Dairy Industry Restructuring Amendment Bill (No 2)

Thank you, Mr Chair, and it’s good to see Minister Chris Hipkins in the chair as well. I hope that he will be able to answer a very simple question that I put to the Minister last night. It’s not an agricultural question; it is a policy question, which I think that as a suitably qualified member of the Labour Cabinet he will be able to give us some direction upon. It is not something that is particular to the Minister of Agriculture but rather something that, being of a policy nature, he would be able to determine for us.

That is, in the Dairy Restructuring Amendment Bill (No 2), the question asked is around why they took out the clause around open entry and exit. Now, for the Minister’s awareness, that clause was in the original bill that the National Party had presented to the House. Basically, it gave the ability to Fonterra to say no to new conversions that they would have to provide capability in their industrial manufacturing sites to process. So, effectively, they have to provide the infrastructure in stainless steel to enable the production of those milk solids into products. Generally, that would go into milk powders, which are not value-added products, because it is spare capacity that they would not have that major investment in.

Now, the Minister made it very clear that the emphasis that the Government is taking in this bill is to direct the industry into a more value-added approach, and nobody has any problem with that. In fact, Fonterra and farmers are very much in that zone. The question is: why then do they take out a clause that encourages now—because that open entry and exit provision is removed, it means that Fonterra has to provide a lot more commodity-based infrastructure, when, if they’d left that clause in, it would achieve their purpose of more value-add for the industry.

So it’s a very simple policy issue that I think the Minister in the chair would be able to give us direction on. He’s a very astute Minister that understands a lot of the policies behind legislation like this, so it’s not something that we needed the actual Minister to be there to determine. So I’d like to have a reply from him as to why that clause was taken out, because it seems contrary to the intention that the Labour Government has made clear in its speeches in this House last night. It just doesn’t make sense when it’s what the industry wanted, it’s what farmers wanted, and it’s what the general public want—to see more value-add—and yet we’re taking out the one clause that would have encouraged that value-add, and now we’re encouraging more of the same, in essence, of a lot of powder production.

The second issue that I didn’t get a chance to talk about in my first contribution in the committee stage yesterday was in relation to regulated milk. This is the portion of milk that Fonterra has to supply to new start-up companies. When Fonterra was formed, the intention was that, of course, there would be that supply to let those companies start, and they get, basically, milk at cost price. Fonterra delivers it at cost price to these companies—

💬 Rt Hon David Carter: The old Fonterra argument.

No, no; that’s how it works, Mr Carter.

So, effectively, these companies get a start with not having to do their own collection at that point. Now, what was looked at—from Fonterra’s point of view, they see that as becoming difficult to maintain because they’re giving a very big start to those other companies, and so the submission, and what was agreed upon, was to reduce that regulated large-scale provision of milk.

Now, that makes a lot of sense when you consider the argument that New Zealand First has made consistently in the public around the internationalisation of the dairy-processing industry. New Zealand First has been very careful on a number of occasions to make public statements saying that they don’t believe New Zealand - regulated milk should go to international processors.

If we look at our market and the production of milk, even in the South Island there’s a very high proportion that has an international component—for example, Synlait; Bright Dairy and Food Co. Ltd, a Chinese company, has 39 percent; Open Country Dairy Ltd has a shareholding that’s overseas based. If you look at some of the other companies, like Yashili New Zealand Dairy and Oceania Dairy Ltd, those companies also very much have an overseas presence in what they own and how they are owned. They, effectively, are getting subsidised milk from New Zealand farmers and the New Zealand cooperative for international companies. Rightly, as you would expect, New Zealand First found that very egregious, and they have taken it upon themselves to say, in many public statements, how bad that is.

I just want to quote the Rt Hon Winston Peters in the Waikato Times on 6 March 2017.

💬 Rt Hon David Carter: You’re getting desperate.

I am brave. He said here that “New Zealand First will not be so craven … While it is positive Fonterra will finally get control of its burgeoning milk pool in 2018/19 with discretion over taking milk from new dairy conversions, we would ensure that ‘regulated milk’ only goes to New Zealand-owned processors.” This is what New Zealand First has said in their policy, and what they have said pre-election: “We will ensure that regulated milk only goes to New Zealand - owned processors.”

