Dairy Industry Restructuring Amendment Bill (No 2)

I move, That the Dairy Industry Restructuring Amendment Bill (No 2) be now read a first time.

The bill deals with an important and urgent matter—to prevent the expiry of certain key provisions in the Dairy Industry Restructuring Act 2001, or the DIRA, as I’ll refer to it, from expiring in the South Island on 31 May 2018. The Government recognises that the dairy industry is important to the economy and to the well-being of New Zealanders. The dairy industry is New Zealand’s largest export earner and it is essential that it performs well.

It generated $14.6 billion in export revenue for the year ended June 2017. This is expected to increase to $16.8 billion for the year ending June 2018. The dairy industry is also a significant employer and contributor to regional economies. It employs over 50,000 people—37,000 on farms and over 14,000 in processing and marketing.

The DIRA was passed in 2001 to enable the formation of Fonterra. At that time, Fonterra had a dominant market share—96 percent of the traded milk in this country. Given Fonterra’s dominance, the DIRA was put in place to ensure that the New Zealand dairy industry remained contestable and that Fonterra performed efficiently for the benefit of consumers and farmers. The DIRA provides disciplines on Fonterra to perform efficiently in the absence of strong competitive pressures. The DIRA contains automatic expiry provisions that were triggered in 2015 when dairy processors other than Fonterra collected more than 20 percent of milk solids in the South Island. At that point, the DIRA required a review of the state of competition, which was conducted by the Commerce Commission.

The DIRA also required an active Government decision as to whether to allow the DIRA to expire in the South Island or to remain in place. Key provisions in the DIRA will no longer apply to the South Island by 31 May this year if the DIRA is not amended. Firstly, open exit and open entry provisions: Fonterra must accept an application to become a shareholding supplier to Fonterra, except in limited circumstances where the milk might be too expensive to collect. Fonterra must also allow any farmer choosing to supply another company for any reason to exit and take their invested capital. These open entry and exit provisions are a key element to ensure that Fonterra is both fair and efficient.

Secondly, in the Dairy Industry Restructuring Amendment Bill (No 2), this milk price monitoring regime—the Commerce Commission must each year review the calculation of Fonterra’s farm-gate milk price for the dairy season that has just concluded. The commission must also review Fonterra’s farm-gate milk price manual. Fonterra’s manual sets out its methodology for calculating its farm-gate milk price for the season. The milk price monitoring regime is intended to promote greater transparency of Fonterra’s farm-gate milk price setting processes.

Thirdly, there is the 20 percent rule by which Fonterra suppliers are permitted to sell 20 percent of their season’s milk production to another processor. This provision primarily ensures that smaller specialist producers of dairy products such as cheese and yoghurt are assured of milk supply.

In December last year, I announced my intent to undertake a comprehensive review of the DIRA as a matter of priority and committed to consulting fully with the dairy sector on further policy decisions in this year, 2018. I want to ensure that the regulatory sittings around the dairy industry support a high-performing, innovative, and sustainable sector that meets the Government’s strategic objectives for the sector. Passing this bill under urgency will allow a major review of the DIRA to be conducted this year. The review will give the public and industry players the opportunity to give us their views in a substantive and meaningful way. Those submissions will guide the Government’s considered and strategic approach to the changing needs of the dairy industry.

💬 Hon Nathan Guy: How long will it take?

I believe it is important to give industry certainty while this review is undertaken, particularly for South Island dairy farmers and dairy processors who need to know what regulatory environment will apply to them in the coming dairy season when they make decisions on who to supply or who to buy their milk from. I therefore do not believe that allowing these key DIRA provisions to expire now in the South Island would be in the best interests of the farmers, the dairy processors, the consumers, or the wider economy. That is why this bill needs to amend the existing DIRA legislation.

In 2016, the Commerce Commission review looked closely at the DIRA regime and found that competition was not yet sufficient to warrant the removal of the DIRA provisions. The Government considers that the DIRA provisions should be retained pending further comprehensive review. For this reason, I’m satisfied that it is appropriate to retain the existing provisions while the Government considers the DIRA and other strategic dairy industry issues during the upcoming review, which we hope—for the member’s question—will be conducted in 12 months. In short, this bill prevents the DIRA from expiring so that the Government can undertake a comprehensive review of the DIRA legislation.

I’ll now turn to the key provisions in the bill—

💬 Hon Member: There’s only one.

—as explained briefly by the Minister in the House. In technical terms—and I think at this point some may go to sleep—it repeals sections 147 to 150 of the DIRA, which set out the triggers and process for expiry of the key DIRA provisions, in either the North or South Island, or both. Second point: it repeals provisions relating to further review of the DIRA given that I have already committed to a comprehensive review of the legislation. Thirdly, it makes consequential changes to other sections in the DIRA. Fourthly, it revokes the Order in Council that would otherwise effect expiry in the South Island on 31 May 2018—this year.

The bill does not make any other changes to regulatory settings. In effect, it just stops the countdown to expiry in the South Island so that the dairy industry can have certainty and so that the Government can undertake a considered review with full opportunity for consultation with, and input from, all interested parties. I therefore consider that this bill should be passed as quickly as possible to enable certainty for the dairy industry and for the Government, and to conduct the DIRA review.

I’d like to take the opportunity to acknowledge the coalition partners who we’ve worked with to ensure the smooth passage of this legislation. Can I acknowledge the Opposition parties—generally speaking, dairy industry legislation has been non-partisan. There has been a unity of purpose and, ultimately, a unity in passing legislation through the House, so I’m hoping that the National Party will see the wisdom to support this legislation through under urgency so that we can ensure that Fonterra and the dairy industry is stable while enabling us to have a comprehensive review that acknowledges the significant challenges facing not just Fonterra but all the other dairy companies in the country and, in fact, the farmers who participate in the dairy industry.

This is a very important piece of legislation. We believe its passage through urgency will enable certainty to remain in the industry and open the door for a useful and worthwhile and necessary discussion around the dairy industry over the next 12 months. At this stage, in one year’s time we’ll be back in here to make any necessary changes to legislation to improve the further and future opportunities of dairy farmers and their industry. Kia ora.

Thank you for an opportunity to address what is a very important issue in the primary sector of New Zealand, the Dairy Industry Restructuring Act. We’ve heard from the Leader of the House why this needs to be heard under urgency. Personally, I don’t agree. I find it disappointing that only one aspect of this bill hasn’t been sent to the Primary Production Committee, which it should have been. OK, I get the fact that there is an expiry date at the end of May and farmers and industry want some certainty, but even if it was a truncated select committee process, the size of the industry—and also this particular issue affects all South Island farmers and processors. Surely, the Government, who stand up in this House talking about openness and honesty and transparency, would want to hear from those farmers and industry representatives of the South Island. Instead, we are here under urgency debating an issue that is really important—the future of the primary sector and growing exports, underpinned by the New Zealand dairy industry. Instead, we’re going to be debating it over the next hour or three—or, perhaps, into tomorrow, because it is worthy of decent consideration.

What I’m also really disappointed about is there’s been a huge amount of effort put in over the last two years to get the National Party’s Government bill on the table, and, yes, we didn’t have enough time to get it through last year, but, effectively, the Minister has gutted that bill. He’s going to go back out and consult and probably get 105 submissions, which we received in Government. The Commerce Commission did a huge amount of work; a very detailed report. Ministry for Primary Industries officials—when I was the Minister, they went out and had a whole lot of meetings up and down the country. We heard from industry, we heard from farmers, and now this open and new and transparent Government want to ram this very small piece of legislation—but important—through under urgency.

💬 Hon Shane Jones: Minor detail.

And what we—that’s what Shane Jones talks about, all the rhetoric, and we wait for his $1 billion fund. And it’s all going to be about the minor detail because—maybe at some stage the detail will turn up. It will be a bit like the trees: no trees planted and we wait and we wait and we wait.

💬 Hon Shane Jones: Water storage.

Yeah, well, we look forward to hearing about water storage in the South Island too, Mr Jones. It’s great that you’re going to stand up to the greenies and to Labour on that one, but once again that’s your rhetoric and we want to see the detail.

