SUBJECT/S: Dairy crisis, Murray Goulburn profit, Sam Dastyari.
TASMANIA TALKS WITH BRIAN CARLTON
THURSDAY, 1 SEPTEMBER 2016
SUBJECT/S: Dairy crisis, Murray Goulburn profit, Sam Dastyari
HOST: Let’s get onto the issue of what was dominating the show yesterday, to be honest I don’t know to what extent you’ve caught up with this Joel. But on Tuesday evening I saw a news story, on one of news bulletins here in Tasmania, and the news story was alerting us to a 25 per cent discount across the range of Woolworths home branded products, these select brand products, but only in the cheese line. These are cheeses that come in significantly under what you already pay for a branded cheese and now they are 25 per cent even cheaper and it has been pitched as the beginning of a “cheese war”. When I saw it Joel I nearly fell off my chair. I couldn’t believe that a major media organisation was running what was effectively an advertisement without declaring what it was and then there was no critical response like: what is the dairy farmers’ reaction to this et cetera. We got that yesterday from Wayne Johnston from the TFGA here in Tassie. I made the analogy with the dairy industry at the moment the farmers have got their faces planted in the dirt, the supermarket will, in this case Woolworths have come along and planted them and put boots to the back of their head. He agreed with that characterisation, he was outraged as was Senator Jacquie Lambie, whom I spoke to yesterday. The issue is, and I guess they are a commercial business and they can pretty much do what they want to , but in the current environment when the dairy industry is struggling so badly to launch what is effectively a cheese war, is obscene. Do you have a comment on that?
FITZGIBBON: And of course I share your concern. Obviously Woolies have decide to use cheese as a loss-leader. In other words, they actually take a loss on one product to get you to walk through their store in the hope that while you are there you will buy other products, that often, I fear, have been margined up to offset what they are losing on the cheese and this is exactly what they were doing with the dollar milk. Now I don’t mind them making a loss as long as they are absorbing the loss. That’s the point rather than send the cost of that loss to the dairy farmer or the producer. This is a thing that is at the point of this debate. One of my very strong interests is trying to improve the bargaining power of the producer of the milk or the cheese et cetera. Now I have been doing some work on this. It is counterintuitive that while the processors and retailers need the dairy farmers as much as they need the other way round, the dairy farmers don’t seem to exert any market power. Why is this so? There is a provision in what used to be the Trade Practices now called the Competition and Consumer Act, to allow farmers to bargain collectively, and use their collective weight to get a better deal out of the process.
HOST: That’s what we used to have and that was the whole point of setting up organisations like Dairy Farmers [sic] as a co-op: it exactly gave the farmers that type of leverage. But of course dairy farmers went a bit rogue and went out seeking external capital and it changed the nature of the business entirely.
FITZGIBBON: Exactly. Murray Goulburn tried to do...
HOST: Of course Murray Goulburn you’re quite right.
FITZGIBBON: Competition with one another is brought in as external investors who are looking for high returns and competing against their cooperative members who have different interests. So that was a mistake on the part of Murray Goulburn and that’s where these problems began. By the way Murray Goulburn has lost the Woolworths contract.
HOST: We mentioned that yesterday and yes it’s gone to Bega.
FITZGIBBON: On this collective bargaining stuff, and I’ve been having a look at the provisions and the Trade Practices Act to see whether they were strong enough, and had a chat to Alan Fels, everyone would know that name the former chair of the ACCC and he agrees we should have a look at those collective bargaining provisions to see whether they are sufficient to give farmers what they need.
HOST: But Joel that would not be surely legally powerful enough to override or overrule a specific contract a dairy farmer has with a processor.
FITZGIBBON: Well first of all the contracts and the call backs in those contracts, which were outrageous, and that’s one of the different issues we are looking at.
HOST: I agree.
FITZGIBBON: But the authorisation provisions in the Trade Practises Act has effectively authorised formally any competitive practices. In other words, farmers getting together in big groups is a form of collusion and on face value would be contrary to the law. This provision allows you to authorise that behaviour. It has been happening a little bit in horticulture for example, but for some reason it is not happening in dairy. Now Alan Fels told me, and I hope he doesn’t mind me sharing a private conversation, that we might look at whether those provisions in the Act are sufficient and that’s what I’m doing now. The Commonwealth doesn’t have any control over prices.
