Lees-Galloway Iain: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Third Reading 
Text is incorporated into the Bound Volume 
Lees-Galloway Iain: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Third Reading 
[Sitting date: 11 May 2011. Volume:672;Page:18611. Text is incorporated into the Bound Volume.] 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 We are almost coming to the end of the debate on the Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill which is a reasonably technical bill but nevertheless very important for New Zealand’s dairy industry. We in the House all know and acknowledge that the dairy industry is a huge driver of our economy and an important component of our economy. Certainly in my electorate of Palmerston North although it is virtually wholly urban—I think I could just about count on one hand the number of paddocks we have in the electorate—the fact that we have Massey University the Crown research institutes Fonterra carrying out its research and development and a very large service industry in the electorate means it is a pretty big deal to my constituents that we do everything we can to ensure that the dairy industry is able to operate efficiently and appropriately in this country.  
The bill seeks to do that by extending the period of time during which Fonterra must provide fixed-price dairy solids to other dairy processors in order to foster competition in the domestic industry. The original Dairy Industry Restructuring Act which was enacted in 2001 set a sunset clause for this requirement in terms of market share of dairy processing but at the moment there just is not the confidence that when this threshold is met the independent processors will have developed enough to keep the market competitive. That is why these new sunset provisions have been brought in by the Government and why the Labour Opposition is very very happy to support the bill.  
We want to see a healthy domestic dairy processing market so that consumers potentially have lower prices available to them and of course a lot more choice. But also we are looking for much greater added value to our dairy primary products and to all our other primary produce.  
We have some reservations about the bill. These have been discussed at some length during all readings of the bill and last night in the Committee of the whole House. We have some reservations about the future of the industry and how long this subsidy for the smaller operators can go on. We also have some issues with where we are going in terms of foreign investment in our dairy industry and what that means for New Zealanders’ ability to own our own future given the importance of this industry to our economy.  
It also has to be noted that a lot of people in New Zealand are very very concerned about the price of milk. A sign of good competition which is what this bill is all about is that prices come down but we have seen the price of milk and other dairy products go up and up far outstripping any increase in wages in this country. People particularly those on middle and lower incomes who are trying to feed their families well and put good nutritional meals on the table are finding it a little bit harder because the price of milk has gone up so much.  
The threshold that this bill changes currently sits at a 12.5 percent market share of the collected raw milk for independent processors in the North Island and a 10 percent market share for South Island processors. The South Island threshold currently excludes the West Coast. That provision was changed by the Primary Production Committee which I think was a sensible change. These thresholds as they stand currently are likely to be reached about now for the North Island and about this time next year for the South Island. As I said there was just a feeling that the independent dairy processors have not quite reached the point where they can stand on their own without the support that this bill provides. Extending those provisions gives an opportunity for that industry to develop a little bit further.  
We on this side of the House were a little perplexed by the timing of this legislation. In fact the first reading of the bill occurred just 1 day after the Minister of Agriculture had announced a review of Fonterra’s obligation to supply milk to independent dairy processors. So it could turn out that all of this is ultimately for naught and the Minister of Agriculture will come back with the results of the review and throw out this bill altogether. We will find that all this good work from the Primary Production Committee and its excellent chair who is listening intently over there could be for naught. That would be unfortunate and perhaps the Government needs to make sure the left hand knows what the right hand is doing.  
The review took place last month and now we wait to see whether its findings and recommendations will make this bill redundant. Labour members wonder whether that review should have taken place a little earlier so that the bill and any changes arising could have fallen out of that review rather than the two happening in parallel. It is quite possible that we will be back here next year debating more changes.  
But we do support the review of Fonterra’s obligations to supply milk to its competitors. It is a bit of a concern that companies such as Synlait and Open Country Dairy which are owned by offshore interests are being subsidised by New Zealand farmers. We have to ensure that foreign investment into New Zealand companies New Zealand businesses and New Zealand farms—although we do not want to cut it off altogether—is actually working for New Zealand. We do not think that we have quite got the criteria right at the moment to ensure that foreign investment is working for New Zealand.  
I will make a final point regarding the price of milk. This bill is all about competition. As I said one of the indicators that competition is working well is that the price of raw milk and the price of the milk that people buy at the supermarket comes down. That is simply not happening at the moment. In fact the price of a litre of Home Brand milk at Foodtown has increased by 20 percent or 37c since April 2008. That is certainly of concern to a number of people in New Zealand and Labour wonders when the Government is going to address that.  
In closing I say that this is a good technical bill that will serve the dairy industry well. The Labour Opposition is more than happy to support it.