Government Senators'
Dissenting Report
1.1
With
Australia's agriculture and food industry undergoing rapid change, Government
Senators welcomed the establishment of the Senate Select Committee on
Australia’s Food Processing Sector in March 2011 to inquire into possible
policy responses to the challenges confronting the sector. The Terms of
Reference for the Inquiry were very broad. The Committee was tasked with
inquiring into and reporting on:
- the
competitiveness and future viability of Australia's food processing sector in
global markets;
- the
regulatory environment for Australia's food processing and manufacturing
companies
- the impact of
Australia's competition regime and the food retail sector, on the food
processing sector, including the effectiveness of the Competition and Consumer
Act 2010;
- production
inputs costs, infrastructure, investment capital and human capital issues
- Trade policy
effects and opportunities.
1.2
Senate Select
Committees are established to consider complex issues which extend beyond the
responsibilities of Senate Standing Committees. The overarching scope of the
terms of reference for this inquiry has been a challenge for the Committee,
particularly in relation to the regulatory issue where submissions have in many
cases reflected anecdotal evidence, rather than providing detailed analysis of
regulatory burdens.
1.3
Government
Senators are particularly disappointed that only one State or Territory
government made a submission to the Inquiry, given that the food processing
sector makes a major contribution to the Australian economy and is particularly
important in rural and regional Victoria, South Australia, Western Australia,
Queensland and New South Wales.
1.4
Seventy submissions
were received, and these were dominated by industry associations and
stakeholders, including the relevant unions who were concerned to do justice to
the terms of reference and to assist the Committee to understand the complexity
and challenges confronting this sector.
1.5
Government
Senators want to highlight that some aspects of the Terms of Reference were not
widely addressed through submissions or evidence, and urge those who are
reading the full report to consider the comprehensive National Food Plan Green
Paper, as well as industry and other research which more fully reflect the
nature of national competition policy, the regulatory environment and the
infrastructure and investment issues which are critical to the future of
Australia’s food Processing Sector.
1.6
This report
does not seek to re-visit the issues raised in the wider Committee Report and
Government Senators support the general thrust of the report. However, we
specifically disagree with recommendations 4, 5, 24 25 and 26.
1.7
Government
Senators make the following further recommendations:
1. Government
Senators reject any call for further reviews of the Fair Work Act. A
comprehensive, independent review has just been completed, which found that the
legislation does provide a number of avenues for flexibility.
2. Government
Senators encourage food processing industry employers who require greater
flexibility of their workforce to utilise the existing mechanisms allowable
under the Fair Work Act.
3. Government
Senators recommend that the Federal Government increase consultation with and
education of the food processing sector about industry opportunities and
obligations in relation to the carbon pricing mechanism.
The Food Processing
Sector in Australia
1.8
Agriculture,
food processing and the retail and export of Australian primary products has
always been part of the Australian 'psyche'. There is a strong connection
between Australian farmers and their land, and between food processing and
manufacturing industries and the rural and regional communities in which they
operate. The Committee visited several regional locations where value-adding
to local produce was a significant part of the local economy.
1.9
The food
processing sector's value chain is significant to the Australian economy.
FIGURE
1: Value chain for food in Australia, 2010–11
Source: DAFF 2012, Australian
Food Statistics 2010-11, Department of Agriculture, Fisheries and Forestry,
Canberra
1.10
Several
reports have informed the Green paper on Australia’s National Food Plan,
released in July 2012, and issues canvassed in the Terms of Reference for the
Senate Inquiry have been considered in the development of the Green Paper.
1.11
The issues
include:
- The adequacy
of investment in innovation and research and development;
- The cost and
availability of transport and freight infrastructure
- Increasing
costs for raw materials, energy, water and labour
- The extent of
competition within the food industry, and particularly in the provision of
retail and wholesale services;
- Concerns
about rapid industry rationalisation and integration across the supply chain
and the impact these developments may have on small producers and processors;
- concerns
about the emergence of ‘private labels’ and they impact these may have on brand
competition and the allocation of shelf space;
- concerns
about food safety and quality;
- the potential
environmental impacts of food production, processing and handling practices;
- Evolving
consumer tastes and preferences for healthier and more life-style compatible
meals;
- Changing
labour requirements in the food processing, distribution and retailing sectors;
- Potential
bio-security risks and the integrity of Australia’s pest and disease status.
