Bills Digest no. 36 2008–09
Dairy Adjustment Levy Termination Bill 2008
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact officer & copyright details
24 September 2008
House: House of Representatives
Portfolio: Agriculture, Fisheries and
Sections 1-3, Schedule 1,
items 1, 2 and 4 of Schedule 3 and Schedule 4 on the day after the
Royal Assent; Schedule 2 on the day after the day declared for the
purposes of subclause 94(1) of Schedule 2 to the Dairy Produce
Act 1986; and Item 3 of Schedule 3 immediately after the day
specified for the purposes of subclause 55(2) of Schedule 2 of the
Dairy Produce Act 1986.
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The purpose of
this Bill is to amend Schedule 2 of the Dairy Produce Act
1986 to terminate both the Dairy Adjustment Authority and the
Dairy Adjustment Levy, and to wind up the Dairy Structural
The issue of deregulation of the dairy industry was the subject of debate and inquiry over
several years, culminating in the inquiry of the Senate Rural and
Regional Affairs and Transport References Committee in 1999 (the
The Senate Committee concluded, in its report
Deregulation of the Australian Dairy Industry (the Senate
Committee report), that sooner rather than later the market will
force deregulation and that a managed outcome with a soft landing
is preferable to a commercially driven crash .
Industry Adjustment Package
On 28 September 1999 the then Minister for
Agriculture, Fisheries and Forestry, the Hon. Warren Truss, MP
announced a $1.8 billion adjustment package for the
dairy industry, subject to all States agreeing to deregulate their
market milk schemes.
The adjustment package comprised four
- the Dairy Structural Adjustment Program allocated $1.63 billion
in payments for eligible dairy producers, administered by the Dairy
- Supplementary Dairy Assistance - allocated an additional $139
million in payments, administered by the Dairy Adjustment
- the Dairy Exit Program - provided an optional tax-free exit
payment of up to $45,000 for eligible dairy producers wishing to
leave the industry, administered by Centrelink, and
- the Dairy Regional Assistance Program provided $65 million to
assist regional communities to adjust to dairy deregulation,
administered by the Department of Transport and Regional
The Dairy Industry Adjustment Act
2000 was part of a raft of legislation that provided the
adjustment program for the deregulation of the Australian dairy
industry. The relevant
bills digest contains useful background information.
In announcing the package the Minister
In order to smooth the move to a deregulated
industry, the Australian Dairy Industry Council has developed a
major package to facilitate adjustment. The package will be funded
through a levy of 11 cents a litre on all retail milk sales. This
levy is unlikely to have any impact on retail prices as farm gate
prices are expected to fall after deregulation by at least this
The Dairy Adjustment Levy (General) Act
2000, Dairy Adjustment Levy (Excise) Act 2000, and
Dairy Adjustment Levy (Customs) Act 2000 provide for the
imposition of the Dairy Adjustment Levy. The Regulation Impact
Statement for the Dairy Industry Adjustment Bill 2000 provides the
following explanation for the funding of the adjustment
The adjustment package is to be financed
through a levy of 11 cents per litre on sales of liquid milk
products. In terms of the levy imposition, consideration has been
given to an appropriate point of imposition to ensure that the
burden is not passed back to the producer, whilst ensuring
efficient levy collection. The levy is to be on cow s milk and will
broadly cover whole milk, modified milk, Ultra Heat Treated (UHT)
and flavoured milk. The levy will be applied on a cents per litre
basis at the retail level. However, collection would be at the
processor level for convenience, efficiency and security. As there
are far fewer processors than retailers, collecting the levy from
processors minimises the number of collection points. As a result,
the administrative burden and costs of levy imposition are reduced
and there is greater scope for ensuring compliance
A levy, set at 11 cents per litre, is
calculated to cover the total cost of payments to producers plus
interest and administration costs (estimated to be $1.74 billion)
over a target period of 8 years 
The current Bill is directed to the
termination of the Dairy Adjustment Authority and Dairy Adjustment
Levy as well as the winding up of the Dairy Structural Adjustment
No exact date has been set for the Dairy
Adjustment Levy to end as this depends on when the amount that the
government outlaid in assistance to dairy farmers has been fully
repaid to the Commonwealth. While the final payment was made to
farmers in April 2008, the Dairy Adjustment Levy has continued to
pay off the interest on loans the former government used to fund
initial payments under the adjustment package.
At its meeting of 25
September 2008, the Selection of Bills Committee resolved to defer
consideration of the Bill until its next meeting.
The move to terminate
the Dairy Adjustment Levy has been welcomed on the grounds that it
should lead to a reduction in milk prices by 11 cents a
Queensland Dairyfarmers Organisation president
Wes Judd was reported as stating that the move [to terminate the
Dairy Adjustment Levy] was expected. This is just part of the
process of winding up the package. 
According to the Explanatory Memorandum, the
Dairy Industry Adjustment Program was designed to be cost neutral
to the Commonwealth; a consumer levy funded all administrative
costs, payments to farmers and grants to dairy dependent
communities under the program. Any surplus levy collected will be
credited to the Commonwealth.
However it should be noted that the Bill
provides that if, as a result of the amendments in the Bill, there
is an acquisition of property from a person otherwise than on just
terms, the Commonwealth is liable to pay a reasonable amount of
The Explanatory Memorandum states that the
Dairy Structural Adjustment Fund had a deficit of approximately
$205 million in July 2008, but is expected to be in balance in the
first quarter of 2009. The amendments in the Bill are intended to allow the
Commonwealth to stop the appropriation of levy funds into the Dairy
Structural Adjustment Fund as soon as possible after the deficit in
the fund has been eliminated.
