EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO. 24
Issued by the authority of the Minister for Primary Industry
DAIRY PRODUCE LEVY REGULATIONS (AMENDMENT)
The purpose of the amendments is to set the operative rates of product levies imposed on domestic sales of butter, butteroil and cheese by section 10 of the Dairy Produce Levy (No. 1) Act 1986 (“the Act”) for each of the six month periods from 1 July 1987 to 31 December 1989. Under section 10 of the Act the operative rates of levy in respect of each product are such as are for the time being prescribed. Current rates of levy are set by regulation 6 of the Dairy Produce Levy Regulations.
The Act is part of a package of legislation which commenced on 1 July 1986 the purpose of which is to establish new marketing and assistance arrangements for the Australian dairy industry. The main aim of the new arrangements is to place the industry on a more market oriented basis. One of the strategies to achieve this aim is to reduce the amount of assistance provided to the industry to a level such that the industry can defend itself in the Australian market on the basis of its competitiveness.
This involves the progressive reduction in domestic price support to a level no higher than the price level at which New Zealand dairy products could be sold in Australia on a fair trade basis.
Because the old marketing arrangements provided assistance well above the target level a scheme was incorporated in the new arrangements to enable progressive reduction of assistance and thus a gradual phasing in of the new price levels that flow from the principles of the arrangements. The scheme involves the imposition of levies on the domestic sales of butter, butteroil and cheese and the utilisation of the proceeds of the levies to make supplementary market support payments on the export of dairy products. Payment of these supplementary market support payments increases the theoretical domestic prices for dairy products and thus provides a higher level of assistance than would otherwise be available under the marketing arrangements. The initial rates of levy were calculated in such a way as to maintain at least the level of assistance provided to the industry immediately prior to the commencement of the new arrangements.
The phasing in of the new price levels involves the progressive reduction of the levies on butter, butteroil and cheese and hence the amounts of supplementary market support payments. The reductions in levies embodied in the Regulations are designed to achieve this process.
At the time of introduction of the new dairy marketing legislation in May 1986 there was general agreement by the industry to such a reduction in assistance levels. The policy and program for phasing out the levies on dairy products were enunciated in the second reading speech on the Bill for the Act, viz
“The levies imposed on dairy products are to be reduced over time. Levies imposed on 1 July 1986 will be maintained at their initial value throughout 1986-87 and then reduced in six monthly steps. The first reduction will occur on 1 July 1987. The intention is that all levies other than on butter and butteroil should be eliminated by 1 July 1989, and that the rate of levy for butter and butteroil should be halved by then.”
The phasing out of the additional assistance afforded the dairy industry by the supplementary market support payment scheme is consistent with the thrust of Australia’s international agricultural trade initiative aimed at halting subsidy escalation and progressively reducing the gap between administered internal prices and international prices for farm products.