Getting back to the importance of this bill and what the Minister has decided to do; that is, to kick off anything that is contentious to a review. Finally, we heard from Minister O’Connor that it’s going to be a 12-month review period. But what we don’t know is what are the terms of reference for the review. Is it going to have a look at foreign ownership, because we know that New Zealand First and Shane Jones are against foreign investment into New Zealand. The Overseas Investment Office has made changes, so what’s going to happen to those that want to invest in New Zealand? Is that going to be included in the terms of reference? Also what is going to happen to other aspects in the terms of reference about the Dairy Core Database that LIC and Dairy New Zealand are very interested in? Also, what about the domestic raw milk processors? In the previous bill, it talked about farm gate and factory gate. No doubt that will need to be included in the terms of reference.

What about environmental considerations? I bet the Greens’ tentacles want to get right into that and move this review scope way broader than what it should be. And those in the dairy industry will remember back: it was only a few months ago that Labour and the Greens used the New Zealand dairy industry as a whipping boy in the election campaign. So I will be very mindful of that fact if the terms of reference have the breadth where it gets way out into environmental issues beyond the scope of this bill that we are debating in urgency today. I guess they’ll also want to get into climate change, which will be another ongoing issue that the Greens in this new Government are keen to see more happening.

What about value and volume? If you think about value, the previous National Government backed the New Zealand dairy industry through the Primary Growth Partnership to ensure that more commodities went into the value-add processing stream. We need to just think about down at Clandeboye in the South Island, where Fonterra has made a massive investment into mozzarella cheese. It used to take months to process; now it takes hours and it’s into the market. This is where the National Government invested and partnered with industry to ensure that the dairy industry could move out of commodities into value-add. So I would expect, Mr O’Connor, that the terms of reference would have a look at value and volume.

Will it indeed have a look at export markets? You had to drag your coalition—[Interruption] Not you, Madam Assistant Speaker; the Minister. The Minister had to drag his coalition partner, New Zealand First—and I look forward to Mark Patterson’s contribution. About the Comprehensive and Progressive Trans-Pacific Partnership agreement, he had to drag them across the line to actually support it. So we’d be keen to see about export markets. Are they going to be included? This review could indeed be bigger than Ben-Hur. The reason I raise it is that we just don’t know.

Who is going to lead the review? Is it going to be the hundreds of officials that want to roll their sleeves up, in the Ministry for Primary Industries, and get stuck in? What about the Ministry of Business, Innovation and Employment? Will they be getting their tentacles in? What about Treasury? Then, of course, the people that matter are the industry and the farmers. Will they be consulted through this review? Will they, Minister?

💬 Hon Damien O’Connor: Absolutely.

Yes. That’s good—that’s good. That’s a good commitment from the Minister today that they will be consulted. I guess they already have been, but this review—I’m worried, in indicating that it could indeed be a very wide review. Who actually is going to lead it? That’s what we want to hear. Do we know, Minister?

💬 Hon Damien O’Connor: Watch this space.

There we go—yet another review. I think we’re up to number 12 or 13 in this new Government—might be approaching 20 shortly. Surely they’d want to get some independence into this review. They might want to go and get a figurehead so that it’s not just done by officialdom, because the fear out there in industry is they’re going to get dealt to by Labour and the Greens through this process, and that is a big fear with this review. So we, on this side of the House, the loyal Opposition, will be very focused on the fact that there’s not enough detail on the terms of reference. The other very, very interesting fact is open entry/exit. That’s going to be an issue that has to be covered in this review. So I look forward to more detail on this review.

We shouldn’t forget that when the dairy industry is going well, so is the New Zealand economy. Fifty thousand jobs, depending on what year it’s counted, depending on the payout. Whether it’s six bucks, four dollars, or potentially eight dollars depends on the significance of the export returns into New Zealand. It could be $18 billion. It could be $14 billion. It is significant: 50,000 jobs. And these aren’t just farmers and their workers; these are processing jobs as well. These are scientists. These are people that are helping innovation and growing our exports into these very important international markets. So the fear out there amongst those 50,000 employees is: where is this review going to end up? I support the concerns that I hear from them. That’s why over this period of the next few hours, potentially into tomorrow, we will explore through the Minister and try and understand more about these terms of reference.

Also, what will be very interesting to note is: will speakers in the Parliament today get up and acknowledge that over the last 15 years our dairy farmers have done a huge amount to support environmental responsibility and sustainability? Excluding dairy cattle from waterways over 24,000 kilometres—it might be 26,000 kilometres—gets you from Wellington to Chicago and back again on a plane. That’s the investment that the New Zealand dairy industry has made, and I’m sure speakers from other political parties standing on the opposite side of me this evening won’t even take a moment to acknowledge that the New Zealand dairy industry—

I apologise to the member. Your time has expired. Thank you.

Tēnā koe, Madam Assistant Speaker. Otirā, e ngā mema o Te Whare nei. Tēnā tātou katoa. It’s a bit rich for the member Nathan Guy, who’s just taken his seat, because when they had their time in bat, they didn’t do anything with this bill. Now, we’ve got a change of Government, and we’re doing something to acknowledge the dairy farmers—particularly in the South Island—with this bill. We believe their contribution to the primary industry sector is important.

I want to commend the Minister of Agriculture, the Hon Damien O’Connor, for bringing this bill to the House under urgency simply because of the 31 May expiry date. It’s to do with assuring clarity for our South Island dairy farmers that this Government is prepared not only to ensure they’ve got clarity going forward but we’re going to undertake this very comprehensive review that the Minister spoke about.

The Dairy Industry Restructuring Amendment Bill (No 2) attempts to amend the Dairy Industry Restructuring Act (DIRA) 2001 to prevent the expiry of certain provisions relating to the South Island in May 2018. It’s rich, as I started to say, because in 2015, the Opposition asked the Commerce Commission to investigate whether the state of competition in the New Zealand dairy industry was sufficient to allow parts of the DIRA regulatory regime to expire in the South Island. I notice that the Commerce Commission’s report found that the competition was not yet sufficient to warrant deregulation. So that side had every opportunity to address this issue. They didn’t while they were in Government, and, like I said, this side has taken the very important role of bringing this bill to the House to give clarity to farmers in the South Island.

I just want to pick up on some of the comments that that previous speaker alluded to—that is, what are the terms of reference for this comprehensive review that the Hon Damien O’Connor is going to take? He actually outlined them himself. It may be an opportunity to look at the environmental issues—for example, the land use. He also talked about the economic value that dairy farmers contribute to this nation. These are all very good terms, which I’m pretty sure the Minister will take on board when he does do this comprehensive review.

It is important that we give assurances to all dairy farmers in this bill, not just in the South Island but throughout the country, so I wanted to respond to that previous speaker. The terms of reference, I’m pretty sure, will be comprehensive because it’s a comprehensive review. In terms of the work that the Opposition, when they were last in Government, did with dairy farmers up and down the country, I’m sure that the review that Minister O’Connor’s going to undertake will give those very farmers and key stakeholders in the dairy industry every opportunity to contribute to that review so that we get the system right. I’ve got no concerns that that’s exactly what Minister O’Connor will do.

The bill, as he has mentioned, is a very short bill. There are only eight clauses in it. The key topic that he has indicated is really to ensure that the expiry provisions in the Act remain, and I want to just, for the purpose of the House, reiterate what the expiry date means for major players like Fonterra and Fonterra farmers. I just note that preventing the expiry of the DIRA in the South Island will mean that the current regulatory regime continues in place. The key provisions that will be maintained will be open entry and exit, and Fonterra must accept any application. What does that mean? It means Fonterra must accept any application to become a shareholding farmer in Fonterra and it must accept supply of milk from that shareholder. Also, there is a milk-pricing monitoring regime that will be maintained as a result of the passage of this particular bill.

The concerns of the previous speaker are unfounded. This is a commitment from this side of the House to ensure that we are giving certainty to dairy farmers but also ensuring that the entire dairy industry system is robust, is fit for service, and is fit for purpose and that, as we go forward over the next term and beyond, we have got a very robust dairy industry system. I commend Minister O’Connor for the action that he’s taken, and we will be working alongside him to ensure that the terms of reference and the leadership on this review will ensure that we meet that aim. I commend this bill to the House.

