Carter David: Dairy Industry Restructuring Amendment Bill — Third Reading 
Text is incorporated into the Bound Volume 
Carter David: Dairy Industry Restructuring Amendment Bill — Third Reading 
[Sitting date: 24 July 2012. Volume:682;Page:3814. Text is incorporated into the Bound Volume.] 
Hon DAVID CARTER (Minister for Primary Industries) 
: 
 I move  
That the Dairy Industry Restructuring Amendment Bill be now read a third time 
. The bill was tabled in the House in March this year. It had its first reading on 3 April 2012 after which it was referred to the Primary Production Committee for consideration. The select committee reported the bill back to the House on 6 June and the bill has now had its second reading and passed through the Committee stage. 
The Dairy Industry Restructuring Act or DIRA promotes the efficient operation of New Zealand’s dairy markets ensuring freedom for dairy farmers to choose the processor of their milk. The contestability of milk supply provides incentives for all dairy companies to seek to innovate and to operate efficiently so that the New Zealand dairy industry can reach its full potential. The bill is about ensuring that this contestability continues but it also responds to a number of developments since the Dairy Industry Restructuring Act was put in place over a decade ago. This bill will ensure that that Act remains fit for purpose. 
Fonterra initiated discussions with the Government in 2009 with a proposal to introduce Trading Among Farmers or TAF. Fonterra was concerned about the instability of its balance sheet under the Act’s existing share issue and redemption requirements. Importantly the ultimate decision on whether to proceed or not to proceed with Trading Among Farmers rested with Fonterra and its shareholders and not with the Government. This decision was put to a vote last month at which 66.45 percent of Fonterra shareholders voted in favour of Trading Among Farmers proceeding. This is the mandate on which Fonterra has said it is proposing to proceed with Trading Among Farmers. The Government’s job therefore is to complete the legislation process and enable Trading Among Farmers to proceed. 
This bill ensures that when Fonterra launches Trading Among Farmers farmers’ freedom of entry into and exit from Fonterra is preserved. This in turn ensures that New Zealand’s dairy markets remain contestable because this creates the right environment for efficiency for innovation and for growth. If Trading Among Farmers does not happen or if Trading Among Farmers is wound up the bill requires Fonterra to value its shares at a full fair value. This is also important to ensure the freedom of entry into and exit from Fonterra because I strongly believe that farmers who decide to move on from Fonterra are entitled to a fair price. Further it will ensure contestability of the farm-gate milk price. This is why unlike the share price of any other cooperative Fonterra’s share price is a public policy concern. 
Finally the bill introduces a new regime to increase transparency in the way Fonterra sets its farm-gate milk price and provides confidence that the farm-gate milk price is consistent with delivering a contestable market. Due to Fonterra’s dominance Fonterra’s farm-gate milk price is effectively the price that all processors must pay in order to attract milk supply from farmers. Confidence and transparency are therefore crucial. If the farm-gate milk price is consistent with the outcomes in a contestable market then this means the price should be efficient which in turn means that both Fonterra and its competitors will have the incentives to operate efficiently and to innovate. This continual endeavour for improvement brings benefits to the entire dairy industry and therefore in turn to all New Zealanders. 
In 2001 the National Party then in Opposition recognised the importance of cross-party support on such significant legislation for the dairy industry the Dairy Industry Restructuring Act and we voted accordingly. It is unfortunate and a personal disappointment to me that the Labour Party has decided that playing politics is more important than continuing this tradition of cross-party support for the Dairy Industry Restructuring Act legislation. I am well aware that opposition to the Dairy Industry Restructuring Amendment Bill is actually not unanimous within the Labour Party caucus. However on balance the decision has been made to stand beside the primary industries spokesman Damien O’Connor who having not fully understood the legislation has continued to paint himself into a corner over the last few months. 
This legislation does not mean the end of ownership of the Fonterra cooperative by its shareholders as Mr O’Connor stated in the House last week. He should give more credit to the intelligence of Fonterra dairy farmers than that. The legislation certainly does not give Mr Damien O’Connor any reason to accuse the Fonterra chairman of lying and stating that he Mr O’Connor did not trust Fonterra. That was the language used by Damien O’Connor which should never have been used in this Parliament. I can only hope that the Labour Party leadership sees past these negative politics and in the future does the right thing by providing this bill with the cross-party support that the original Dairy Industry Restructuring Act enjoyed. 
This bill is crucial to the ongoing growth of New Zealand’s dairy sector and therefore to the ongoing economic prosperity of all New Zealanders. I commend this bill to the House.