Whilst the Dairy Industry Adjustment Program
was cost neutral to the Commonwealth, the key issues from the
perspective of those consumers who have been paying the levy
- Does the Bill effectively minimise the amount of surplus funds
collected under the Dairy Adjustment Levy?
- Steps have been taken (in item 6 of the Bill) to minimise the
amount of surplus funds collected under the Dairy Adjustment Levy
by reducing the levy termination notification period from 28 days
to seven days.
- Does the Bill make provision for any surplus funds collected
under the Dairy Adjustment Levy?
- Any surplus funds collected under the Dairy Adjustment Levy are
to be paid (under item 5 of the Bill) to the Commonwealth.
- Who has responsibility for any claims made on the Dairy
Structural Adjustment Fund after it is wound up?
- The Secretary of the Department of Agriculture, Fisheries and
Forestry will have that responsibility.
Part 1 of
Schedule 1 of the Bill winds up the Dairy
Item 2 amends the Dairy
Produce Act 1986 (the Dairy Produce Act) by inserting
proposed subclauses 55(2) and (3)
into existing Schedule 2. The amendment will empower the
declare that the Dairy Adjustment Authority ceases to exist
immediately after a specified day. That declaration will be by
legislative instrument which will, in accordance with the
Legislative Instruments Act 2003, be registered on the
Federal Register of Legislative Instruments and will be subject to
the disallowance regime.
Item 3 is an applications
allows the Secretary of the Department of Agriculture, Fisheries
and Forestry to assume the powers of the Dairy Adjustment Authority
immediately after it ceases to exist under proposed
Part 2 of
Schedule 1 of the Bill terminates the Dairy Adjustment
Existing clause 79 of Schedule 2 of the Dairy
Produce Act lists the manner in which money standing to the credit
of the Dairy Structural Adjustment Fund is to be expended.
Item 4 inserts proposed paragraph
79(ia) so that monies can also be expended in meeting the
expenses incurred by the Commonwealth in terminating the Dairy
Industry Adjustment Program.
Existing subclauses 83(1) and (2) of Schedule
2 of the Dairy Produce Act provide for the payment of dairy
adjustment levy to the industry services body, namely Dairy
Australia Limited. Item 5 inserts proposed
subclause 83(3A) which will allow the Minister to declare
that subclauses 83(1) and (2) do not apply. The effect of the
amendment is that no further payments of Dairy Adjustment Levy will
be made to Dairy Australia Limited after the declaration is made.
The declaration must be by legislative instrument and the date
specified in the legislative instrument must not be before the
levy termination day.
Existing subclause 94(1) of the Dairy Produce
Act provides for the Dairy Adjustment Levy to be terminated by the
Minister publishing a notice in the Gazette once the
Minister is satisfied that all costs associated with the Dairy
Industry Adjustment Package have been met. According to the
existing provision, the 28th day after the publication of notice is
the levy termination day.
Item 6 repeals that provision
and substitutes proposed subclause 94(1) which
empowers the Minister to declare by legislative instrument that the
seventh day after the day that the instrument is registered on the
Federal Register of Legislative Instruments is the levy
termination day. The effect of this amendment is to
reduce the levy termination notification period from 28 days to
seven days to minimise collection of levy funds which are surplus
Amendments to existing subclause 94(2) under
item 7 will prevent the Minister from making a
declaration about levy termination day
unless there is sufficient money in the Dairy Structural Adjustment
Fund for the purposes prescribed in the subclause.
Part 3 of Schedule 1 of the Bill winds up the
Dairy Structural Adjustment Fund.
Item 8 inserts
proposed clause 77AA into Schedule 2 of the Dairy
Produce Act which will allow the Minister to give written notice
(or notices) that monies which are credits in the Dairy Structural
Adjustment Fund are to be paid to the Commonwealth. When the Dairy
Structural Adjustment Fund is no longer in credit it will be wound
up: proposed subclause 77AA(3). According to the
Explanatory Memorandum, the rationale for this provision is that
sufficient funds be retained in the Dairy Structural Adjustment
Fund to ensure its solvency until it is formally wound up.
There is, entrenched in section 51(xxxi) of
the Constitution of Australia, a guarantee which
stipulates that property acquired by the Commonwealth Government
must be acquired on just terms .
Item 9 refers to an
acquisition otherwise than on just terms in the context of section
51(xxxi) of the Constitution but then provides that the
Commonwealth is liable to pay a 'reasonable amount of
compensation'. It should be noted that proposed clause
- does not specifically apply paragraph 51(xxxi) of the
Constitution of Australia to the acquisition
- provides that the Commonwealth is liable to pay a reasonable
amount of compensation , as distinct from just terms , and
- allows for a person to initiate court proceedings to determine
the amount of compensation, if an agreement on an amount cannot be
reached between parties.
However, use of such a provision is now
commonplace, for example, section 152AQC of the Trade Practices
Act 1974 and in section 60 of the Northern Territory
Emergency Response Act 2007.
Schedule 2 of the Bill
contains items which repeal the whole of the following Acts:
None of these Acts will be required after the
Minister has declared the levy termination
day under proposed subclause
94(1) of this Bill. Subsequently, commencement of
these provisions will occur on the day after the levy termination
Schedule 3 of the Bill
contains consequential amendments.
Item 1 of Schedule
4 of the Bill provides for the making of any regulations
which may be required.
. In accordance with section 19A of the Acts
Interpretation Act 1901 the reference to the Minister in this
Bill is a reference to the Minister for Agriculture, Fisheries and
9 October 2008
Bills Digest Service
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