Thank you, Madam Assistant Speaker. Dairy farmers be warned: your worst nightmare is happening in front of you today in this House. There is no need for this bill to go to urgency; therefore, you have to ask your question: why would the Government want to take this bill to urgency? The reason is because they are going to have a full-scale attack on the dairy industry, and by doing this they take away any option for the industry and farmers to have any say in what’s happening to their companies, their industry, their milk, and their land over the next few years.

This will be a “comprehensive” review. We have heard that from the Minister and the Labour Government spokesperson in this area. If you look at the press release, it said: “environmental issues, land use and how to achieve the best outcomes for farmers, consumers and the New Zealand economy.” “Environmental issues, land use”—they have nothing to do with the Dairy Industry Restructuring Act (DIRA). The DIRA is set up around milk supply issues, around Fonterra when it was created. It is not meant to be an investigation into land use, environmental issues. Every dairy farmer out there that is milking cows now, listen to the radio because in the next few days you will see that the dairy industry will now be subject to a review that will be set up by the Labour Government, will be backed up by the Green Party, and will have New Zealand First in there, and that review will bring environmental and land use changes to your properties and to your farms. It’s exactly what’s happened in the Waikato with the regional council up there and will be the next stage of what that Minister of Agriculture wants to do, and those environmental and land-use changes will reflect in the industry going forward.

I bet that one of the things that will come out of this will be a stocking rate cap on New Zealand dairy farmers. That will happen as a result of this review. That’s what the Greens want. They’ve always wanted that. They’ve wanted to stop dairying in New Zealand. This is their chance. They’re laughing, licking their lips, because they know they’ve got their opportunity, and in the darkness of night they’re putting this through Parliament to make sure dairy farmers don’t have any say and then are going to attack the guts out of that industry going forward. That’s what Labour are up to here today. Don’t dress it up in any way, talking about dates for May and the South Island industry; this is an attack on all New Zealand dairy farmers and it is about environmental and land use, and it is a disgrace for the Labour Government to do this.

💬 Hon Member: Scam.

It is a scam. I ask this question: if it is so important and there are so many issues there, why didn’t the Labour Government pass what had been introduced into this House some time ago? Not only was that South Island component in there but there were three other major components that were in the bill that was introduced originally. The first was open entry and exit. Now, the Green Party is against conversions of dairy farm land in New Zealand. The open entry and exit provisions that were in the original bill would have enabled Fonterra to say no to new conversions. Why aren’t the Green Party supporting that, because there’s going to be the potential now for new conversions to go ahead that the dairy bill would have stopped. The Green Party actually knows that it can let that go, because it’s got a wider agenda, and that’s around land use and environmental change that this bill will enable them to follow.

I want to look at the effect that another party in this Parliament said, and that’s the Rt Hon Winston Peters on 16 June. He said, “Look at the Dairy Industry Restructuring Act. Instead of triggering ‘sunset clauses’ with Fonterra’s South Island market share meeting the Act’s 80 per cent threshold, National wants to revise it lower to 75 per cent in both islands. That only benefits … foreign processors.” That was New Zealand First, and then they’re doing it again here today. So I want to see what New Zealand First have said, but there is help on its way, because they said that “New Zealand First is now working on legislation to amend the Dairy Industry Restructuring Act.” That was Winston Peters on 23 March. Well, if he’s worked on it, he’s had a year, and he’s done nothing. It should be here today, and where is the New Zealand First Party when it comes to their chance to put it in front?

I guess there’s some other issues. The second issue was about regulating large-scale processors. This is a really important submission from Fonterra, because there are some large-scale processors that get regulated milk from Fonterra, and they no longer wish to do that in some cases because these companies are now able to sustain operations on their own two feet. I ask the New Zealand First Party: how can you, in good conscience, take away that provision that will enable companies like Synlait, Open Country Dairy, Yashili, Oceania Dairy, which are foreign-owned, to now have that regulated milker application still apply to them, because that bill was taking away the ability for those companies to have regulated milk for ever and a day at a certain price, and the New Zealand First Party has taken away that opportunity.

There’s another great quote I see from New Zealand First, and this was Winston Peters in the Waikato Times on 6 March. He said, “New Zealand First will not be so craven. Our policy recognises that regulated milk is an asset to this country … While it is positive Fonterra will … get control of its burgeoning milk pool in 2018 … with discretion over taking milk from new dairy conversions, we would ensure that ‘regulated milk’ only goes to New Zealand-owned processors.” Where is New Zealand First making sure that that happens in this bill today, because they are taking out the very regulation, by not enabling the full bill that was proposed earlier, to come into fruition today, and that means that foreign-owned processors will have their chance to take milk out of the New Zealand economy.

This bill is an attack on dairy farmers. Farmers need to be worried. Can they trust a Minister that has let a disease go through this whole country now—that started in the South Island—a Minister sitting over there that has had responsibility and has let it spread through this country? Can they trust a Minister that has stripped irrigation proposals from dairy farmers and other farmers going ahead in this country? Can we have a Minister that backtracked on mānuka honey when he found that he’d gone too far and had to change his mind?

We cannot trust Labour and the Green Party and the New Zealand First Party to dictate the future of New Zealand’s biggest industry. This bill is an attack on that industry and is just a method for them to go out and review everything in the dairy sector. It is a blatant attack on farmers and their businesses. There is no way that farmers should trust the Green Party to be involved in their future, there is no way that they should trust the Labour Government to be involved in their future, and there is no way they should trust the New Zealand First Party to be involved in their future. All those parties have indicated a preference to hurt dairying and New Zealand agricultural production, and this bill is an attempt by them to cover that up. It is part of the plan to take away any ability for New Zealand’s biggest industry to have a voice in the legislation that governs them, and, secondly, it is an attempt to extend the rules of the DIRA away from what it was set up to do, which was to look at the percentages of milk that would flow to certain companies and look at how milk supply would be picked up by Fonterra and other companies, and now it is being used as the proxy for an attack on environmental and land use changes.

That is the true agenda of the Labour Government that is being seen here today. That is why they are going into urgency. The only reason the Labour Government is going into urgency is because they know that this is bad for our biggest industry. They can go through a normal process, and if they really want to support the dairy industry, why don’t they do the other parts of the bill that were originally part of the Dairy Industry Restructuring Act? They will not do that, because they are not supporting dairying.

This is an attack on dairy farmers, this is an attack on land use, and don’t think it’s going to stop at dairy farmers. Once they set these rules around land use, that applies to horticulture. It applies to other landowners throughout the country, as you’ve seen in the Waikato example. This is an attack on property rights. This is an attack on the ability of people to actually own and run their own businesses. This is a blatant attack by the urban elite on the rural communities that actually make this country go forward.

This bill should not pass in the Parliament. If it does, then that party has set up the agenda to take away the rights of New Zealanders, and that just fits in with their complete agenda, as we’ve seen in the last few months.

It’s with great pleasure that I rise to speak to the Dairy Industry Restructuring Amendment Bill (No 2) on behalf of New Zealand First. I must have read a different bill, because I heard David Bennett, the member opposite, misrepresent completely—

💬 Hon David Bennett: I raise a point of order, Madam Speaker. I take offence at that—the misrepresentation comment.

ASSISTANT SPEAKER (Poto Williams): The member has taken offence. I would ask the member to withdraw and apologise.

I withdraw and apologise—

ASSISTANT SPEAKER (Poto Williams): Thank you.

—and I apologise to the member. Right, the aim of this is, as we have heard, to prevent the expiry provisions on 31 March as the threshold of under 80 percent is breached in the South Island. But dairy farmers, who may be alarmed after that presentation, can rest assured tonight because the cavalry has arrived in the form of New Zealand First. But we do support this bill. We do so strictly on the proviso and the understanding and the goodwill of Minister Damien O’Connor that there will be a thorough and comprehensive review of this bill. We know that the terms of reference will be such that it will be of benefit to this very important industry.

