By Boyd Champness

DEREGULATION of the Australian dairy industry could be off the agenda following a shock decision by three independents to form a government with the Labor Party in Victoria.

The three independents – Russell Savage, Susan Davies and Craig Ingram – today (Monday) announced that they would support a minority Labor Government.

On Saturday, Labor won the all-important by-election of Frankston East giving it 42 seats to the Liberal/National Partys 43.

This encouraged the three country independents, angered by the Liberal/National Partys city-centric policies over the past eight years, to go against Westminster tradition and support a minority government.

The result could have wider implications for a number of national issues, not least, deregulation of the Australian dairy industry.

Before the State election on 18 September, Labor leader Steve Bracks promised a moratorium on deregulation until a farmer vote on the elimination of market milk regulations had taken place if elected.

Victorian dairy farmers – where 63% of the nations milk is produced – have championed deregulation in a bid to gain access to the lucrative fresh milk markets of other states.

Naturally, the other states oppose deregulation but grudgingly accept that if Victoria takes the lead they would have little choice other than to follow.

However, arguments that deregulation will only line the pockets of processors have gained momentum in recent weeks and a number of smaller Victorian dairy farmers are now having second thoughts.

Earlier this month, the Federal Government announced a $1.8 million restructuring package for dairy farmers in light of reduced prices for raw milk under deregulation. Labor attacked this decision as being presumptuous.

Had the Liberal/National Party been returned to power, it would have, in all likelihood, pursued deregulation without further debate.

Meanwhile, the first Australian study into the effects of dairy deregulation has painted a gloomy picture of potential devastation.

The study, which concentrates on dairy enterprises in the Bega Valley in south-east New South Wales, analyses the social impact of deregulation based on a sliding scale of falling milk prices.

If deregulation caused a 5A¢/litre (2ppl) reduction, the study estimated 5.4% of dairy farms in the district would become unviable.

However, the real damage occurred if the median price dropped by 10A¢/litre.

Under this scenario, the report estimated that up to 47% of farmers in the district would fail.

This would affect more than 300 people equating to a loss of A$31.3 million (£12m) to the local community, according to the report published in The Weekly Times.

Dr Mark Fenton of Townsvilles James Cook University prepared the study on behalf of the Bega Valley Water Management Committee.

“The dairy industry across Australia is hurtling towards deregulation without any real knowledge of what that might mean for individual farmers or for communities,” said Kerry Pfeiffer, the studys steering committee chair.

Federal Democrat rural spokesman Senator John Woodley said: “this report confirms evidence to the Senate inquiry that deregulation would devastate many regional centres heavily dependent on dairy incomes”.