1.12
Government
Senators acknowledge therefore that this Inquiry has not been a 'stand-alone'
piece of work. In fact, the development and consultation around the National
Food Plan has built upon submissions provided to the Inquiry. In the same way,
the development of the Committee's report reflects issues raised in regional
consultations and industry roundtable meetings which have informed the Green
Paper for the National Food Plan as well as other work being undertaken by
government and industry to continue to address challenges in this sector.
1.13
Australia's
status as a net exporter of food products depends on market access and a
liberal trade regime. The Committee received extensive evidence that those
within the sector acknowledge that the Australian food industry exists within a
global economic food market, and many of the recent changes evident in the
industry reflect the fact that producers and processors are competing in global
export markers as well as with importers in the Australian domestic market.
1.14
Many
Australian food supply chains are also increasingly part of global business and
supply chains. This global participation enables access to foreign technology,
knowledge, capital and other business inputs.
1.15
The National
Food Plan Green Paper identifies Australia's key strengths in the market as:
Its
geographic location, with relative proximity to key emerging markets in Asia;
resource endowments favourable to producing abroad range of agricultural
products; a large pest-and –disease-free bio-security status; a stable
political and business environment, strong R&D and innovation; and a
skilled and capable workforce. (p. 6)
1.16
The food
processing sector is facing pressure from increasing international competition
including on costs of the strong Australian dollar and variable seasonal
outputs. To maximise opportunities, Australian businesses need to continue to
change and innovate in seeking cost efficiencies and market share.
1.17
While the
Committee heard evidence that parts of the food industry face difficult
business conditions such as labour and skills shortages and increasing costs of
some farm inputs, industry bodies including the Meat and Livestock Australia
acknowledge that Australia's market advantages are allowing businesses to tap
into rising food demand and food prices, particularly in commodity and niche
markets.
1.18
Meat and
Livestock Australia are promoting innovation as the way forward.
The
global financial crisis separated the best from the rest as leaders were forced
to make tough decisions fast, based on less-than-perfect information, throwing
out the rule book without sacrificing growth potential. Today’s operating
environment is hyper-connected, volatile and fragmented. Technology is a major
driver, but the changes are more profound and the implications for Australia
are far-reaching. Sections of our economy might be cushioned by resource wealth
and Asia’s growing markets, but such advantages are selective and finite.
Developing
and implementing appropriate technology solutions is critical to improving a
processor’s bottom line and ensuring the sustainability of the industry. MLA is
committed to foster creativity and support technology providers and processors
to innovate and develop new safer, sustainable and cost-efficient solutions to
problems affecting the industry
1.19
Australian
food producers and food businesses have significant opportunities as the demand
and prices for food commodities increase, in response to both population and
income growth, particularly in Asia.
Trade Policy
Implications
1.20
Successive
governments have supported multilateral trading systems. High-quality bilateral
and regional FTAS support the multilateral system promoting a liberalised
approach to trade in food and agricultural products between Australia and its
trading partners.
1.21
Australia has
successfully concluded FTAs with New Zealand, Singapore, the US, Thailand,
Chile and the Association of Southeast Asian Nations (ASEAN). Work is also
underway to conclude FTAs with Korea, Japan, China, and co-operation Agreements
with India, Indonesia and the Gulf Cooperation Council. Negotiations are
continuing on the Trans-Pacific Partnership Agreement with the Asia-Pacific
countries of Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand,
Peru, Singapore, US and Vietnam.
1.22
Some
submissions argued that FTAs reduce Australia's competitiveness and argued for
'fair trade' rather than 'free trade'. Government senators are concerned
misunderstandings exist about the potential benefits and opportunities that
come from FTAs, and the importance of these agreements for driving regional
economic trade liberalisation and integration in participating countries.
1.23
Some
submissions conflated several issues and argued for greater protection for
Australian industry. For example: Mrs' Mac's stated:
"...the
lack of willingness by governments and retailers to consider applying a level
manufacturing playing field by requiring foreign manufacturers that export food
products into Australia to meet the same processing standards and hence
consequential costs that are imposed by government regulation here in Australia
across all tiers of government." (p. 1)
1.24
Rather than a
drive to the bottom, multi-lateral agreements seek to impose WTO rules and
obligations on those countries.
1.25
Australia
also pursues agreements with trading partners on specific commodities or
commodity groups to ensure existing markets remain open and trade in Australian
products takes place with minimal disruptions. These include beef, wheat,
dairy, sheep, meat and sugar. To support export-ready companies to expand
their business in growing and emerging markets, the industry has argued
strongly for improving trade services to help identify those opportunities.
