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Australian Dairy Industry Deregulation
The Australian Dairy industry was deregulated on 1 July 2000, after the industry undertook an exhaustive process of examining options for change in the face of growing imbalances between the state based industries. In particular, the Victorian industry, which accounts for around 62% of the total national production was seeking the freedom to expand into interstate markets. In response to this commercial pressure, the industry as a whole explored a number of options including continued regulation. However, these options were not supported by the majority of the industry and it was concluded that managed deregulation, supported by an Australian Government funded adjustment package, was the only viable way forward. The alternative was unmanaged deregulation through commercial forces without an assistance package. It is important to note that, in agreeing to the package, the Australian Government took into account that it was the industry itself that was seeking the changes to the regulated arrangements.
The Australian Government was very conscious of the impacts of dairy industry deregulation on farmers and local dairy communities and it was clear from the Government’s perspective that, once the State market milk regulations were removed, a considerable number of dairy producers would experience significant and abrupt income losses, and without assistance many would have difficulty adapting to the new market conditions. It is for this reason that, on 1 July 2000, the Federal Government made available an industry adjustment package worth $1.78 billion to assist the dairy industry and dairy communities make the transition to a deregulated environment. In addition, in May 2001 a further $159 million supplementary assistance package was announced, bringing the total amount of Australian Government assistance for restructure of the dairy industry to $1.94 billion. This is the largest amount ever provided by the Commonwealth Government for rural adjustment.
Funding for the deregulation package is provided through the imposition of a Commonwealth levy of 11 cents per litre on retail sales of drinking milk, called the Dairy Adjustment Levy (DAL). This levy commenced on 8 July 2000 and is estimated to run until 2010. It is important to note that the consumer and not the farmer bear the cost of the levy. At the outset, the dairy industry and Government agreed that it was most appropriate for the consumer to pay the levy given ti was the consumer that was most likely to benefit significantly from lower costs for fresh milk and greater choice. The Australian dairy industry is now worth $2.4 billion in exports, with virtually all potential growth in farm output and value-adding production linked to the Australian industry’s ability to compete in export markets.