Luxton JoJO LUXTON (Labour): Thank you Mr Chair. I'm pleased to stand and take a call on this small short but very important bill as the Hon Nathan Guy alluded to. As Minister Hipkins also alluded to the fact of the matter is that the previous National Government sat on its hands over this particular issue with the bill that they had looked to introduce but chose to take no further. Well you know I'm just reiterating what someone says that makes absolute sense to me.We believe that the removal of the expiry provisions is of utmost importance in order to allow the industry to continue to operate in an efficient and competitive manner whilst allowing the Government to undertake a review of the issues in the dairy sector and the Dairy Industry Restructuring Act. We know that back when Fonterra was established there was concern about it having a dominant market position. A way to manage that was the Dairy Industry Restructuring Act in 2001 which placed regulatory requirements on Fonterra through Subparts 5 and 5A of Part 2 promoting the efficient operation of dairy markets in New Zealand and providing for the monitoring of Fonterra's Farmgate Milk Price.We know now looking back that there are more independent processors in the South Island and that they are collecting over 20 percent. The default expiry of the efficiency and contestability was triggered. Once that happens the Minister must request a report on the state of the competition and then once the Minister's received the report and gazetted the response to it the Governor-General must by Order in Council declare that Subpart 5 and all of Subpart 5A will cease to apply to the island that's reached the market threshold. The default expiry requirement really creates uncertainty for those involved in the dairy industry whilst also imposing time and scope restraints on managing the whole decision-making process and the regulatory response to expiry.So under clause 4 we see that sections 147 to 150 will be repealed. Currently section 148 says that Subparts 5 and 5A cease to apply. So what that means is that there will be no obligation from Fonterra to collect milk from new conversions—or potentially dairy farms currently—and that does not help provide certainty to the industry and it's an industry that at times faces real uncertainty through weather conditions payouts etc. So amending the Dairy Industry Restructuring Act and preventing expiry provisions will mean that the status quo remains.Some of the key provisions that will be maintained are the open entry and exit whereby Fonterra must accept applications from farmers to become a shareholding farmer and they must accept a supply of milk from that shareholder. Shareholding farmers can also exit when they choose and move to supply another dairy processor. This is one of the most significant of the Dairy Industry Restructuring Act provisions and it allows for new processors entering the industry the opportunity to obtain milk supply and will also incentivise Fonterra to price milk efficiently.The milk price monitoring regime currently the Commerce Commission is required to review Fonterra's Farmgate Milk Price calculation at the end of each dairy season and it also reviews Fonterra's Farmgate Milk Price manual. This manual sets out the methodology by which Fonterra calculates its base milk price that is paid to the farmers for their milk at that season.The intention of this is to provide confidence and transparency in Fonterra's base milk price settings. It also allows for the 20 percent rule. This allows farmers to sell 20 percent of their milk to other processors each season. So again this is going to continue to provide certainty to dairy farmers while the Government undertakes a full review or the ministry organises a full review of the industry and I think that it's really important for our farmers. Where I live in the electorate of Rangitata the majority of farming practice there is predominantly dairying and this will provide real certainty for them.