House of Representatives

Second Reading Speech

Mr Burke (Minister for Agriculture, Fisheries and Forestry)

I move:

That this bill be now read a second time.

The Dairy Adjustment Levy Termination Bill 2008 will amend the Dairy Produce Act 1986 to finalise the Dairy Structural Adjustment Program. The adjustment program was established in 2000 by legislation supported by both sides of the parliament.

To finalise the program the bill will allow the government to wind up the Dairy Adjustment Authority and the Dairy Structural Adjustment Fund.

The bill makes consequential amendments to remove references to the adjustment program in other acts and repeal of the acts that established the dairy adjustment levy.

The bill clarifies that activities associated with the closure of the program can be considered a cost of the program and that surplus levy funds will be returned to the Consolidated Revenue Fund.

Importantly the bill will allow the government to terminate the levy, paid by consumers on fresh milk, in a manner that minimises over collection. In doing so, the passage of this bill will reduce the levies paid by Australian consumers.

Termination of the dairy adjustment levy

The levy has funded a number of adjustment measures to help farmers adjust to the removal of state and Commonwealth government price support measures.

These measures included 32 quarterly payments to around 13,000 individual dairy businesses over eight years. The last scheduled quarterly payment was made in April 2008.

Given the adjustment program has fulfilled its purpose, it is timely to terminate the 11c per litre consumer levy on fresh milk sales, which has funded the program.

Revenue from the dairy adjustment levy is appropriated into a trust fund, which is administered according to statutory obligations, and a statutory funding agreement between Dairy Australia Ltd and the Commonwealth.

Initial outlays related to the adjustment program exceeded income from the levy. The then government decided to use commercial loan arrangements rather than budget funding to meet these initial costs.

While final payments have been made to farmers, the levy continues in order to pay off loan debts.

Once the levy has generated enough revenue to bring the adjustment fund into balance, I can remove the levy under provisions in schedule 2 of the Dairy Produce Act 1986.

Avoiding overcollection

The dairy adjustment levy generates around $20 million per month and takes around 60 days to fully flow from consumers to the adjustment fund.

The act requires the minister to give 28 days notice before removing the levy. But the legislation provides that notice can only be given against receipted revenue.

Because of the notification process and the delay in collections being receipted, levy termination arrangements set out in the act currently would result in around $50 million being collected in excess of what is needed.

It is not acceptable to continue to collect up to $50 million from consumers once the job for which it is collected is funded.

The government is committed to terminating the levy as soon as is practical.

The amendments will allow me to consider levies paid, but not yet receipted into the adjustment fund, when declaring a levy termination date.

It will also allow me to reduce the levy termination notice period from 28 to seven days.

The department will work with milk processors to ensure this happens and that the levy is removed in a seamless manner.

The government expects the removal of the levy to be passed onto consumers. Any complaints or suggestion of anti-competitive conduct in relation to removal of the levy will be dealt with by the Australian Competition and Consumer Commission.

Wind-up of the Dairy Adjustment Authority

The Dairy Adjustment Authority was established as a statutory authority under the Agriculture, Fisheries and Forestry portfolio in 2000. The authority was created to make eligibility determinations for payments to farmers under the two largest components of the program.

At the peak of its operations in 2000, the authority had 83 contracted staff and a number of consultants.

The authority now has four part-time staff.

This downsizing reflects that the authority has substantially completed its functions and can now be wound up.

I would like to acknowledge the work of the authority and its staff over the past eight years, particularly Dr John Drinan, who recently retired from his position as chief executive.

Dr Drinan and the authority have worked closely with my department over the past 18 months to finalise the authority's operations.

From 1 July 2008 the Secretary of the Department of Agriculture, Fisheries and Forestry assumed the role of chief executive of the authority.

The amendments will allow me to wind up the authority by ministerial declaration after it has completed its 2007-08 annual reporting requirements and transferred its records to the department.

I expect to make this declaration by early next year.

After the authority is wound up, the Department of Agriculture, Fisheries and Forestry will assume the powers and functions of the authority. This will primarily include record keeping, reporting on its 2008-09 operations and finalising any outstanding payments to farmers.

Closure of the adjustment fund

The act provides that all revenue raised by the levy must be appropriated to the adjustment fund.

If this mechanism remains in place, all levy collected surplus to the needs of the adjustment fund must be paid to Dairy Australia.

Accordingly, this bill amends the act to allow the minister to stop the flow of levy funds from the Commonwealth to the adjustment fund after enough revenue has been collected and the deficit in the adjustment fund has been eliminated.

The decision on exactly when to stop the appropriation of levy funds to the adjustment fund, held by Dairy Australia Ltd, will be made in consultation with Dairy Australia, having regard to the present debts and future liabilities of the adjustment fund.

Amendments will also provide for the closure of the adjustment fund, for Dairy Australia Ltd to return surplus funds to the Commonwealth following the completion of the program and allow surplus levy funds to be transferred to the Commonwealth.

The closure of the fund will signify the finalisation of the program.

Other amendments

Revenue generated by the levy can currently be spent on a number of legislated activities, including administration of the program.

The bill will confirm that activities associated with the wind-up of the authority are appropriately considered in the administration of the program. Wind-up activities will include transfer of hardcopy files to the department and staffing costs.

I have mentioned that all scheduled quarterly adjustment payments have been made. There are a small number of outstanding payments due to administrative matters like incorrect bank details, and uncertain estate arrangements where a recipient is deceased.

The bill includes a provision to ensure that any outstanding payments to farmers at the time the adjustment fund is closed can still be paid after the authority is wound up. The department will administer these payments.

Until its wind-up, the Dairy Adjustment Authority will continue to finalise the small number of outstanding payments that exist.

Consequential amendments and repeals

A number of acts require amendment as a consequence of the Dairy Adjustment Levy Termination Bill 2008.

Consequential amendments in this bill will remove references to the adjustment program and its various components. Affected legislation includes:

Income Tax Assessment Act 1997,

Remuneration Tribunal Act 1973, and

Social Security Act 1991.

Additionally, the bill allows for the repeal of the three acts that set the rate of the dairy adjustment levy, namely:

Dairy Adjustment Levy (Customs) Act 2000,

Dairy Adjustment Levy (Excise) Act 2000, and

Dairy Adjustment Levy (General) Act 2000.

Conclusion

This bill will allow the government to finalise the Dairy Industry Adjustment Package.

The package was established to help farmers adjust to the removal of state and Commonwealth government price support measures.

The objectives of the Dairy Industry Adjustment Package have been realised and it is appropriate to both wrap up the administrative arrangements and terminate the consumer levy as soon as is practicable.

I therefore urge the swift passage of this legislation through the parliament and commend the bill to the House.

Debate (on motion by Mrs May) adjourned.