will not continue to earn the profits that provide us with the freedoms we have today.
I too rise to speak on the Protecting Australian Dairy Bill. In doing so, I will point out and pay tribute to the three colleagues of mine who have spoken before me on this bill, all of them with direct experience of agriculture in Australia.
That is the case with me too. As many of you know, I grew up on a family farm in the South West of Western Australia—a family farm that has done pretty much everything in the course of its life. My dad built a dairy. My dad ran a dairy for a number of years. As with Senator Rennick, he left the industry when I was a young boy—again, well before deregulation took over. On our family farm alone, we've had four highly regulated industries where we've seen the heavy hand of government, sometimes aided and abetted by industry leaders who think they know best, try to control what farmers do. On our farm in the South West of Western Australia, at various times we've produced milk, we've had a fine-wool merino flock, we've had prime lamb production and we've grown potatoes. All of these at one stage or another were massively overregulated. They were highly regulated, with price controls and quotas. You name it; those industries had it, and it affected them all negatively.
Senator Rennick talked about the collapse of the reserve price scheme for wool. Dad and Mum struggled on for probably six years with our fine-wool merino flock, but with that wool stockpile hanging over their head they just couldn't do it any longer, and in the end they had to get out. I think Senator Rennick was actually a little bit kind to the impact of the collapse of the reserve price scheme when he said '10 years'. I think it was closer to 15. It's probably only been in the last six or seven years that there have been decent returns for wool again in this country, as finally that floor price for wool and the negative impact it had on the wool industry in Australia have washed out of the system and finally woolgrowers across Australia have got a decent return for their clip.
We had a regulated lamb industry in Western Australia and, obviously, a regulated dairy industry. The potato marketing board, up until recently, regulated the production of potatoes in Western Australia. All of these in the end had to wind up. They had to collapse. They had to be wound up because they failed. They failed to meet the test of what agriculture needs, and that is farmers being able to do their best to produce the food and fibre that the world and Australia need.
Bureaucrats in Canberra or Perth cannot judge what is required by farmers on the land. It is impossible. We can help set the rules by which everyone operates. We can help make sure that those rules are as robust and fair as possible and encourage transparency as much as possible, but, as soon as we get into the realm of starting to talk about floor prices, we are rerunning history that has already failed. The devastation that was caused by the previous regulation of industries cannot be overstated. I had another example in my professional life when working with the Pastoralists and Graziers Association at the time of the end of the Australian Wheat Board, the export monopoly for wheat, a situation which saw Western Australian grain growers effectively underwriting the cost of marketing wheat to the rest of the world and eastern states grain growers, who operated in a deregulated domestic market, taking advantage of that in some years and ignoring it in others. West Australian grain growers carried the costs. Regulation of industries with a one-size-fits-all model does not work. It has failed. It has failed. It has failed again.
As a servant to the people of Queensland and Australia, I want to talk about regulations. Having listened to the socialists on my left in the Liberal and National parties, let's have a look at some of the regulations. I've also listened to the farmers who are doing it bloody tough, right up the whole of the east coast and in South Australia. Let's start with property rights being stolen from farmers due to John Howard's government policies, without compensation. Let's have a look at water prices that are now ridiculous thanks to speculators driven by the same John Howard's government policies. Let's have a look at the shortage of water driven by the same Murray-Darling Basin created by John Howard's government. Let's have a look at power prices that are now the highest in the world—and not the lowest as they used to be—thanks to John Howard's government. Let's have a look at the drought, and that has become a water crisis. Drought is natural. The crisis is man made. It's government made. Let's have a look at the banks that have been given an easy ride thanks to John Howard's government. Let's have a look at free trade agreements that are now giving New Zealand and Canada a free ride.
So much of this is underpinned by the climate scam, which most farmers know is rubbish, and which most Liberals know is rubbish but haven't got the guts to stand up about. The farmers get squeezed. I was on the banks of the Murray River just a week ago. Water was flowing past. A farmer walked up to me with a construction man, the owner of a construction business. He has not got a single customer, because the farmers are lacking confidence. He told me himself. He said: 'They can handle drought. They can't handle the current uncertainty that is due to government. They can understand nature. They can't understand what the government will do next.' This is urgent and the government won't address it!
Senator McDonald opposes regulation. So do I. But this has been created by regulation—uninformed, bureaucratic nightmares driven by the Liberal and National parties over many years. They need to either rescind all of those regulations that I have talked about or pass this bill. We hope that the National Party senators will support Senator Pauline Hanson's bill, because the people do support looking after the dairy farmers. I commend this bill to the Senate.