1.26
Government
senators are very concerned about the level of pessimism that exists within the
food processing industry, as parts of the industry continue to struggle with
the impacts of the global financial crisis, our strong exchange rate and the
reduced competitiveness of the industry. The answer however, is not to diminish
Australian standards, rather to strive for efficiencies in regulation, minimise
duplication and support innovation across the supply chain. For Australia, as a
developed country with a strong, educated labour force, we are not going to
compete on labour costs. Therefore, the emphasis by successive governments must
be on research and development, and innovation that will increase productivity,
marketability and address production challenges.
1.27
Industry
bodies acknowledge this. Meat and Livestock Australia, promoting innovation in
their sector argue:
Tight
margins in the red meat processing sector mean limited resources have been devoted
to technical innovation and the application of automation to some of the
pressing human capital issues facing the sector.
New
technologies such as automation offer significant opportunities to solve
problems such as improving productivity, increasing yield recovery and
remuneration levels, occupational health and safety (OH&S) performance and
attracting people with new skills into the industry.
Developing
and implementing appropriate technology solutions is critical to improving a
processor’s bottom line and ensuring the sustainability of the industry. MLA is
committed to foster creativity and support technology providers and processors
to innovate and develop new safer, sustainable and cost-efficient solutions to
problems affecting the industry.[1]
1.28
The Australian
government has a range of programs to assist firms increase their productivity
and move up the value chain by encouraging innovation. Raising the
capabilities of these firms is aimed at helping them adapt to the challenges of
working in a global economy, including currency fluctuations and in particular
the current high Australian dollar.
1.29
The committee
heard evidence that food industry firms are seeking greater assistance to
commercialise new products in response to changing food consumption patterns
and tastes. This may include how to manage IP issues and access investment
capital to modernise plant and equipment and to fund research and development.
Government incentives for SMEs with up to $20m turnover include a 45% refundable tax offset for
research and development. From 1 January 2014, these companies will be
able to access credits on a quarterly basis.
1.30
Government
senators believe however, that more can be done to support SMEs to access quality advice, support,
technology advice and access to research , and encourages Enterprise Connect,
(a government funded network that links local firms to resources in their
immediate region and across the country) encouraging innovation, sustainability
and entrepreneurship to better promote its Food Network throughout the
industry. This is critical for boutique parts of the sector developing gourmet
products, such as the Australian Barramundi Farmers Association, who need access to early
research funding for pre-commercialisation activities
1.31
The Australian
government also pursues agreements with trading partners on specific
commodities to ensure existing markets for Australian agricultural and food
exports remain open. This is done through industry bodies, working closely with
government funded trade services located in overseas countries.
1.32
Industry
leaders acknowledge the importance of market intelligence and support for
Australian food businesses and rely on government representatives to provide
country specific advice to potential exporters. However, some concerns were
expressed about the lack of access to this kind of information for small and
medium enterprises, which have fewer resources and capacity to understand
technical market access issues.
1.33
Government
senators therefore call for greater efforts to improve market intelligence and
its coordination and dissemination to food export businesses to help the
industry, particularly SMEs to identify potential trade opportunities.
Regulation and
Competition Policy Implications
1.34
Government
senators support efforts to reduce duplication in the regulatory environment
and urges state and territory governments to address issues which are delaying
the completion of the National Partnership on the Seamless National Economy. We
particularly note concerns
from industry on the importance of delivering reforms to harmonise occupational
health and safety laws and urges all jurisdictions which have yet to deliver
agreed outcomes for this reform to do so by the end of 2012.
1.35
Given the
importance and challenges for the food processing sector of ongoing regulatory
reform as highlighted by this chapter, we urge urges all jurisdictions to
prioritise work through COAG to develop a new regulatory reform agenda for
finalisation by the end of this year.
1.36
Government
Senators reject Recommendations 4 and 5. We see no need at this time to review
the competition provisions of the Competition and Consumer Act 2010 (CCA).
Since coming into office in 2007, the Government has made a number of important
amendments to the competition provisions of the CCA, including clarifying the
misuse of market power provisions, criminalising hard-core cartel conduct and
clarifying the mergers and acquisitions laws in relation to creeping
acquisitions. We note that these recommendations closely mirror Recommendations
5 & 7 from the Senate Economics References Committee’s Inquiry into The
Impacts of Supermarket Pricing Decisions on the Dairy Industry. We endorse the
comments by the Government Senators in relation to the Senate Economics
References Committee report.