HOST: No. I understand that Joel, but there’s a broader issue here too rather than whether the supermarkets taking a hit, a profit hit in the particular product lines, it goes through the perception of the industry as a whole. It goes through the investor perception of milk products in Australia. We are devaluing the entire dairy industry to the point where it just won’t be attractive to investors even though there’s potential. The growth is tipped what, at 2 per cent plus per annum over the next foreseeable future. The industry has already done a bit of a price turnaround internationally. So things are looking on the up, but at the same time, we are screwing the industry down to a point where we are devaluing its output to less than a litre of water in value. How can you sustain an industry for a longer term with that sort of impression about its ability?
FITZGIBBON: There is certainly a role for government and I have mentioned a couple of initiatives and what has shocked me is the slowness of the Commonwealth’s government’s reaction to this thing. Murray Goulburn first made that terrible and devastating announcement four months ago and yet it was only last week when Barnaby Joyce finally decided he was going to have the ACCC act on an inquiry into the industry now; we know that inquiry will take at least a year and of course struggling dairy farmers need action and they need action now. Now the last time we had this conversation I said that he could have joined me in putting pressure on Murray Goulburn to do the right thing by its dairy farmers, which he hasn’t been prepared to do and I think if he went with me, then they would have had no choice but to act. For some reason Barnaby Joyce has been unprepared to do so.
HOST: Okay now the minister for small business Michael McCormack should he still have that job in a little while, has been looking at new unfair contract laws that will come into effect apparently on November 12, I might leave that a little closer to time to have a chat about that in detail but Barnaby’s statement that came through yesterday, this is the Agriculture Minister Barnaby Joyce, your opposite number Joel Fitzgibbon. "Australian dairy farmers milk twice a day, every day to provide families with high quality health drink and food products, the deserve to be paid a fair price for their work. As I’ve said over time and time again, including on your show, supermarkets selling milk and dairy products for less than the cost of water is obscene."
What do we do about it Joel? The Labor Party has been pretty vigorous calling for a royal commission into the banking sector despite no real allegations of systemic corruption or relegation in their industry, we will leave that aside for a sec, but should there be a royal commission into the power of the supermarket duopolies in every area in which they operate?
FITZGIBBON: I will answer that but can I first say that Barnaby Joyce is very good at identifying the problems, and sympathising with farmers as we all do, as do all your listeners. By the way in the House of Representatives question time yesterday he talked about the Victorian dairy farmers supplying Murray Goulburn and their plight and he failed to mention Tasmanian producers at all.
HOST: Look we are very used to that for what it’s worth. We are used to being left off the map in all sorts of ways but I’m just going to keep rattling the cage until we get some federal recognition of this.
FITZGIBBON: I didn’t know if there is a justification for a royal commission, however I do agree with a broad ranging ACCC inquiry into the dairy sector which is Barnaby Joyce has now announced and it’s quite powerful. We have got a sort of commission if you like in a sense, but why does it take Barnaby Joyce four months to come to the conclusion that we need such action. It’s just extraordinary and inexplicable really.
HOST: Well the other thing too, this is not just a Tasmanian story it has just seemed to been noticed first here. The Woolies program is a national program and they have sent me a statement confirming exactly what they are doing and why they are doing it with no mention of dairy farmers, no mention of broader issues. I just think it is an act of corporate stupidity apart from anything else and when everyone wakes up to what they up to which won’t be too long now I’m thinking, they are likely to cop a significant backlash. Would you concur with me Joel in urging Coles and West farmers not to match this Woolworths discount plan?
FITZGIBBON: One thing that has been reinforced in my mind in my over 20 years of politics is that everyone loves our famers. They must be amongst the highest regarded groups in the country. It’s just unbelievable that every time these retailers look for a loss-leader, they look for a product which comes from our farmers, in this case our dairy farmers. You would think they would wake up and realise that does not make them popular and does not make consumers fond of their business entity. I’m very happy to say to Coles and Woolworths, back off you know, you want to use a loss-leader, find some other products or absorb the costs yourselves, do not push the cost of that loss back on to our producers.
HOST: Joel I appreciate your time and effort in this issues. It is causing a considerable amount of consummation, to the extent the dairy farmers who are in Tasmania are being urged to drop their pride and just swallow that generations’ pride and go get the help you need apply for the grants because they are just not doing it. That typical issue with diary famers Joel, you’d be very familiar with, they are a tough bunch and do it themselves and don’t like government mucking around in their business and don’t want to have to spend huge amounts of hours day, after day filling out paperwork and jumping through hoops. They just don’t have the time to do all that.
FITZGIBBON: They don’t want debt, they just want a fair go.
HOST: What is the immediate short term answer Joe,l as you’ve indicated the price is starting to turn around and that will take some time to flow through through. In the immediate six to eight months, what can we do for them realistically?