Now, the regulated milk provisions in the bill that was put forward by the previous Minister have been removed. One cannot reconcile the fact that the Labour - New Zealand First coalition has removed the clauses that would limit regulated milk, and, in effect, what New Zealand First is actually doing by voting for this bill in the form it is in now, is increasing the amount of milk that now goes to international companies and internationally owned companies, because they’re not limiting that amount of regulated milk. That is very much contrary to the perception of New Zealand First. It’s contrary to the approach that New Zealand First has always taken.

There’s another comment from the Rt Hon Winston Peters on 16 June 2016, where he said, “If you look at this Act, it only benefits the foreign processors.” So instead of having the sunset clauses that would have applied in the legislation—that’s the 80 percent threshold—and reducing it to 75 percent and keeping the legislation going, the Rt Hon Winston Peters, his comment was that this only benefits foreign-produced processors.

I ask the New Zealand First Party to actually explain, through the Minister—because the Minister will be acting on behalf of both coalition partners—why, before this bill was actually introduced to this House yesterday, they were so strident in their opposition to foreign processors, and yet the very bill they bring in means that foreign processors have more access to milk. Why did they take away the provision that would have limited foreign processors’ access to milk and replace it with nothing, but encourage and mean that foreign processors have that access? It just does not make sense, from a New Zealand First point of view, that they would do that.

So there are two things that I would like the Minister to explain. The first is a policy rationale: why this Government has taken out the open entry and exit provisions that would have meant that Fonterra would have been able to say no to new conversions, and therefore would have been able to invest more money in value-add, rather than just have to have more stainless steel there—why that was taken out. Secondly, why the other provision on regulated milk was taken out, which only has the effect of encouraging and increasing the milk supply at a regulated price to foreign companies.

Those two things can still be left in this legislation and still enable the Labour Party to do their wider review. That doesn’t preclude them doing that. I just can’t understand why they’ve taken them out, from a policy point of view, because it doesn’t match with the intention that the Labour Party said yesterday, of wanting to have more value-add, and it doesn’t match with the intention that the New Zealand First Party has said, of reducing the regulated milk that would go to international companies. So I’d really appreciate it if the Minister could answer those two questions. Thank you.

For a short part of those two contributions to the debate, I found myself in the very unusual position of agreeing with David Bennett. I don’t recall that happening before, actually, in the history of this Parliament. But I am recovering a little bit from that position, and I guess the reason for that is that this bill was, in part, introduced by the honourable member’s party. It was introduced in the bad old days, when we had a National-led Government. It didn’t proceed to a select committee.

The incoming Government looked at it and said there are some provisions in this legislation that we want to see go ahead, but the new Minister of Agriculture, the Hon Damien O’Connor, who has had a lot more experience with the dairy industry than the member who just made a contribution, although I acknowledge his experience in the dairy industry—

💬 Hon Nathan Guy: Try and be nice. Try and be nice, Ruth, if you can.

You should address people by their proper names, the Hon Nathan Guy. Standing Orders of the House of Representatives—page a day. The Hon Damien O’Connor, the current Minister, who has a lot of experience in the dairy industry, said there are some provisions in this legislation that if they don’t progress through to the third reading and be passed, will mean that provisions that everyone in the House seems to agree on will expire. So that’s why I’m pleased that we’ve seen, despite the debate that the National Party keeps contributing to, that there’s a lot of agreement that those provisions shouldn’t expire.

There is some debate about that, and that’s one of the downsides of not having gone through the select committee process, but I want to raise one that’s been mentioned to me, because I know it’s been considered by the Minister, and in his view the positives from this legislation outweighed the negatives. In fact, in his view taking away the provisions that I’m just going to refer to would not address the problem, and that is this: there are some units that are dairy farms that would in most situations be considered not viable.

Most good dairy farmers would say, “That’s not a place that you should have a dairy farm.” It might cost too much to irrigate, it might cost too much to fertilise, or it might be too far away from the pick-up system, but under the dairy industry legislation, of course, Fonterra have a requirement to collect that milk. So the position that’s been put to me is that we should consider that as a Parliament, and I think we should, in the way that often these issues are discussed—in a more bipartisan way than many other pieces of legislation. If we do have some parts of our country where we actually don’t think that dairy farming is the best use of that land, but some people have started a dairy farm, and then Fonterra are required to pick up the milk, is that good? Do we want to see that continue?