1.37
Government
senators welcome the recent focus placed on the major supermarket chains by the
Australian Competition and Consumer Commission (ACCC). The ACCC has
stated that, during 2012, it will be giving priority to competition and
consumer issues in highly concentrated sectors, particularly in the supermarket
sector. The ACCC is closely examining the major supermarket chains to
ensure that any negotiations of supply arrangements are not unconscionable and
that they do not misuse any market power.
1.38
Given the
recent changes to the CCA, Government Senators consider that the competition
provisions need not be reviewed until the ACCC has had the opportunity to
further test the law in the courts. It is only after the laws have been
suitably tested that any weaknesses in the law can be appropriately identified.
Bio-security issues
1.39
Increased
global trade and increased passenger travel has placed significant pressure on
Australia's bio-security, import inspection and export certification systems.
Food producers should not underestimate the advantages that come with
Australia's reputation for clean, pest and disease-free status in a number of
key markets.
1.40
Australia
regulates the export of meat, dairy, fish, grains, horticulture and live
animals through the provisions of the Export Control Act 1982. These
provisions relate to the requirements of importing countries and are the
outcome of negotiations between Australia and the importing country.
1.41
Government
senators were concerned to hear evidence that some trading partners are setting
unnecessary and unsubstantiated import requirements posing significant burdens
on food export businesses. The live cattle export trade is one example of where
this has occurred.
1.42
Imported
foods, plants and animals must comply with all applicable Australian laws,
including those covering labelling, environmental, food safety and biosecurity
arrangements. Biosecurity restrictions are set out in the Quarantine Act
1908 and are consistent with Australia's obligations under the WTO. Imported
foods are inspected under the provisions of the Imported Food Control Act
1992 which provides for inspection and control of imported goods. However,
the most common deficiency in meeting these standards is in food labelling.
1.43
Evidence
provided to the committee highlighted the cost impost on the Australian food
processing industry of the import and export system, and Government Senators
are particularly keen to see the development and introduction of the new Biosecurity
Bill to replace the 1908 Quarantine Act with a more streamlined and
cost –effective legislative framework. As well, we believe that the Imported
Food Control Act should be reviewed to address the concerns of industry about
controls of imported foods.
Cost recovery policy
issues
1.44
In relation
to issues of cost recovery mechanisms, it would appear that not all parts of
the industry understand the reforms and initiatives being undertaken to bring
the industry in line with the conditions of WTO agreements. New export fees
and charges returning industry to full cost recovery commenced on
1 December 2009. The Australian Government provided $25.8 million to
support reforms to the meat sector., and a further $1.92 million in
transitional assistance to exporters of smallgoods and poultry products, cold
stores and freight forwarders.
1.45
This measure
was not contested by the Coalition at the time . It is worth noting that at the
2007 election the Coalition made no promise to extend the 40% rebate on export
certification fees. They made no provision for it in the budget beyond 2008.
Full cost recovery was their stated policy in Government. However, they
subsidised the system which helped to entrench inefficiency and shielded export
certification users.
1.46
In relation
to the evidence provided to the Committee from the horticultural sector in
relation to cost recovery issues, we note that even with the 40% rebate, the
Horticulture export certification program was subject to chronic
under-collection and was inefficient. Government senators note that the new arrangements
have the potential to deliver significant efficiencies and has provided $6.5
million in transitional assistance to horticulture exporters..
1.47
Government
Senators note that the Australian Government Cost Recovery Guidelines were
implemented by the Howard Government, and applaud the Government’s efforts
which have resulted in a reduction in the cost to exporters of export
certification services in the order of $30 million per annum.
Anti-Dumping Measures
1.48
The Committee
received anecdotal evidence about this issue and Government Senators are
interested to ensure that our food processing sector is not disadvantaged by
this practice. Dumping occurs when goods are exported to Australia at a price
below the domestic price in the country of export. While it is a problem that
reaches industries far beyond primary production, the Committee considered the
problem of tinned, frozen and fresh food from across the globe flooding the
Australian market at a fraction of the price.
