Joel Fitzgibbon MP: Federal Member for Hunter | Shadow Minister for Agriculture and Rural Affairs

E&OE TRANSCRIPT
RADIO INTERVIEW
RN BREAKFAST
WEDNESDAY, 25 MAY 2016

SUBJECT/S: Murray Goulburn milk crisis.

FRAN KELLY: As we heard on AM Barnaby Joyce will this morning announce the Government’s plan to help struggling dairy farmers but the Shadow Agriculture Minister, Joel Fitzgibbon, he is drawing up his own rescue package and he has got a bit of a different idea to try and bring some immediate relief to dairy farmers. The Labor frontbencher says there’s a clause in the prospectus for the dairy giant, Murray Goulburn, that would allow the company’s directors to slash the dividend return to investors and then that money could be handed, in the short term anyway, to dairy farmers in the form of a higher price per litre for their milk. Joel Fitzgibbon says this is a temporary message to keep farmers going until the global milk price recovers. Yesterday he wrote to the Agriculture Minister, Barnaby Joyce, inviting him to go with him to put this to the Murray Goulburn Board. Joel Fitzgibbon, thank you very much for joining us.

JOEL FITZGIBBON, SHADOW MINISTER FOR AGRICULTURE, FISHERIES AND FORESTRY, SHADOW MINISTER FOR RURAL AFFAIRS: Good to be with you Fran.

KELLY: What is the plan exactly you want to pitch to the Murray Goulburn Board?

FITZGIBBON: Well I’m not saying it’s a plan that stands alone we need a broader package for the sector and we’ll see what Barnaby Joyce has to say very shortly. But this is a common sense approach. The co-operative raised money outside the co-operative. It took money from what we call note holders, unit holders, and those unit holders of course have also been affected by what’s happened with the collapse in the price because they are not getting the return they expected. But it’s clear that the Board has put the interests of those Collins and Pitt Street investors ahead of the needs of those struggling farming families which have been so bad affected. So what I’m saying is they should suspend the dividend to the unit holders and redirect that money into a higher farm gate price for farmers. That will put cash immediately and directly into the pockets of the farmers over a projected period of time and that rise in milk price should have knock on effects for Fonterra suppliers as well because their price is linked to that of Murray Goulburn’s -

KELLY: Yeah but hang on, they had a deal with the farmers as part of their expansion deal and they had a deal with the investors or the unit holders as you call them are they able to just suspend that dividend return to the investors to the unit holders?

FITZGIBBON: They are because the investors go into these things eyes wide open and the prospectus makes clear under the profit sharing mechanism that in extraordinary circumstances they can suspend that dividend. Now, this is an opportunity, I can’t imagine a circumstance more extraordinary than the one facing us now. Now it is in the interest of the investors to do this as well because in the end the co-operative only survives if it has dairy farmers supplying milk to it, so the survival of the dairy farmers goes very much to the survival of the co-operative and therefore the long term return for those people who put their money into Murray Goulburn.

KELLY: The profit sharing mechanism that you talk about, this is listed in the prospectus so everyone would appreciate that it’s there, this mechanism, if they know about it why hasn’t the Board used it because instead they’ve cut the price for dairy farmers and we know that some dairy farmers are at risk of leaving the land if they haven’t left already because of this.

FITZGIBBON: Well as you know I put forward this proposition yesterday and wrote to Barnaby Joyce seeking bipartisan support for my call on the Murray Goulburn Board.  But the extraordinary revelation this morning in the Fin Review is that the Board of course was aware of this mechanism, had considered it,  but took the decision not to invoke  it. In other words they put the interests of the Pitt and Collins Street investors in front of the interest of struggling dairy farming families which I find extraordinary.

KELLY: Well have you spoken to anyone at Murray Goulburn at the Board about why they didn’t activate this trigger, if it is there as a legal thing to do. Presumably there’s some conditions that need to be met before they can trigger it.

FITZGIBBON: No there are no conditions to be met. The prospectus made it clear for anyone considering investing in Murray Goulburn that the Board has the discretion to change those profit sharing arrangements in these extraordinary circumstances. So there is no legal question here and the investors went into the investment with their eyes wide open, and I’m sure they did, knew that the Board had the capacity to change those profit sharing arrangements in these circumstances. The Board has just taken a political decision, really,  to take care of the investors ahead of the dairy farmers who have been so badly affected.

KELLY: Well the Agriculture Minister Barnaby Joyce was asked about this on AM, he was asked whether the Directors of Murray Goulburn should take some of the pain and references the clause in that prospectus that you are talking about here and the Minister’s answer was that the Government is investigating whether there are any unreasonable inducements at the time of the float and he said the ACCC is investigating this and he said basically the long game here is that Murray Goulburn as a co-operative owned by the dairy farmers needs to survive, it’s a massive exporter of dairy in Asia for Australia’s sake and the sake of those dairy farmers we need to keep it going, that’s the priority.

FITZGIBBON: Well Barnaby Joyce is wrong. He did belatedly call for an investigation into the behaviour of Murray Goulburn, as he should have done. But their behaviour about the information that they did or didn’t give to the market early enough is another question. This is a decision entirely for the Board. Who takes the pain or the bulk of the pain; the investors who we raise money from, or the struggling farming families. I make the point again, the co-operative does not survive without milk suppliers , so the survival of the producers- dairy farmers - is critical to the survival of the co-operative,. So this is really a win-win, it just means some cash going back to the farmers very quickly and the investors having to wait longer for a return on their investment.

KELLY: So from the way that you see it this money could be going out to dairy farmers now, is that what you are saying?