I think that’s a legitimate debate to have, and, as I say, because we are progressing this bill through all stages so that the provisions we all agree on don’t expire, I think that as the wider review is done—the Minister’s given us a clear undertaking that the wider review of the dairy industry is going to take place—I welcome the contribution from our National Party members. The Hon David Bennett, who I’ve already acknowledged, has got experience in the dairy industry, and the Rt Hon David Carter—a former Minister—has got a lot of experience in this House, as well as in the farming community. I would welcome their contribution to that particular point: is this a problem? Is it an issue that this Parliament should consider? Should we just leave it entirely to the market, in which case would we take away the requirement for Fonterra? I’m not talking about for existing farms, of course, because you couldn’t retrospectively change the rules, but in my view the incentives are wrong. We are providing incentives for dairy farming in parts of the country that without that Fonterra requirement would probably not run a dairy farm.

So I’m really pleased with the progress that this bill is making. It hasn’t been around the Parliament that long—it was introduced only last year by the National Government, and didn’t ever make it to a select committee. As I said, some provisions that were in it originally have been taken out, but to make sure that the parts that this Parliament wants to keep don’t expire, this very small bill is going to progress through all stages, provided that it gets the votes that it needs. I’ve enjoyed listening to the debate yesterday and today. I hope that we have more contributions to it, and that perhaps, more than just biffing bricks at each other, we talk about, and contribute to, the actual policies that drove the introduction of this legislation in the first place, under a National-led Government, and which have led us to this situation as we currently are in.

It seems to me that the more we are able to openly discuss policies, rather than just take political point-scoring opportunities, the better off our legislation will be. We can consider the views and perspectives of other members of Parliament, particularly those who have experience and expertise in this area, and make what might be a medium-quality bill even better, or, as I have seen in years gone past, a bad bill better. That’s the responsibility of a member of Parliament. I think it’s one that we take pretty seriously. I know that the Hon Nathan Guy has put in one amendment to this. I’ve had only a brief read of it. I don’t think it will be getting the support of our party at this stage, but—

💬 Hon Nathan Guy: I’ve pulled it.

Oh, the honourable member’s pulled it? Thank you. I didn’t realise that. I wasn’t aware of that fact. I just saw it on the Table about half an hour ago. So we haven’t, then, had any amendments to this legislation. Perhaps it’s not big enough to amend—there’s not much to it! But, certainly, I would welcome the opportunity to give consideration to amendments from whatever party in Parliament, to make sure that as we progress this, particularly without select committee consideration, we make it as good as we possibly can. Thank you, Mr Chairman.

Thanks very much for an opportunity to make a call on what is a very important bill even though it’s a very small bill. What it does is just a band-aid on an expiry date for South Island processors, but the substantive point that I want to make is it’s kind of interesting that the Government chose to put the House in urgency for this bill yesterday, and then took it out of urgency last night, and now we’re back debating it not in urgency. So it is kind of bizarre, and having the Leader of the House in the chair this afternoon, it would be quite good to hear from him about his strategy, because what I found rather ironic is there was no discussion with Opposition parties—that I’m aware of, and I’ve canvassed it with my colleagues last night—from the Minister about putting the House into urgency for what is really just a small, technical date change. I find it really hard to fathom that the House was thrown into urgency yesterday to debate a very technical change on this bill, and yet here we are this afternoon, now not in urgency.

Mr Chair, while you’re referring me to refer back to the bill, I’m happy to do that, but here we are today, now that this bill isn’t so urgent as it was yesterday. I think, had the Government not been so arrogant as to presume that we would just tick this through under urgency yesterday, without making the full speeches that we made—and they were full of content, not of rhetoric, because we know how important this bill is to the primary sector and, indeed, to the dairy industry. So I would appreciate hearing from Mr Hipkins this afternoon as to why this bill was urgent under all stages yesterday, and now suddenly it’s not so urgent.

What I would also want to hear from the Minister is why there couldn’t have been a truncated select committee period. You would think, for a bill that is significant to the South Island—there’s probably 4,000 suppliers in the South Island; certainly, I would think, there’s 50,000 jobs that are created in the dairy industry in New Zealand, so let’s presume there’s probably 20,000-odd in the South Island—it would warrant the select committee having a look at it. Yes, Mr Hipkins will no doubt get up and say, “Oh, it’s just a technical one. It’s a date change.”, but there’re a whole lot of things that could have been included in this bill that we are debating in the committee stage this afternoon that aren’t, and those things are going to be swept off to a review.