1.49
One of the
main drivers of produce dumping is the subsidies paid by foreign governments,
particularly in the European Union and US, where farmers and owners of farmland
receive cash subsidies depending on market prices for crops, the level of
disaster payments and other factors. The US Department of Agriculture also
provides subsidised crop insurance and marketing support to the country’s
farmers. This is not the case in Australia, where we operate on the counter
argument to subsidised farming – that it props up growers who are inefficient,
instead of promoting successful farming and production practices.
1.50
Other
overseas producers have significantly lower costs across all categories –
including cheap and sometimes even illegal labour – that allow them to produce
food at a price that undercut Australians producers. Flooding the market with
imported produce, especially in the frozen food category, being may be
profitable for some, but many growers would like to see some level of
protection against aggressive dumping of food products at below the cost of
production.
1.51
It is
important to consider the conditions that Australian producers have fought for
decades for to secure. More than this, if free trade is also to be fair trade,
we need to consider the effect on wider Australian economy of local food
producers being excluded from the market because the supermarkets are not
prepared to pay them enough to survive while they can source similar products
overseas.
1.52
Government
senators acknowledge that in response to industry and consumer calls, the Minister
for Home Affairs has announced the Brumby Review to examine the current
arrangements for assessing and investigating anti-dumping matters and consider
the feasibility of a commonwealth anti-dumping agency.
Transport and Freight
issues
1.53
The transport
industry across Australia is under pressure to plan effectively for the massive
increase in the national freight task. The relationships between freight
infrastructure and economic growth is one of interdependence, and in terms of
the food processing sector, freight infrastructure is critical to ensuring that
fresh produce gets to market quickly and efficiently.
1.54
Government
Senators disagree with the claims of some witnesses that the Coastal Trading
Bill 2012 will increase costs. This claim is based on modelling done by
Deloitte that claimed freight costs would increase up to 16% under the Shipping
Reforms. However the baseline assumptions of the Deloitte report are incorrect.
The modelling is based on the assumption that all temporary licenses will be
phased out in 5 years and that all coastal cargo will be carried on Australian
licensed vessels, paying Part A wages. This has never been the
Government’s intention and the exposure drafts do not contain such a measure.
The Deloitte analysis therefore is not based on the legislation currently
before Parliament.
1.55
The
Government has also pursued the creation of single National Transport
Regulators since coming to Office in 2007. From 1 January 2013 there will
finally be three National Transport Regulators (for Heavy Vehicles, Rail and
Maritime). This will reduce the number of regulators from 23 to 3 and result in
$30 billion in productivity gains over the next 20 years.
Workforce issues
1.56
The
Government senators reject Recommendation 24 as it stands, pending further
consideration. The Australia and New Zealand Standard Classification of
occupations (ANZCO) is an international standard for comparative evaluation and
statistical analysis used by the ABS. Devoting resources to establishing
another set of standard for the food industry would be time-consuming and
contentious and would conflict with standards across other sectors,
particularly in agriculture.
1.57
Government
Senators also reject Recommendation 25. We do not believe that, industry
specific training is likely to assist in addressing this issue, because
concerns expressed by witnesses went more to the policy settings, rather than
how DIAC officers apply those settings. In fact, the challenges of a two
speed economy are common across a range of industries therefore specific
training is unlikely to assist.
1.58
In relation
to the industrial relations issues canvassed in the Inquiry, Government
Senators refer the Committee to the recently completed independent Review into
the Fair Work Act. The Report of the Panel reviewing the Fair Work Act found
that labour costs have not increased, with overall wage growth since 2009
around its decade-long average. It noted that the legislation provides a number
of avenues for flexibility, including through the use of individual flexibility
agreements and enterprise bargaining.
1.59
Under the
Fair Work Act, an employer and employees can negotiate an enterprise agreement
on any matter that pertains to their relationship. There are no unnecessary
restrictions on what can be included in an agreement. The Fair Work Act
requires that such an agreement leave employees better off overall than against
the applicable modern award. This provides flexibility to change award
conditions, so long as employees are better off overall.
1.60
In addition,
an employer and employee covered by an award or an enterprise agreement can
negotiate an individual flexibility agreement that meets the employee’s
individual needs. Again, the employee must be better off overall against the
modern award or enterprise agreement, as applicable.
1.61
The
independent Panel rejected claims that flexibility is created by cutting wages
and conditions. The Report did not recommend the reintroduction of AWAs or any
form of individual contract. In fact, the Panel identified that AWAs were bad
for many employees, especially for low-skilled and vulnerable workers. The
Panel found many of these workers suffered the unilateral removal of
conditions, a reduction in their take-home pay and were worse off overall
compared with the relevant award. AWAs undermined the safety net, often for
those who needed protection most, and the Panel had no appetite to reintroduce
this arrangement.