We did have concerns that this is a bit of kicking the can down the road, but when we looked at the previous legislation that was put up by the National Party, it was half measures. It was full of half measures, and it is time that we took a proper and comprehensive look at this legislation. I think, when you look at the 12 months that the Minister has given us assurance that it will be carried out within, that is a blink of an eye. We are talking about multigenerational businesses. It’s really important that we get this legislation right and future-focused, and not half measures to get through before 31 March. That will be a thorough review, I’m sure, and that will give the industry certainty. It might not be exactly what they want at this time, but it is certainty, and we, of course, are a Government that is looking to provide business with confidence and certainty.

The Commerce Commission report, of course, contended that there was not enough competition. I think the review will challenge that assertion, and we will see where that takes us.

The background of this, of course, is that Fonterra was formed out of farmer recognition of the importance of the Dairy Board and the single-desk seller and the merits of sticking together, and when that National Government—the previous one before the last one—looked to strip that away and open it up in a neo-liberal way to open competition, the dairy farmers pushed back. Great leaders in that industry, the Sir Henry van der Heydens, the John Roadleys, and the Greg Gents would not take that. They led their co-ops towards a merger. The Clark Labour Government listened to their request and pulled Fonterra together, and this enabling legislation allowed a monopoly of 96 percent. Now, that is a pretty extraordinary development in itself in a free market. It was a big step for that previous Clark Government to take.

When you think about it, there would be no country in the OECD that has a company as significant to their economy as Fonterra is to ours. This is a major company. It is a behemoth—$19.2 billion worth of turnover last year. It dwarfs any company on the NZX. We do not want to rush through this legislation—

💬 Hon Nathan Guy: But you are tonight.

—this review, in haste. Well, the previous Government was able to live with this quite comfortably over the last nine years, so what’s the panic just at the moment? Just going back to the significance of this company, this is over 30 percent of the world’s tradable dairy products. This is significant in the sense that it has been compared to the OPEC of milk. So it is important we get this right, and we do a thorough review and we don’t rush this through.

💬 Hon Nathan Guy: You are rushing it through.

We are not rushing through a proper review, as is being misrepresented here at the moment.

The 10,600 shareholders in Fonterra are owed the courtesy of us doing this properly. These people are national heroes. They each have, on average, over $1 million worth of shares. How many urban people are prepared to hold that level of investment within their business, investing in the value chain? It is an incredibly important investment and we much cherish that, because the other end of that is foreign ownership and being at the end of a supply chain controlled by foreign multinationals, and that’s where this is heading if we don’t get this right. So it’s pertinent that we do take a little bit of time on this issue.

We have to look at the cooperative model and why it is so important. It is the only model that is set up to maximise returns to its suppliers. Private companies have a raw material that they are looking to get for the cheapest-possible price so that they can return to their shareholders. Dairy farmers, on the whole, know the benefit of the cooperative, and that’s why they have stuck with it through thick and thin. Even though their market share is down, I might say that, certainly, their kilograms of milksolids have gone up significantly. They’re now at $1.25 billion, up from $1.2 billion when it first emerged.

We’ve seen the value of the cooperative shown in other ways, too. When the commodity prices fell a couple of years ago, Fonterra stumped up with a 50c a kilogram advance payment, interest-free. They mined their own balance sheet for those family farms that support them through the good times. That is why we must get this legislation right, to protect this valuable institution and business.

It’s worth noting that Fonterra also sets the benchmark. You know, there’s a lot of talk about some of these foreign companies, and they come in and they’re adding value here and adding there, but they don’t pay any more than Fonterra—Fonterra sets the benchmark. So if we weaken Fonterra, we weaken the whole industry.

This is quite significant for me personally because my pathway to this House came through trying to set reform for the meat industry. I have seen this movie before. I have seen what foreign ownership and lack of control of supply chains can do. There is destructive competition, companies trading off against each other to the detriment of their suppliers, and you end up as price-takers at the end of supply chains.

Now, we’re looking here at some of the provisions: the open entry provision—I think we are going to have to have a look at that. Fonterra are required to take milk wherever it comes from. That is unsustainable. It has led to a situation where they have had to take a wall of milk coming at them when all those dairy conversions—they had to put up those dryers. They have been locked into a commodity track because they have had to do it, basically—they have had to accept that milk. They have made great strides and I acknowledge the Hon Nathan Guy. He mentioned a very good example at Clandeboye with the mozzarella, but I believe they’ve been held up by this open-entry provision that has seen them have no control over the amount of milk that they’ve got to provide.

The provision of raw milk to foreign-owned companies, as raised by the Hon David Bennett—totally agree with that; that has to end, and that must be part of that provision. Fonterra at this stage has got its hands tied behind its back, and that is not the place where we want it to be. I note that Federated Farmers have lobbied in that direction as well, so that will certainly be part of the view. New Zealand First will be asking plenty of questions on that particular issue, which is, of course, fundamental to our core philosophy.

So we look forward to a new Fonterra after the review is concerned. A higher performing, innovative, and value-adding Fonterra, as the Minister pointed out in his opening address. We will get there. It’s important we get this review right, that’s why we have to roll this legislation over in the short term. We support that, but only under the provision of this comprehensive review. So thank you, Madam Deputy Speaker, for your time. Cheers.

There were more oxymorons in that last speech than there are between the parties that currently make up the Government at the moment. That speaker actually stood up and he, basically, said, “We’re not going to rush this.” He hasn’t actually noticed that we’re in urgency. I also noticed that the Minister was sitting there, actually, really, really finding it difficult not to shake his head through some of that commentary, particularly when that member got up and said, “Rest assured the cavalry’s here. We’re going to look after it. We’re going to make sure that these guys don’t do anything that we didn’t want them to.” So I’d be really interested when you get up to make your next speech on this bill, Mr Patterson, if you would like to elaborate on that and just exactly what it is the cavalry’s saving.

Our speaker before you, David Bennett, has alluded to a few things that he sees that are likely to be dropped into these terms of reference that we don’t know about. So I would really love you to elaborate on what it was that the cavalry was coming to save that the Minister had on the table; so we would appreciate that.

There are a few other things that you talked about. You talked about farmers being the heroes, and you talked about the commodity trap.

💬 DEPUTY SPEAKER: I didn’t.

Sorry, Madam Deputy Speaker. The member talked about our farmers being heroes, and the member talked about foreign companies coming in and making the farmers be price-takers. So I’ve actually just got a little quote here that I’d like to put across. I put a question in recently to the Minister, Damien O’Connor, and I said, “Further to question 8923, why is it that the Minister has not been able to provide Cabinet with any briefings in respect of his Rural Communities portfolio?” He came back, the Minister, saying, “The Government has prioritised policies that were included in its 100-day plan. Many of these policies, including the families package and restrictions on foreign buyers, help rural communities.”

So I’m actually having trouble understanding how we are trying to protect these heroes who are New Zealand farmers, which you said in your speech. We know that New Zealand First and the Government’s policies are totally anti - foreign investment. We know that many of these companies that are coming in and setting up in competition with Fonterra—a lot of it is driven by foreign investment, so there’s going to be a lot of explaining to do when we get further down the track with this bill.

But this bill really is a band-aid. It’s a band-aid for changing the date of the expiry for the South Island. But what I’m hearing a lot out in our communities is that this Government, apart from this whole change of Government scenario, now thinks they have to change everything. And there’s nothing worse than change for the sake of change, because every time the Government says they’re going to change something, everybody goes, “To what?”, and we go, “We don’t know; they won’t tell us.” Where are the terms of reference?

The member over there was talking before about David Bennett being right off track. Well, tell us what is on track. Tell us what is in these terms of reference, because when the last Dairy Industry Restructuring Amendment Bill (DIRA) consultation went on, the Commerce Commission made a finding, and it recommended, at that stage, that the DIRA regulations stay in place. So they did a finding, they did a review. They did it and put out the findings. That’s only, literally, two years’ ago.

