Oz dairy industry milks government protection

By Boyd Champness

AFTER remaining steady for much of the decade, government assistance to Australian agriculture fell to a near-record low of 8% in 1997-98, due mainly to the end of sugar tariffs.

But as Victorian dairy farmers prepare to vote on deregulating their industry, the Productivity Commissions annual report on trade and assistance shows that producers of fresh milk and tobacco get more government assistance than any manufacturers.

Dairying is the most protected industry in Australia, with governments giving producers of fresh milk returns that are three times what they would be on world markets, according to the report, which was published in The Age newspaper last week.

In 1997-98, the commission estimated that government regulation kept fresh milk prices 70% above world levels.

Effective protection of fresh-milk producers was more than 200% – paying farmers three times world value.

Victorian dairy farmers are seemingly disadvantaged by state government protection because the vast majority of their milk goes into manufacturing, which had an effective rate of protection of 18% in 1997-98, whereas milk producers in other states sell primarily to the premium-based fresh milk markets.

An effective rate of protection of 18% is similar to protection for the car and textile industries from next year, the commission estimates.

However, if Victorian dairy farmers choose to embrace deregulation in their December poll – which will effectively force the hands of other states – Australias government assistance to agriculture will drop markedly.

“If the dairy industry was excluded, the 1997-98 effective rate of assistance for agriculture would be 3.2%,” the report stated.