1.62
The Report
found no convincing evidence that the Act impedes productivity growth. It also
cautiously notes some recent figures indicating improvements in productivity.
The Panel found that since the Act came into force, important outcomes like
wages growth, industrial disputation, the responsiveness of wages to supply and
demand, the rate of employment growth and the flexibility of work patterns have
been favourable to Australia’s continuing prosperity.
1.63
Government
Senators note that Fair Work Australia is currently undertaking a review of
modern awards, including in relation to penalty rates and flexibility.
Interested parties are able to make submissions in relation to these matters as
part of the independent Fair Work Australia process.
1.64
The AMWU, as
the union representing workers in the food processing sector was not questioned
about wages, conditions or flexibility let alone the impact of the Fair Work
Act and modern awards on their members and their members’ workplaces.
1.65
It is
disappointing that the majority report reflects highly selective evidence on
industrial relations matters from the Committee's public hearings, rather than
including more measured responses by businesses to Committee questions about
the Fair Work Act.
1.66
At the Sydney
hearing of the Committee, Mr Vincent Pinneri from SPC Ardmona, a major fruit
and vegetable processor, was questioned by Senator Fisher about the supposed
impacts of the Fair Work Act and modern awards on his business. Mr Pinneri’s
evidence, not included in the Committee Report, reflects a different
perspective:
Senator
Fisher: Thank you.
In your opening statement and your submission you talk about challenges to your
business and labour costs. How have you found the Fair Work Act―good, bad
or indifferent?
Mr
Pinneri: I think
there are some areas of improvement in the relationship with the unions and the
Fair Work Act.
Senator
Fisher: Such as?
Mr
Pinneri: I think the
arrangements need to become more flexible.
Senator
Fisher: Is that
because of the unions’ conduct or because of the legislative provisions or
both?
Mr
Pinneri: Both.
Senator
Fisher: Have the
unions approached your business any differently since the passage of the Fair
Work Act?
Mr
Pinneri: The
relationships that we currently have with the unions we deal with has actually
been quite collaborative. We want to move the discussion into a different
direction moving forward because right now, we need to get to a very different
space in the negotiations around the next EBAs. In our world, Sunday during a
season is like a Friday.
Senator
Fisher: You said
that your needs are primarily in the area of flexibility. Do you mean agreement
content or the agreement-making process?
Mr
Pinneri: Agreement
content.
Senator
Fisher: Yes. The PM
does not control when the apples ripen―none of us do.
Mr
Pinneri: So during
the season I think there is a different approach that we should have in terms of
the agreement content versus out of season. We are going to try to do
everything we can to deseasonalise our business by leveraging technology.
Senator
Fisher: But you grow
fruit.
Mr
Pinneri: But there
is processing technology that allows you to put it into bulk containers that
you can manufacture out of season without losing the integrity of the product.
We will do that, but our primary focus is during a five- or six-month period.
So we need to have very different arrangements during that period which will
help with our cost competitiveness as well in terms of taking the input costs
out of the business, specifically labour ones.
Senator
Fisher: So how is
your modern award?
Mr
Pinneri: In what
regard?
Senator
Fisher: There is a
federal award that would govern you and underpin your agreement. Do you have
any views on that or is that largely irrelevant because of your enterprise
agreement?
Mr
Pinneri: It is
largely irrelevant because of the enterprise agreement.
Senator
Fisher: You talked
about productivity and how you have been able to increase it with your
machinery et cetera, particularly during peak seasons. Has the Fair Work Act
helped you in respect of increasing productivity?
Mr
Pinneri: I think
that has been driven by us making the right level of investments out of season
and us working with our own people to actually get to the productivity and the
union stewards that are on the floor.
Senator
Fisher: Has the Fair
Work Act hindered you? Could you have done better without it in that respect?
Mr
Pinneri: No, it has
been irrelevant.[2]
1.67
Also at the
Sydney hearing, in response to questions about the Fair Work Act Mr Craig
Funnell of Campell Arnott’s made the following observations:
Mr
Funnell: In terms of
Fair Work.. we probably see Fair Work Australia as being reasonably benign...
We have a very close working relationship with our employees across our plants.
We continue to drive productivity and they continue to drive productivity in
our operations. We have had no real issue with Fair Work.
