O'Connor Damien: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
O'Connor Damien: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
[Volume:661;Page:10139] 
Hon DAMIEN O’CONNOR (Labour) 
: 
 This is a very good bill if only for the reason that I am sure the Minister for the Environment is a lot wiser about the dairy industry now than he probably was earlier this evening. That is progress. 
Hon Rodney Hide 
: What a nasty thing to say. He’s the nicest bloke. 
Hon DAMIEN O’CONNOR 
: There is someone who certainly needs some education in every area of his portfolio. Perhaps he can learn a bit about Auckland; I am sure he will shortly. 
Labour supports the bill. The purpose of the bill as was stated by the Minister is to replace the current regulated pricing formula for a formula that is fairer to the parties—to Fonterra to suppliers to shareholders and to independent processors. It sets up ultimately we think an auction system. There are possibilities of other systems but the auction system is one that has been investigated. It has been identified as being the fairest to the parties. Minister Smith’s amendment identified once again the fact that this Government has let this bill languish. It has procrastinated it has not realised the importance of the bill and this bill is late going through the House. I suggest it is going through a year later than it should have been but even now it is too late for the Governor-General to sign off so we had an amendment at the last minute saying that the bill will come into force on the day after the date on which it receives the Royal assent instead of 1 April. This is just an example of the mismanagement that occurs from time to time. None the less the Opposition is happy to facilitate the passage of this bill and to agree to it. 
We did look at these issues very very carefully. As Minister Smith said we are dealing with the most important industry in the country. It is a primary industry that has thrived and grown in spite of critics out there saying that it should do better it could do better and we have to restructure and change the whole thing. I say to the House to members opposite to Ministers—in particular Mr Steven Joyce who is an enthusiastic seller of State assets in New Zealand—and to anyone who wants to come along that that is why the Minister assisted with the changing of the Overseas Investment Office rules. We will see whether he stays around long enough for the sale of many many things but hopefully not Fonterra. 
Farmers should be concerned that although we are improving their returns and rebalancing the system of auction for 5 percent of their milk the 95 percent that we are not addressing tonight in this House has to be carefully managed. The returns and the value from that milk have to come back to New Zealand farmers because they are the people who produce 25 percent of the export revenue for this country. 
Colin King 
: 27. 
Hon DAMIEN O’CONNOR 
: It is 27 percent—there it is; it has gone up. It must have gone up in the last few days but anyway 27 percent is a huge chunk of wealth creation in this country. It is not the investors it is the farmers who have made the investment in the land in their stock in their machines in their knowledge and in their commitment as individuals—it is a hard life often—whom we have to ensure we look after because they have driven this economy right through the 1900s and will drive it in the 21st century as well if we get it right. 
The passage of this bill deals with 5 percent of the milk industry. It allows opportunities for independent processes for companies like Cadbury’s and for the cheese producers but it also continues to supply opportunities for growing and larger companies like Synlait like Open Country Cheese and like Westland Cooperative Dairy. The bill provides opportunities for those companies to access milk and that is a privilege in any commercial arrangement. In the interim they pay 10c above market value for raw milk but ultimately it will go to auction we think on the basis that it will offer a fairer deal for all players. 
As I have said we have to get this right. I have some concerns about what will happen next. We will pass this bill and then there will be another one before the House. We will have people advocating for recapitalisation the capital restructure of Fonterra and questions must be asked whether that will assist with the progress that we have made here or whether in fact it will detract from the wealth that can be created and retained by New Zealanders. I say as the Irish farmers say and as Desiree Reid has discovered that Fonterra is the jewel in our crown. It is owned by farmers and the Irish dairy industry is desperately trying to recreate that position. 
There will be people in this House and people who have gone and looked at Kerry Group plc which was once a cooperative owned by farmers and said what a wonderful measure of success it is for the dairy industry. Well I have to say that the Irish dairy industry found very quickly that it has left farmers in a desperate situation. They are receiving the lowest payout of any dairy company and the same could happen in this country. The dairy industry would be ruined if we allowed farmers to be just the takers of the raw milk price rather than the owners the shareholders and ultimately the beneficiaries of a totally vertically integrated dairy system. That is the reason why we have a successful dairy industry that is able to produce 27 percent we are told of our export earnings. That is based on smart carefully assessed legislation. 
This has been the discipline that has driven success in the dairy industry. It has been good legislation. I trust we are passing good legislation now. We worked through it under the wise guidance of the chairman of the Primary Production Committee Shane Ardern who should be the Minister. I have concerns about his ministerial colleagues and what they will bring to the select committee if they are brave enough of course. They might try to divert it to another select committee but I know that Shane Ardern will fight tooth and nail to ensure that any dairy legislation in particular any legislation relating to possible capital restructure will come to the wise— 
Hon Member 
: All-powerful. 
Hon DAMIEN O’CONNOR 
: —all-powerful and astute Primary Production Committee. If it does not there is a danger that people for their own reasons will want to see capital restructure. 
The question I ask as I did in my second reading speech is whether John Key is one of those people. Is he still a shareholder and a major investor in the Dairy Investment Fund? This is a private equity investor focused on deregulating the dairy sector so it can invest in this profitable sector. The question I ask which I know Mr Ardern will ask and will want the answer to is whether John Key is still a major investor in that fund; if so will he declare an interest with the passage of this dairy legislation and any other possible dairy legislation that will be considered by this House? 
I know we have members such as Shane Ardern who are farmers. He has declared an interest up front as a shareholder. But it is the subtle investments through back-door deals such as the Chinese wanting to come into our dairy industry with $1.5 billion. We have had Russian interests and we had Singaporean interests through Synlait. We have a number of overseas interests in the dairy industry and they are growing in both their influence and their power. The question is: if Fonterra goes through a capital restructure and if as many want to see its shares are put on the stock market will John Key still be an investor in the Dairy Investment Fund which will be out there trying to lap up and buy up shares in Fonterra? 
Ultimately the loss of control by farmers will be the demise of the dairy industry. They will end up taking a price for raw milk that will see them just survive and nothing else. That is the experience internationally and that is the experience of the Irish. I suggest to anyone who thinks otherwise to read the wise words of Desiree Reid who has been travelling over there. 
Labour supports the passage of this legislation. It addresses issues around 5 percent of the milk supply in this country and issues around the other 95 percent have to be carefully considered. I trust that we can end up with the same good outcomes.