Following on from that, the Ministry for Primary Industries sent people out into the field. They had various meetings, they had consultation processes going on, they had 105 submissions going in—what does this Government think is going to be any different, or who are these people going to be that are going to submit anything different to what they did before? You’ve already got access to the submissions. You’ve already got access to everything that was said before. You’ve already got the Commerce Commission’s report, so if you’re looking at something that’s not in these reports, then it is very fair for David Bennett to be asking the questioners, “What are you going to add?” Is the member going to find something else? Is the Minister going to find out—sorry, Madam Deputy Speaker. So it is the same group of farmers out there, and you talked about them being heroes but I get the same suspicion right now that this bill is going to throw up something in those terms of reference that is unexpected. Because if those terms of reference were going to be straightforward, then why is this bill being rushed under urgency? And why can’t we have an idea of what is going to be in those terms of reference before it comes along?

We don’t know who’s going to lead this review. We don’t know what industry involvement there will be, and I know that after this debate today—we’ve already been asked these questions that the shareholders and farmers in Fonterra are going to come and ask us, “What does this mean?” We have no indication about anything around the time frames—the costs. You know, everything that happened in the first 100 days of this Government, the majority of it was, “Look, let’s just go and get another review.” It’s more money. It’s more cost. It’s actually people out there asking, “Why can’t decisions be made on information that’s already been provided? Why do we have to do another review?” So I think the onus is on the Minister and on the members of the Minister’s Government to explain why there’s going to be another review when there was a review done under the previous Minister recently.

I also understand that, yes, there’s a 31 May date coming up, and I do understand that there’s a time frame running. But actually, if this Government was serious about making some change, there’s been plenty of time to make some change. There have been a number of years where the Minister has been involved in going through some of these processes as well. Were there not any ideas on that other side of the House before actually going through this process? And if there were other ideas on the other side of the House, we want to know what they are. It is just diabolical that we could have this put up.

The member talked about Federated Farmers lobbying. Now, if you were up with the play you might realise that Federated Farmers did do a lot of lobbying and there were some concerns within Federated Farmers for a period of time. But then, more recently, as we got through this process, Federated Farmers came to some arrangement with Fonterra whereby they had actually sat down, as a group of people, and figured out some spaces where they could stay on the same page. They had worked out that if they followed a specific time frame, then that could be acceptable to all parties.

So I’m just trying to work out who all the different players are that are expected to come into this review. The only reason I think there would be different players coming into this review would be if there were different terms of reference that were wider and broader than the terms of reference that were given for the last review, and went wider than the Commerce Commission and started to bring all sorts of other things into the review.

So the onus really—I’m looking for some answers from the speakers on the other side of the House. We want some reassurance. We want some reassurance on behalf of our farmers that this bill that you’re wanting to pass through the House this afternoon is not just a cover sheet for a whole lot of other stuff that lies underneath it. We want to make sure that this Government is on level pegging with farmers.

We all know that we go back to the formation of Fonterra, and we do hear that from time to time it was the Labour Government that played a part in that. I think it would be an appalling day in this Parliament if something went by in this piece of legislation that was unknown to the farmers and the good heroes of Fonterra, as Mr Patterson described them. I think it’s time to be up front. It’s time to tell us what these terms of reference are. It’s time to tell us what this review is really about. If you want to save some money, go back to the review that was just done and do some thinking and some work yourselves, and let us know what that’s going to be. Thank you, Madam Deputy Speaker

Kia ora, Madam Deputy Speaker. Ngā mihi nui ki a koutou, kia ora. I think people in our rural communities call speeches like that “bulldust”. What we heard was petty politics—scaremongering coming from the National benches. Just revel in the irony of it. Here’s the National Party, which for nine years was prepared to ram through, under urgency, all sorts of things: unethical Acts, where it comes to criminalising protest activity at sea—the so-called Anadarko amendment passed under urgency at Easter—and criminalising people for the Skynet laws, where it came to kicking people off their computers. This is the party that in their nine years literally sacked the democratically elected Environment Canterbury commissioners because they were doing too good a job of cleaning up water quality.

Oh, the irony of the National Party, which for nine years presided over a skyrocketing growth that hit “peak cow”, that saw massive subsidies going to agricultural intensification and massive subsidies for irrigation. The irony of the National Party, which presided over such a decline of our water quality; a National Party that saw, by the end of its terms, two-thirds of our kids getting sick when they swam in our rivers. What we don’t need is more scaremongering, more petty politics, over an entirely reasonable use of it.

The irony, of course, is that had the existing legislation gone through, the public wouldn’t have had a say, the farmers wouldn’t have had a say and the people involved in the business wouldn’t have had a say. What you’re railing against is the chance to have a 12-month review, to get everyone around the table. For too long what we saw was those incredibly important issues like water quality swept under the carpet. When we saw fundamental issues facing our sector—like value-add, innovation, and how we’re selling our agricultural products overseas—we didn’t get everyone around the table and come up with real solutions. In fact, we saw mock talk shops, where an agenda was rammed through.

What we do know is there’s a limit to how many cows we can cram on to a paddock. Equally so, there’s a limit to how many people we can cram down in Fiordland. There’s no limit to the export of smart intellectual property, services, software, and value-added dairy products.

It’s important we get this right. Dairy is 40 percent of our primary industries’ market. It’s important we get it right. What National would have you do is go into the old legislation and make a simple change to the open entry and exit and the milk price monitoring regime because the Commerce Commission found that the threshold had been met in the South Island.

What the National Party wouldn’t have the industry, the farmers, environmentalists, iwi, and hapū do, is have a proper review. I’d acknowledge the Minister, Damien O’Connor, because he’s doing the right thing. He’s giving people a chance to have a say on one of the most fundamental questions facing us: what is our economy going to look like over the next decade? What’s our environment going to look like? Are we going to have swimmable rivers? I’d give him full credit, because in that review there is going to be a look at organic farming, which we know is more valuable for the farmers, higher-value export industries. It’s a good thing for our environment. We also know that there’s going to be a look at how we encourage value-add into the environment.

Critically, though, for the state of our environment, where we have hit “peak cow”, there’s going to be a review into how we have the automatic entry and the automatic pick-ups. It’s critically important that we can have these conversations nationally.

This is, I guess, the sad irony. National is simply being oppositional for oppositional sake. They could get involved. They could have a say. They could partake in it. I know the Minister wants to have all conversations represented. Instead, what we’re seeing is opposition for opposition’s sake.

We think this review is reasonable. We think the time frame of 12 months is eminently sensible. What we want to see is a sensible, long-term, pragmatic solution that everybody can get behind. What we’ve seen for too long is things swept under the carpet, the very serious problems, solutions rammed through without getting those buy-ins. Let’s get around the table together. Let’s find those solutions together. Let’s find those long-term, cross-party solutions, which mean everyone can have certainty. I guess our vision—right—is that we can have sustainable farming industry for the long term, where there is community buy-in and community support, there is a social licence to operate and where our rivers are swimmable once again. That’s the vision for New Zealand.

I look forward to making further contributions in this debate, but it’s eminently reasonable and eminently sensible. That’s why the Green Party is supporting it.

First of all, can I comment on the speech from the Green member Gareth Hughes. There is no need for urgency for this legislation. I am one of those who remember the late Rod Donald calling urgency “constitutionally outrageous” whenever the then National Government attempted to use it. I think there’s a word beginning with “h” and ending with “y”, and I wouldn’t dare use it. I wouldn’t dare use it.

💬 Hon David Bennett: They’re hypocrites—that’s all they are.

No, I said I wouldn’t use it.

I know why we’re here in urgency, and it’s because this bill is not a good look for the Hon Damien O’Connor. Can you imagine how dreadful he feels today, after spending nine long years in Opposition, as he finally achieves his lifelong ambition to be the Minister of Agriculture and he comes forward with all these wonderful ideas about what he’s going to do for the primary sector of New Zealand, and his first brainwave is a two-page piece of legislation—approximately 60 words.

I say to the Hon Damien O’Connor that it is a disgrace to have spent nine long years in Opposition and this is the very best that the Hon Damien O’Connor can do. If he had been organised and if he had read the briefing to incoming Ministers in October when he became the Minister, he would know that on the agenda was this issue to deal with, and to deal with it before 31 May. But we’ve had nine months of a Labour - New Zealand First Government—

💬 Hon Member: Nine months?