Senator
Fisher: Fair Work
Australia is the tribunal. Do you mean the Act as well?
Mr
Funnell: We have
certainly had no issues across our plants that have really required us to get
into any major issues with Fair Work Australia. We have certainly worked
through an EBA process across our factories. We have certainly had EBAs come up
for renegotiation. They have been processed through Fair Work with no issue.[3]
1.68
In Adelaide,
Mr John Millington, from Luv-a-Duck specifically identified no adverse impacts
of the Fair Work Act:
Senator
Fisher: In your experience have you found any ramifications for you in terms of
labour, any changes good or bad since the implementation of the Gillard
government's Fair Work legislation?
Mr
Millington: In our case we have not.... we have enterprise agreements in
place and we just do not have IR issues at all. So Fair Work Australia has not
been a problem for us in compliance or with our staff.[4]
1.69
Government
Senators note that there are the flexibilities available to employers through
the Fair Work Act that enable them to negotiate with their employees an
enterprise agreement on any matter that pertains to their relationship, as long
as the employee is better off overall comparative to the applicable modern
award. Further, an employer and employee covered by an award or an enterprise
agreement can negotiate an individual flexibility agreement that meets the
employee’s individual needs as long as the employee is better off overall
against the modern award or enterprise agreement, as applicable.
Recommendation
1
1.70
Government
Senators reject any call for further reviews of the Fair Work Act. A
comprehensive, independent review has just been completed, which found that the
legislation does provide a number of avenues for flexibility.
Recommendation
2
1.71
Government
Senators encourage food processing industry employers who require greater
flexibility of their workforce to utilise the existing mechanisms allowable
under the Fair Work Act.
Skills
1.72
Government
Senators are concerned by the Committee Report's lack of focus on increasing
the skills of Australian workers. While we support programs that seek to fill
skills gaps with labour from overseas, this must not be done without due
consideration or at the expense of Australian workers.
1.73
A significant
initiative in workforce skills development omitted from the Committee Report is
the AgriFood Skills component of the National Workforce Development Fund
(NWDF). This fund provides more than $6 million of skills and training initiatives
across the industry sectors and has been actively accessed by food processing
firms to ensure workers gain the specific skills required to improve their
business.
1.74
For example,
Haigh's Chocolates has used the NWDF to train and qualify workers in Competitive
Manufacturing. Funding is also available through AgriFood Skills to help
individual employers to implement workforce planning and the training of their
workforce and to support industry stakeholders to implement sector wide or
regional workforce initiatives.
1.75
Government
Senators note that AgriFood Skills was created by the Howard Government in 2004
when it disbanded the National Food Industry Training Council. While the
National Food Industry Training Council was focussed solely on the food industry,
AgriFood Skills has vast responsibilities for areas such as food, beverage and
pharmaceutical processing; meat; horse and greyhound racing; rural and related
industries; and seafood.
1.76
Government
Senators fundamentally disagree with much of the evidence presented to the
Committee in relation to the Carbon pricing policy. There are many examples in
the food processing sector that highlight the potential for innovation and
opportunities being harnessed through the Clean Energy Technology package.
1.77
Government
Senators note that a significant portion of the revenue from carbon pricing is
spent on industry assistance. Of particular relevance to the food processing
sector is the Clean Technology Investment program for manufacturing businesses,
which provides government co-investment into new capital which lowers energy
costs and improves competitiveness.
1.78
In evidence
to the Committee, Mrs Mac’s Pty Ltd, a large scale bakehouse, expressed
appreciation for the range of government grants to assist businesses
Mr Beros:
"We have actually accessed, very recently, federal government funding for
some energy-saving initiatives within the organisation. The benefits to us, for
example, are: a 28 percent reduction in our water heating costs, a 25 percent
increase in one of our line speeds using the same level of energy input, and a
30 per cent efficiency gain in some of our condensers within our operations."[5]
1.79
The Jobs and
Competitiveness Program (JCP) alleviates anti-competitive impacts from the
carbon price on trade exposed and directly liable businesses. By allocating up
to 94.5 per cent of permits free to businesses who operate in international
markets, the JCP allows these businesses to remain competitive. Businesses
which provide inputs into the food processing sector are directly liable for
the carbon price and are trade exposed, therefore they are not required to
pass on carbon related costs, ensuring upstream clients are also shielded from
anti-competitive carbon price impacts.