FITZGIBBON: In terms of both Murray Goulburn and Fonterra suppliers, and they are very large in number, it’s the solution I have been talking about for months now and that is to force Murray Goulburn to deviate from their profit sharing mechanism and send more money back into their farmers. I mean they own the cooperative. It’s their money.
HOST: And they declared it as what a $40 million profit last week?
FITZGIBBON: $40 million profit. Whose money is that? It’s the dairy farmers', the cooperative members. They are also sending more money to the investors they used to raise capital on the market, and more money to them, at the expense of the dairy farmers.
HOST: To be fair that’s exactly the Fonterra plan we have not exactly spoken about it in any detail, but that’s specifically the Fonterra plan with their price matching arrangement with Murray Goulburn and the noises from the CEO which I have quoted on the radio a dozen times, was quite simply, we are going to screw down the Australian farmers as much as we can to return as much value to the New Zealand shareholders as we can. That’s a paraphrase, not a quote.
FITZGIBBON: It’s outrageous, but if we can get the Murray Goulburn Board to lift the farm gate prices, not only for cash in the pockets for farmers but it reduces the debt we now have to Murray Goulburn and it has a flow on effect to Fonterra’s supplies because Fonterra links its price to Murray Goulburn. If we can just get the Board to move now. If Barnaby Joyce joined with me in that call, I believe the Board would have no choice but to do exactly what I have asked them to do. But Barnaby Joyce refused to do so. I don’t understand why and people should start asking the questions.
HOST: Joel Fitzgibbon if I may just very quickly before we go. There are a lot of Labor pollies, yourself included who are backing NSW Senator Sam Dastyari over the Chinese $1670 payment for his travel expenses for his office. It’s okay to declare one side of that I would have thought if this happened. Should the public be entitled to know what Sam Dastyari has guaranteed the Chinese in return?
FITZGIBBON: I doubt he has guaranteed them anything in return.
HOST: We don’t know that, Joel we don’t know that, he can’t stay on as Senator, he can’t. He has no credibility left. How can you do that? Who is he working for?
FITZGIBBON: The same company as I understand has made a pretty big donations to the Liberal Party.
HOST: Joel this is not a political donation.
FITZGIBBON: It’s not?
HOST: It’s not political donation. How can it be, he paid a bill. It’s a personal bill.
FITZGIBBON: I said on Sky News yesterday that Senator Dastyari declared the payment and the payment came directly from the company to the Department of Finance in Canberra.
HOST: Which was an error of judgement to begin with.
FITZGIBBON: Well he couldn’t have been more transparent. I mean he could have said to the guy, you know, I’m going to see you $1600 worth of raffle tickets, stuck it in his back pocket and paid it an no one would have known.
HOST: The guy earns $200,000 a year, he can’t whack a $1,600 bill on a credit card?
FITZGIBBON: I’m not defending it and he’s not defending it. He has apologised and conceded it was a dumb decision, but he hasn’t done technically anything wrong. He took what was an effective donation and he declared it, the payment went directly to Finance and he couldn’t have been any more transparent and he has acknowledged it was a mistake and has apologised but I don’t think it’s a hanging offence.
HOST: Calling up and asking for a favour and the favour has been returned, what is the other side of the equation and don’t we have a right to know that?
FITZGIBBON: That’s what politicians of all persuasions do every time they raise funds for their election campaigns I suppose.
HOST: This is not the same Joel and you know why it’s not the same Joel. Who is his master? Is he working for the Australian public or is he working for an arm of the Chinese Government and what is he guaranteed in return?
FITZGIBBON: Sam Dastyari has worked very hard since he has arrived and the payment was for an overspend on his staff travel and I would suggest his staff are travelling more than they were entitled to .
HOST: That’s a 97 thousand annual allowance. They get paid extra for that. 97 grand the electoral office gets paid to cover those sorts of expenses and that’s on top of his salary and he has to go to the Chinese begging for 1600 bucks?
FITZGIBBON: Busy and working hard they accidently overspent on their travel entitlements and that’s what happened. He didn’t take money for the Chinese to go and have a beer.
HOST: I know, but I would very much like to know what they other side of the arrangement is Joel and I think the Australian Public have a right to know.
FITZGIBBON: Well I will let Sam speak for himself but again, he has acknowledged it was a mistake and he has apologised for it, but technically he has done nothing wrong.
HOST: Okay I appreciate your time and look keep banging on with the dairy thing and we are right with you on that, appreciate it.
FITZGIBBON: We will as you know I was down there with Justine Keay prior to the election and I look forward to another visit sometime soon.
HOST: I appreciate it Joel; Joel Fitzgibbon, Shadow Minister for Agriculture, Fisheries and Forestry.