Kiwis add to simmering dairy anger

By GREG ANSLEY Canberra bureau chief

Australia is coming under mounting pressure to wind back or significantly modify the deregulation of the dairy industry as the country heads into a year of state and federal elections.

The first signs are also emerging of anger at New Zealand's growing presence in the transtasman industry through large stakes in major manufacturing groups and the possibility of wider holdings in producer-owned cooperatives.

Kiwi Cooperative Dairies owns a controlling slice of Western Australia's Peters and Browne Food, NZ Dairy Group has 18.2 per cent of National Foods, and NZ Dairy Board wants 25 per cent of Bonlac.

Australian Democrats Senator John Woodley, whose party is preparing a plan for the re-regulation of the industry, attacked the invasion during an impassioned debate on deregulation in the Senate.

"We have seen since deregulation that Bonlac, one of the drivers of deregulation, is itself in great financial difficulty and about to be taken over by New Zealand," he said.

"That will be a further disaster for the Australian dairy industry."

The issue is of growing political significance because of the importance of key marginal seats in rural areas to state and federal governments, and the threat posed to them by the rise of independent candidates and Pauline Hanson's resurrected One Nation Party.

In Queensland, where the minority Labour Government is clinging to power by a fingernail and the Opposition National Party is riven by deals between rebel MPs and One Nation, 600 dairy farmers last week threatened to cut milk supplies to the state.

A study by the Australian Bureau of Agricultural and Resource Economics reported that 110 farmers in Queensland had quit the industry since deregulation last July, following the collapse of milk prices.

The State Government had strongly resisted deregulation, but caved in under pressure from Canberra and the powerful Victorian industry, and the certainty of defeat in what would have become a High Court challenge to its position under constitutional guarantees of free trade between states.

Protesting dairy farmers threatened to cut off Queensland's milk supply if deregulation was not reversed, and they could play an important role in Saturday's state election if they decide to punish the National-Liberal Opposition for deregulation imposed by its coalition counterpart in Canberra.

Prime Minister John Howard is already feeling the anger of dairy farmers as he prepares to go to the polls this year.

The Democrats, who hold the balance of power in the Senate, are proposing not only re-regulation of dairying, but increased compensation to farmers and more producer control of the processing sector.

New South Wales Senator Michael Forshaw, whose state has born the brunt of deregulation, has bitterly attacked what he says is the inadequacy of the Government's response to warnings of impending crisis and the widespread failures that have followed deregulation.

Mr Howard said he understood the unhappiness of dairy farmers in some areas.

But deregulation had been introduced at the request of the industry, and was "not something the Government imposed on the industry."