FITZGIBBON: The Board can make a decision today to change the profit share and direct the money away from the investors into the pockets of dairy farmers. That would be an immediate cash injection and, depending on what interest rate and yield you are working on, you could put $10,000 annually or more - maybe even $20,000 annually into the pockets of farmers. You see Fran the only thing that matters here - and this is the problem with Concessional Loans -which I am not opposed to - I support, but only as a broader package. The problem is it just shifts the debt from one book to another, it doesn’t improve the cash flow for farmers. I mean it may – if Barnaby Joyce sets the interest rate low enough so there is a sufficient differential between the bank interest rate and the Government’s interest rate, but it is going to be minor and over time. The redirection of the money back to the farmers from Murray Goulburn will put money in the pockets straight away, and will have the knock on affect hopefully of raising the price of Fonterra suppliers as well.

KELLY: Hi you’re listening to RN Breakfast its twelve minutes past eight our guest is the Shadow Agriculture Minister Joel Fitzgibbon. Barnaby Joyce has just released his plan – his rescue plan or relief plan for the dairy farmers – and as we knew and as he told us on AM the number one element of that plan is a $555 million pool of dairy recovery concessional loans. Do you welcome that?

FITZGIBBON: Well I sort of do Fran and I’ve been working on my own package,  I took my foot off the peddle waiting for Barnaby Joyce  who had extended or requested that I take a bipartisan approach and support his package, I need to study it. But I just make this point-

KELLY: I should just say in that because we’ve got some more detail of that, the Coalition will immediately make available $55 million to dairy recovery concessional loans for Murray Goulburn- Fonterra supplies this year as well as access to $500 million in concessional loans in out years.

FITZGIBBON: While concessional loans can be useful and I’m considering them too and I’ll support them of course, just let me say this to you. Just say that you owe me $100 okay, and you pay interest on that. concessional loans allow you to take $50 of that $100 and put it on the Commonwealths books so now you owe me $50 and the Commonwealth $50, but you will still pay both of us interest so if there is no difference in the interest rate you’ve saved nothing. The Commonwealth makes their interest rate a little bit cheaper than mine then you save the difference. It’s not a big amount of money and it’s not going to have a big impact for farmers so it’s got to be part of the equation, I think they should be made available, but it’s all about the criteria;  how long it’s going to take them to apply, what are the eligibility criteria, these are all the things that we don&rsq uo;t yet know, but even if they are able to access them almost immediately, I fear that the boost to farmers is going to be very very moderate indeed.

KELLY: Well the rescue plan also is $900,000 for an additional 9 Rural Financial Counsellors in Victoria so they will be on hand immediately, and there’ll also be $900,000 for Dairy Australia’s Tactics for Tight Times program, which is also immediate access to financial counselling to give business advice. Do you welcome all that?

FITZGIBBON:  Well they're emanately supportable things but what both farmers on the ground in both Tasmania yesterday and Victoria last week were telling me, is that they feel that they are adequately supplied with financial counsellors etc and as you know the Victorian Government has put additional money into those programs already. So it’s already received a boost. So of course I’ll support those measures but at the end of the day what farmers are telling me is  that they need cash to pay the bills, and to keep the bank from the front gate, that’s the big issue for farmers. On the loans, Barnaby always quotes the headline value of the loans, so if he says we’ve got $30 million worth of loans that’s the money that they will loan out. The Government borrows at the bond rate of 2 per cent and lends at 2.5 or 3, it actually makes money on the loans. It doesn’t hit the budget bottom line. He likes to talk about the value of the loans, not the cost to Government-

KELLY: Ok.

FITZGIBBON: This is really modest.

KELLY: Can I just ask you two quick questions - on the milk on the shelves, we’ve spoke to Chris Gleeson,  a dairy farmer from Farmer Power calling for a 50c levy per litre of milk sold, but what seems to be happening is the public is demonstrating that they want to help, apparently you know, we’re buying the branded milk off the shelves, but we’ve seen  pictures also of empty shelves in the big supermarkets, and we’ve heard that they are not restocking the branded milk instead they are stocking it with their own generic brand – a home brand milk- do you have any insight into that?

FITZGIBBON: Well I don’t believe a compulsory levy is the way of dealing with this very serious problem but the Australian community is a very generous one and those who can afford to kick in are generously doing that, of course there are some who just can’t afford a levy. They just can’t afford to pay more on milk so we don’t think that is the answer. Yes, the retailers are scrambling to recover some of their reputation and to take some credit by doing certain things on the supermarket shelves but at the end of the day Fran, it’s not going to make all that much difference to those who have been most affected by this.

KELLY: Ok.

FITZGIBBON: The recklessness really, I say, of the Murray Goulburn Board, and by the way I see no contrition yet from the Chairman of the Murray Goulburn Board, who still continues to say they would not have done anything differently, I take a very different view.

KELLY: And just finally we heard earlier on the program and we know already of course depression and suicide are serious problems in the bush in this country, and we know that mental health pressures are being just only made worse in the dairy sector given the current price pressures, we’ve heard about that in recent times. In the Federal Budget Mental Health Services and Counselling for farmers suffering drought was cut at the 30th June. Would Labor restore that funding if elected?

FITZGIBBON: This comes under the portfolio of Jenny Macklin and we’ve started a discussion about that absolutely. Barnaby Joyce says that this was always going to be a one-off funding round, that is true. But we were all hoping at that point that the drought would come to an end sometime soon and it hasn’t. It has now been exacerbated by these other variables,  so it’s not good enough to say that it was a one-off so it just has to disappear, the drought is still ere it has been exacerbated by the Murray Goulburn crisis and we should all be re-visiting it.

KELLY: Ok, Joel Fitzgibbon thank you very much.

FITZGIBBON: A great pleasure.