1.80
The Committee
noted industry requests that government support be targeted ‘so that the
competitive balance is not tilted in favour of products with a larger carbon
footprint’. Government Senators believe that this concern is addressed in the
design of the Clean Technology Investment Programs (CTIP) and the JCP. JCP
assistance is directly tied to carbon price liability and trade exposure in the
market, while the CTIP provides co-investment based on the merit of investment
proposals.
1.81
The food
processing sector is quickly drawing on these programs to improve innovation
and productivity. For example
- Crafty Chef –
Emu Plains NSW
have received nearly $500,000 from carbon pricing revenue to install a new
commercial blast freezer. This will reduce the carbon intensity of its
operations by 54.1 percent, reduce energy intensity by over 56 per cent and
boost turnover by 150 per cent to $50 million.
- Across its
national network, De Bortoli Wines
is undertaking a range of measures across its all areas of its business from
production to warehousing. The purpose is to improve energy efficiency across
its operations and upgrade old equipment, supported by almost $5 million from
the Clean Energy Technology package. De Bortoli will improve energy efficiency
across its operations by 36.3 per cent.
1.82
Government
Senators refute the claim made by Campbell Arnott's using modelling from the
AFGC, that pricing carbon will have about a 4.5 percent impact on operating
profits in the industry. The AFGC modelling did not include the assistance
measures outlined above and should be treated as an overestimate of the actual
impacts on the sector.
1.83
Lion Pty Ltd
suggested significant potential administrative costs would occur as a result of
the carbon pricing mechanism. As Lion Pty Ltd is not a directly liable
business, there should not in fact be any additional administrative burdens.
However, the evidence indicates the extent of community misunderstanding about
the actual impacts of carbon pricing on Australian businesses.
1.84
Treasury
modelling of the food manufacturing industry projects growth by 108 per cent by
2050, with meat processing growing by 137 per cent over the same period. It
also projects that carbon pricing will result in food processing outputs 2 per
cent higher in 2050 than without, and that meat processing output alone will be
over 1 per cent higher in the same time period. This supports Treasury’s broad
conclusion that carbon pricing will drive a shift of economic activity towards
non-emission intensive sectors of manufacturing, like food processing, and away
from emission intensive sectors of manufacturing, like aluminium.
1.85
The food
processing sector needs assistance to understand the real implications of the
carbon price on the food supply chain and the mechanisms for determining those
costs and how to pass them on to consumers. Government Senators are concerned
that consumer information and education is a critical factor in understanding
the principles and purposes of carbon pricing and its effect on the sector, and
urges continued investment in community awareness and education as the
mechanism comes into operation.
Recommendation
3
1.86
Government
Senators recommend that the Federal Government increase consultation with and
education of the food processing sector about industry opportunities and
obligations in relation to the carbon pricing mechanism.
1.87
Government
Senators note that the ACCC has a strong mandate to monitor business activity
that makes misleading claims about the impact of carbon pricing to mask other
price increases. Misleading claims can result in action by the ACCC and fines
of up to $1.1 million. Directors and senior officers also face fines of up to
$220,000, and disqualification as a director. The ACCC has already fined
companies for misleading price gouging.
1.88
For example,
in late July,2012 the ACCC accepted an enforceable undertaking from a South
Australian refrigeration contractor, Equipserve, to correct their claims that
price increases were wholly due to the carbon price. Equipserve represented
that the entire refrigerant price increase from $98 to $395/kg was wholly due
to the carbon price, but this was not the case. Equipserve Solutions admitted
that the conduct breached the Australian Consumer Law by wrongly attributing
the entire price increase to the carbon price.
Concluding Remarks
1.89
Government
senators were impressed by the depth and diversity of the food processing
sector represented through this Inquiry. The evidence highlighted the
challenges of an industry sector undergoing significant change, and the
opportunities for innovation that are emerging from those pressures.
1.90
Domestic and
international factors impacting on the sector reflect the globalised nature of
the sector, as well as more highly informed consumers seeking value for
money. It is government's role to create an enabling environment for
strong market participation, and this report highlights important areas of
reform that will be critical for the food processing sector.
1.91
It is clear
that the answer is in the sector's capacity to innovate and thrive. We
were provided with inspiring examples of new and emerging products that are
capable of transforming parts of the sector. We need to remember however,
that the industry is best served by an innovative and adaptive business culture
and a well trained and supported workforce.
Senator
Ursula Stephens
Senator
Glenn Sterle
Senator
Anne Urquhart
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