Sorry, five months. It seems like longer, I do agree. It seems like a hell of a long time, but it’s five months during which we’ve sat in this House, day after day after day, passing legislation promoted by the former National-led Government because the Damien O’Connors of this Cabinet haven’t been prepared to get cracking and get their own legislation before this House.

So here we are, in urgency, passing a two-page bill—a two-page bill that, if it had been introduced at the right time, could have gone to a select committee. We could have let those 4,000 South Island dairy farmers have a say and could have let those six or eight processors in the South Island have a say on this legislation. But, no, the arrogance of this Government has started early, where they know best. They’ll rush it through in urgency because they don’t want the record of the Hon Damien O’Connor examined with any scrutiny at all, because this is a disgrace.

💬 Hon Willie Jackson: No, it’s good.

This—well, the Hon Willie Jackson says it’s good, just because the Hon Willie Jackson couldn’t come up with anything better himself. That’s the reason he says it’s good. I think it’s a disgrace. I think it’s a disgrace that the primary industry of New Zealand waits so long to see the foresight and the vision that the Hon Damien O’Connor has for his industry, and all it is is 50 or 60 words.

I do want to talk about Fonterra, because I’m one of those that thinks Fonterra is a great company. It’s a huge company. It’s New Zealand’s biggest company, and I say to Willie Jackson—I say to Willie Jackson—that his standard of living and the standard of living of every constituent here in New Zealand depends on how this company performs.

I noted the folklore of Mark Patterson in his contribution, when he said the Labour Government brought Fonterra together in 2001. Well, that short-changes the history of the formation of Fonterra, because I was involved. I was an Associate Minister at the time. The debate that led into the formation of Fonterra was very long-winded. It took a long time and a lot of effort, led by those wonderful people like the Hon Sir William Birch, who put his intellectual grunt into putting something together that did allow a massive amalgamation and potential competition industries to the dairy industry of New Zealand. Yes, there was a change of Government, and finally the legislation was passed in 2001, but don’t ever argue—don’t ever argue—that it was solely the work of the then Labour Government, because it was not.

Now the other thing I’d say about the formation of Fonterra is—acknowledging that it’s a great company—it has not lived up to the expectations that were raised at the time we agreed to its formation. It was going to perform substantially better than it has, and I look forward to the day when it does. But I can say to members of this House that as I’ve had the privilege of travelling overseas and of talking to farmers elsewhere in the world and talking to trade representatives elsewhere in world, this is a model that I think is almost held in jealousy by many other dairy farmers around the world. It is a good model, but competition is essential to make sure that Fonterra works well. When you sit in overseas fora—and, often, the language may not be my language—you’ll hear the word “Fonterra” offered in speeches because it is respected. It is respected as an industry leader throughout the world, but that doesn’t mean to say that we can’t do better.

But I’m concerned that we’re seeing this piece of legislation gutted by the Hon Damien O’Connor because he hasn’t had the resources. He hasn’t, possibly, had the intellectual grunt to think about the real issues that face and challenge this industry. So he has gutted out the difficult issues and left this, very simplistically, just around the issue of the South Island quota.

I understand that of the milk now collected in the South Island, probably about 24 percent is processed by other than Fonterra. That’s competition working. We shouldn’t be too worried about that. But what I’d say to the Hon Damien O’Connor is that for him to announce tonight in the House that we’re going to have a review, and then, when we ask about the terms of reference, we’re told by the Hon Meka Whaitiri that they will be comprehensive and wide ranging, it should put fear into every dairy farmer in New Zealand listening to this debate tonight. When, I ask the Hon Damien O’Connor, will you tell us those terms of reference?

When are we going to be talking about the terms of reference for this comprehensive review, which could dramatically affect the ability to operate of not only Fonterra but great companies like Synlait, established not far from where I live in Canterbury. What a remarkable success story that has been. I take my hat off to Dr John Penno for the work he’s done previously as the general manager, and he is perhaps soon to be the chair of that company. It’s a remarkable success story, the way that company was able to set up and operate in Dunsandel. It managed to get under way only because of the way National and Labour put the Dairy Industry Restructuring Act together in the first place.

Fonterra should not be scared of competition. Fonterra should relish the opportunity to have competition in the dairy industry because competition will also make them sharper. But I still object to the issue of urgency. I see no reason at all why we have to be here rushing this through over the next 24 hours and not letting farmers have a say. There are possibly two or three reasons, the main one being that the Hon Damien O’Connor didn’t read his briefing for incoming Ministers and notice the risk that was ahead of him. He sat around for five months and didn’t bring it to the Cabinet committee responsible for legislation, and now, at the last minute, we’re doing a rush to fix up a mistake.

So I say to the Hon Damien O’Connor, I know a lot of people who may not be supporters of the Labour Party and who may not be enthralled that there’s now no longer a National Government, but they actually think that this guy Damien O’Connor, the dairy farmer from the West Coast, is not a bad guy. But they’re looking for him to be inspirational—inspirational—Damien O’Connor, for our industry. We want you to come forward with some real gravitas—gravitas. Well, he should know the meaning of the word. He went through a good school, this boy.

It is time to really tackle the issues that matter, and I say to him, as he puts those terms of reference together for the comprehensive review that’s going to occur: beware, Hon Damien O’Connor, that you don’t get led by the nose like a bull at a good A and P show by the Greens and New Zealand First, because neither of those two parties have shown any empathy at all for New Zealand farming. They’ve shown no empathy at all for the New Zealand dairy industry—the industry that leads the exports of this country. I thank you, Madam Deputy Speaker.

The next call is a split call—five minutes each, and a bell at one minute.

Madam Deputy Speaker, can I assure those on the opposite benches who are doubting the bona fides of the Minister around his dairy-farming background that I have milked in his father’s cowshed. He has milked in my father’s cowshed, as we were young men growing up together, and has learnt the niceties of milking in a West Coast spring. So you can be reassured he has.

On the question of having a choice of pick up, I would have chosen a provider who stopped picking up just before the May holidays started and started picking up just after the August holidays, to avoid having to milk through those holidays. However, we didn’t have that choice. Perhaps, fortunately, as a result of this legislation, that choice may remain.

But look, can I just say, listening to the Opposition, the scaremongering that’s going on, particularly from the member Mr Bennett—that is the same scaremongering that we saw in Morrinsville prior to the election, where there was an attempt to turn country against city, to try and leverage, for some cheap political points, to have some ignoramus stand up in Morrinsville and actually backfire badly.

There is some very good work going on in farming—some very good work around the ecology and around the environment. However, the ability for us to see that work is being clouded by this absolutely ridiculous attempt to leverage against city and farm. So can I say, have a look at this. Look at the legislation for what it is. It is going to be a review that is going to enable and ensure that a few facts come into this, not the stupid emotion that was leveraged and fortunately didn’t work in the last election.

This is an absolutely necessary piece of legislation. I know of farmers in the South Island now who are extremely afraid that they are not going to get their milk picked up because they are on the extremities of the current milking, and those people are extremely worried. This will give an opportunity for an industry that is changing very quickly, as the member very well knows, to ensure they have some certainty, at least for the next 12 months. Thank you.

Sitting suspended from 6 p.m. to 7.30 p.m.

Madam Assistant Speaker, thank you for the invitation to speak again on this bill. Yes, just as I finished, I was advising my colleagues across the House against their policy of dividing city and country in the manner in which they have been doing—for very cheap political gains, which, fortunately, didn’t work for them—and to cease and desist their practice of trying to score cheap political points by continuing on this urban - rural divide, which will not work.

Just, finally, I speak on the matter of the advantage of having competition in the dairy industry. I think every New Zealander who goes to Europe finds it very attractive to go around the small villages of the Alps and other parts of Europe and see each village having its own little cheese, its own dairy products. That’s the sort of industry that we can develop when we get good competition into the sector. So I commend this bill to the House.

Thank you, Madam Assistant Speaker. It’s a pleasure to be taking a call on the first reading of the Dairy Industry Restructuring Amendment Bill (No 2). But before I do, I’d just like to join some of my other colleagues this evening and pay tribute to our leader, Bill English, who has announced he’s stepping down. Bill has made a remarkable contribution to our Parliament and to our country, and I thank him very much.

Canterbury accounts for around one-fifth of our nation’s dairy herd, and I’m very proud to come from the electorate of Rangitata and represent them in this Parliament. It is one of the premier dairy regions of New Zealand, and they contribute a huge amount to our local economy, both in mid-Canterbury and in South Canterbury.

In South Canterbury, in particular, we have the Fonterra Clandeboye plant, which will be directly affected by this bill by being a Fonterra asset. They employ about 1,000 staff in my electorate, and have just increased their staffing by around 100 with a huge expansion of their mozzarella plant. It’s exactly what some other speakers have been talking about tonight in terms of that value-add. It’s taking that raw product and turning it into a highly valuable and highly marketable product internationally. It’s the third expansion in just a few short years, and it means that Fonterra mozzarella now accounts for just less than half, I think, of the mozzarella on pizzas in China. I am a reasonably regular visitor to their plant. Unfortunately, as members can tell, I’m also a relatively regular consumer of their product.

I do want to turn directly to the bill, though, and, I guess, more directly, to what’s not in the bill. The Minister has made reference several times to a review, as have other members, which is going to kick this, or any meaningful reform, down the road by around 12 months.

The other aspect that’s not in this bill—and that will probably come up because the Minister, I think, himself has referred to the need for environmental aspects to be included in that review—is what happened during the election campaign just last year, when you had David Parker, then just a humble Labour MP, come to my electorate to discuss water issues, and, particularly, water issues as they pertained to the dairy industry. So he came along to a meeting in Ashburton, which was attended by a large number of dairy farmers. I, unfortunately, didn’t go to that meeting, but I’ve heard a huge number of reports of how he behaved at that meeting. He was pressed on what value or what price the water tax that Labour were proposing would be. At the time he wasn’t willing to give a figure, but he responded by saying, “Don’t push me or I’ll double it.” Unfortunately, that is something that this review that the Minister is kicking off will probably cover, by covering the environmental aspects and, more specifically, issues around water. That’s what will be included, unfortunately, if Labour, and particularly the Greens, have their way.

I want to speak more broadly, I guess, on the environment, and particularly as it pertains to this bill and the review that will be kicked off by this bill. I don’t think members opposite give farmers nearly enough credit, and my colleague Nathan Guy touched on this before. Actually, farmers have done a huge amount over the last few years in improving the environment around them by things like riparian planting, by a huge amount of fencing of waterways, and then also, backed by the Government, through things like the National Policy Statement on Freshwater Management and Plan Change 5 in Canterbury—that’s put on strict nutrient limits, and I hope the Government continues to work with farmers on that.

I want to, before I end, just cover off a comment that was made by Mark Patterson, from New Zealand First, earlier. He mentioned that 12 months in terms of the review is the blink of an eye. Well, actually, it’s 12 months that doesn’t need to happen, because we did that review—we’ve been out and consulted with farmers and the industry on what needs to happen with this legislation. So it staggers me that the Minister feels the need to go off and start another 12-month process when, as my colleagues have said, all he needs to do is go back and read those submissions and talk to those same people, and chances are he’ll come to the same position that we did.

So I’m genuinely surprised that Mark Patterson, who I understand is a dairy farmer, is defending that position. Certainly, what I hear down my way in Rangitata is that people want to know what’s going to happen. They want certainty, and that’s what, if we were in Government, we would deliver. Thank you, Madam Assistant Speaker.

Thank you for the opportunity to take a call on the Dairy Industry Restructuring Amendment Bill (No 2). As the Hon Nathan Guy alluded to earlier, this is a very important issue, and, as the previous speaker, Andrew Falloon, mentioned, Rangitata is one of the premier dairying areas in New Zealand, and that is why this bill is so important to dairy farmers in that region, to provide certainty going forward. It is intended to amend the Dairy Industry Restructuring Act 2001 to prevent efficiency and contestability provisions from expiring in the South Island in May 2018.

The Dairy Industry Restructuring Act 2001 originated to allow for the creation of Fonterra. In its infancy at the time, Fonterra collected approximately 96 percent of New Zealand’s milk production. There was concern, and rightly so, around a cooperative having such a dominant market position. It could potentially lock in its suppliers by declining applications for new supply or by paying higher milk prices to existing suppliers. As a way to address these concerns, the Dairy Industry Restructuring Act placed regulatory requirements on Fonterra through Subparts 5 and 5A of Part 2. Subpart 5 of Part 2 of the Dairy Industry Restructuring Act ensures that the activities of Fonterra are regulated, and thus promotes the efficient operation of dairy markets in New Zealand. Subpart 5A provides for the monitoring of Fonterra’s Farmgate Milk Price, and this is a way of managing Fonterra’s dominant position within dairy markets, until more competitors were on the scene.

Because Fonterra has now reduced their market share in the South Island, the automatic expiry provisions in the Dairy Industry Restructuring Act were triggered in 2015. When this triggered, it also meant that there was a review of the state of competition in dairy markets done by the Commerce Commission. The commerce report was completed in March of 2016, and the findings of the review by the Commerce Commission were that there was simply not enough, or not sufficient, competition within the industry to let the Dairy Industry Restructuring Act expire in the South Island.

This Government also believes that the market conditions have not changed significantly enough since the Commerce Commission’s review, and, therefore, that expiry be prevented at this time. This bill moves to remove or repeal the provisions that provide for the expiry of Subparts 5 and 5A of Part 2.

As mentioned earlier, the default expiry of efficiency and contestability provisions was triggered, and that was because of the fact that 22 percent of milk solids were collected by independent processors in the South Island in the 2014-15 season. Therefore, based on the findings of the Commerce Commission, that there is insufficient competition to allow expiry provision regulations to be enacted and that the markets are currently more efficient with the regulations in place, an amendment to the Dairy Industry Restructuring Act is certainly required. This is the bill we have before us in the House today, in the name of the Hon Damien O’Connor, and I commend this bill to the House.

Thank you, Madam Assistant Speaker. Look, this is interesting. We are discussing the Dairy Industry Restructuring Amendment Bill (No 2), and, as we’ve heard already, this bill—a previous version, a much more robust and detailed version of this bill—was put forward by the previous Government. However, it wasn’t debated, due to the fine level of other projects that were being progressed through the Government at that time. So what we’ve seen now, though, is a total revision of that bill. It’s been pulled to pieces and we’ve just had a couple of little bits chucked forward as a suggestion of something we might like to tweak, with actually no real detail in behind it.

It’s very light in substance. Right—we’re repealing sections 147 to 150, removing Subparts 5 and 5A. Great—and then what? What are we replacing it with? That’s what we don’t have the detail on here. We have no idea what’s coming next. Yes, we hit the 20 percent target in the South Island in the 2014-15 season. Great—triggered the review. The Commerce Commission stepped in and did a fantastic report on that. We consulted widely across the country following that. Submissions were received—105 of them. We’ve got good feedback around the proposals that were part of the former bill that was announced by the previous Minister, the Hon Nathan Guy. And now we’re hearing we need to go back to the drawing board and have a full review on it all. What’s that going to achieve? It’s wasting time.

Eventually we were given a time frame, after it being asked for many times from this side of the House. The Minister announced that we would have a review completed this calendar year, 2018. As we’ve heard a few more speeches from the Government benches, that’s extended to 12 months from now, and then it’s extended to 31 March. So over the course of this evening’s debate, we’ve already had a 30 percent blowout in the time frame they’re proposing for this review that hasn’t yet commenced. And we still don’t know the terms of reference of this bill. When are we going to see the detail? All we’re hearing is smoke and mirrors. The dairy sector deserves better. It’s a major part of our economy; we need to understand what’s happening in that sector.

I am proud to represent the Waikato electorate, the dairy heartland of New Zealand. We are very much invested in this piece of legislation. We need to know what’s happening. It’s not just the farmers, of course; it’s the processors, as well. Fonterra, our largest company—when are they going to be given some clarity around what this looks like and what the future may hold for them? We still have no idea, no answers, no terms of reference, and all we’re seeing is ducking and diving and failure to answer.

So what’s going to be in this review? Is it comparing the farm gate to the factory gate, getting those markets established, as was previously suggested? Or are we delving into the environmental part, going totally away from dairying? We’ve already heard about that a bit from our Green Party representative, Gareth Hughes, earlier, who, interestingly, noted through most of his speech that we just need to improve water quality, and if only farmers would fix it we’d be all right. There was no mention in there about anyone else having any influence on the water quality in this country. Well, I can assure you that there is so much impact on our water quality from all contributors. We all have a part to play in this. Agriculture is part of that, and they’ve done a fantastic job over many years now improving their farming practices. We’ve seen a significant investment in improved irrigation systems, fencing off of waterways—over 20,000 kilometres’ worth. We’re seeing a massive investment here. Let’s see an equal investment in the urban centres if we really want to have that green focus on water quality.

But what’s been interesting for me is that coming from the Government benches we’ve had a range of different perspectives, and whilst we had a reasonably informed and at least partly agriculturally based initial speech, I’ve struggled to see much credibility from an agricultural perspective represented in the other speeches from the Government benches. We heard Mark Patterson talking about Fonterra’s formation, when it was producing 1 billion milk solids, and how now it’s risen to 1.3 billion, and that’s great. Well, actually, we’re now at 1.8 billion milk solids, well ahead of that. Out of touch—that’s what we’re hearing from the Government benches. They don’t know what’s happening. And we saw that during the campaign last year, as well. They’re not connecting with rural New Zealand. The Prime Minister said she wanted to be in touch with all 10,000 farmers in New Zealand; there’s over 50,000 farmers in New Zealand. These are some of the things that demonstrate to rural New Zealand that there is a real disconnect from the Government. They don’t understand our sector and haven’t given us confidence that they have our best interests at heart.

We’re seeing a disorganised approach from a Government that’s uninformed, and we’re seeing no unity within their parties. Look at water storage, for example. There’s so much potential for water storage projects in New Zealand, and we’re hearing that’s been pulled apart. One document allegedly says there’s going to be no more. Another says they’re winding back, but then we have the Minister for Regional Economic Development, with his billion-dollar fund, who says he will be funding localised storage projects, and those localised storage projects are most of the water projects that are currently under consideration. This is another example of where the Government’s not supporting the primary sectors within New Zealand.

This bill we’re debating tonight is in exactly the same vein. We don’t know what we’re up against here. We still haven’t heard what sorts of things are going to be included, and that’s the biggest risk for us. The value of the sector is so important to New Zealand we can’t afford to have this uncertainty. We’re already seeing it in the business space. Business confidence has dropped significantly since the change in Government, and now we’re hearing from one of the previous speakers, Greg O’Connor, that it’s our fault, and we’re promoting a growing divide between rural and urban New Zealand. That’s ridiculous—absolutely outrageous—

💬 Greg O’Connor: Morrinsville.

—and Morrinsville is exactly the example of the divide that the Labour Party has created through that campaign. They’ve manufactured spin. They’ve created all sorts of ridiculous proposals about taxes that are going to come in—they will do this to agriculture, they will do that to agriculture. Where’s the actual effort to incorporate rural New Zealand into a progressive framework, from that Government? We don’t see it at all. It’s extremely disappointing.

Morrinsville is a town in my electorate. I’m proud to have that town, and they are constantly concerned around how their interests are being represented. They just don’t know what it looks like, and what we’re hearing now is that a major review is going to come. After this flimsy piece of legislation is enacted, we’re going to have a thorough review. That could take 12 months. Maybe it’ll be done by this year, maybe it’ll be some time in March, or maybe it’ll be even longer—we just don’t know. And what’s going to be in that? We’ve heard nothing around the sorts of things that will be covered. We heard earlier that the Hon Shane Jones actually wants this review to take even longer. So what’s it going to be? When are we going to have some clarity? Why do we have to wait? Why can’t our primary sector get on with confidence and do what they do well?

💬 Simeon Brown: Because they don’t trust them.

I suspect that may well be right. There’s a lack of trust from the Government for what our primary sector does, and I would really encourage them to engage more widely with the sector. I would be more than happy to host them, in Morrinsville perhaps, or at Matamata—any of our strong rural Waikato areas, where farming is so well represented. There you will be able to see—you’ll get an insight into what happens on a farm and how it works, what it means to be a part of the primary sector. It’s different, and I would really encourage you to take up that opportunity.

We need to be internationally competitive, and whilst I acknowledge there are some aspects within this bill that will look to amend the Dairy Industry Restructuring Act, part of that requires us to remain internationally competitive, and, of course, we’re focused on doing that. We’re a major trade nation. Export is a massive part of what we do as New Zealanders. We’ve got to have clarity about this, and, at this stage, we have none. I would encourage the Minister to share his terms of reference proposed under his review with us, to outline what it’s going to take, who he’s going to be consulting with, who’s going to be doing the work—because, actually, we heard earlier it was going to be Ministry for Primary Industries doing this. But hang on. We’ve also been told there is not going to be a Ministry for Primary Industries shortly. It’s going to be smashed apart into all these different ministries. So who is going to be doing the work? They’re going to be so internally focused that it won’t happen.

I’d encourage them to share with us what’s happening, and how the rural sector can get on with confidence so that we can have clarity. Thank you.

Well, I’ve had the absolute delight of sitting here for the last, I don’t know, hour and a half, two hours, listening to my colleagues on the Opposition benches espousing and waxing lyrical about how they have been the champions for the dairy industry and they’re out there for rural communities. Well, you know, the funny thing is—and I commend the member Mr van de Molen, and the Hon, the former Hon—the Hon?—David Bennett, who are both from the Waikato.

Now, when I have a look at this, the Dairy Industry Restructuring Amendment Bill (No 2)—blah, blah, blah, blah, blah—it is about making amendments for the dairy industry to provide certainty for the South Island. Now, I know that the poor little $750 million industry down there in the South Island merely pales in comparison to the $2.2 billion contribution that the Waikato dairy industry contributes to GDP, but I can see how these little guys down the South Island got missed off the little agenda. So we can sit here and wax lyrical.

Then we get to hear the Hon David Bennett talk about how there’s all these urban liberals on this side of the House who wouldn’t have a clue about what’s going on out there in the dairy sector. Well, I had the absolute pleasure of attending the Te Puke A & P show in the weekend, and it was fantastic to see members from that side of the House in their brand new, sparkling Red Bands with their brand new, sparkling blue jackets and their brand new—it looked fantastic. But the reality is that those gumboots were about as close as most of those members have been to touching a spade, turning over a piece of sod, because all they’ve done for the last nine years is show up, cut pretty ribbons, and really have become absolutely disconnected from our dairy industries, which is why these plethora of farmers—actually, some of your 50,000 that you’re talking about—are coming back to this side of the House because we actually go in to bat for the little guys, the farmers who’re actually struggling all over the country.

So look, you guys talked about, as well, Fonterra—the most successful co-operative in the world. And then we heard from the Hon Mr Carter that it wasn’t the Labour Party that set it up, it was National. I don’t know if my history’s wrong, but that occurred under Labour. That occurred under Labour. It absolutely did—under Labour, 2001. You know it; we know it. We have been consistently, for a very long time, swinging a pretty big bat to make sure that the largest export industry from our country is well and truly protected.

Now, all this bill does is it fixes up a mess that the former Government couldn’t deal with. Now, you guys had, for how long—how long did you have the former Dairy Industry Restructuring Amendment (DIRA) Bill sitting on the Order Paper and not get it into the select committee? How long? Months and months and months and months. You didn’t care that the expiration for these guys—it was triggered in 2015. The time frame expires in May of this year. You knew that that was an impending time frame for these guys, but you also knew that the bill that you were proposing was so challenging for the industry that you were too scared to put it up.

ASSISTANT SPEAKER (Poto Williams): Order! Don’t bring me into the debate.

Sorry, Madam Assistant Speaker—my colleagues from the other side of the House.

The independent dairy consultants that reviewed your bill at that time of the year—they said that they were absolutely terrified by the proposition of that former DIRA bill. So, to the Hon Damien O’Connor, who has had to cut through and tidy up the mess that was left by the former Government, I absolutely commend this bill to the House.

Bill read a first time.

Second Reading