We spent quite a bit of time yesterday referring to the review. We finally heard from Minister O’Connor that the review is going to take 12 months, but we didn’t hear whether the review is going to be run by the Ministry for Primary Industries (MPI), the Ministry of Business, Innovation, and Employment (MBIE), or Treasury or whether there is going to be any independence. He actually offered up to me yesterday—not you, Mr Chair, but Minister O’Connor—that we could choose to nominate people for a sort of panel or committee. Then he also went on to say that it would have been great if he could have brought the terms of reference to the debate yesterday, because that would have helped the fulsome nature of debating this part that we are now debating in the committee, but he couldn’t do that, because anyone with any dairy industry experience within MPI was focused on M. bovis cattle disease. I find that a little bit hard to fathom, when there are about 2,500 officials that work in the Ministry for Primary Industries.

So, concluding my contribution this afternoon, we support this technical change, in the National Party, but it would have been good to have had the discussion prior to leading up to urgency yesterday, because we saw that as a real, sort of, breach of our confidence on this side of the House that there was no—[Time expired]

Thank you very much, Mr Chair. The member who has just spoken, Nathan Guy, has raised some fairly legitimate, I think, questions about the process the Government has followed in this bill, so I am very happy to respond to those, as to why the bill was introduced under urgency yesterday and then urgency was discontinued last night and the bill has been brought back during the regular sitting time today.

The bill was introduced under urgency because we want to have it passed by the end of the month. We want to provide the certainty to the farming community in the South Island that will go with that. Therefore, the only way to do that and to have it passed by the end of the month was to ensure that there was no select committee process between the first and second readings. Urgency was required to deliver that yesterday, and we did just that last night.

We could have continued through urgency this morning, for example, and passed the bill before lunchtime today. However, that would have most likely affected the select committees that Parliament had scheduled to meet this morning. I’m aware that there are a number of annual review hearings that took place this morning, including one on my own portfolio of education, that most likely would have been cancelled, had the House been sitting. I am sure that the Opposition members, in their role of holding the Government to account, would have been somewhat disappointed had I, as Leader of the House, put Parliament into urgency that would have resulted in annual reviews being cancelled because the House was sitting, and select committees aren’t supposed to meet while the House is sitting. So, therefore, I made the decision to end urgency last night and bring the bill back for the remaining part of its committee stage this afternoon, then we will do the third reading tomorrow, and the Government will still meet its objective of passing this bill through reasonably promptly to give that certainty required.

The member David Bennett asked a variety of questions, as did Nathan Guy, as to why certain provisions were not in the legislation. The legislation, quite simply, preserves the status quo. As the member previously indicated, it simply pushes out the clock to stop the South Island provisions from expiring whilst a wider review takes place. The matters that the members have raised simply sit outside of that objective. They are wider than that objective. The objective is very simple: it’s to preserve the status quo while a wider review takes place.

The final question is: why the urgency? Well, obviously, there is a ticking clock; there is a deadline here. I note that the previous bill that was introduced into the House in March last year by the previous Government was not progressed in any way. A full select committee process could have taken place between March and the general election, had the previous Government thought that this was a priority. They clearly didn’t. Therefore, this Government is left cleaning up the mess that we inherited.

Thank you, Mr Chair. I’m pleased to stand and take a call on this small, short, but very important bill, as the Hon Nathan Guy alluded to. As Minister Hipkins also alluded to, the fact of the matter is that the previous National Government sat on its hands over this particular issue with the bill that they had looked to introduce but chose to take no further. Well, you know, I’m just reiterating what someone says that makes absolute sense to me.

We believe that the removal of the expiry provisions is of utmost importance in order to allow the industry to continue to operate in an efficient and competitive manner whilst allowing the Government to undertake a review of the issues in the dairy sector and the Dairy Industry Restructuring Act. We know that back when Fonterra was established, there was concern about it having a dominant market position. A way to manage that was the Dairy Industry Restructuring Act in 2001, which placed regulatory requirements on Fonterra through Subparts 5 and 5A of Part 2, promoting the efficient operation of dairy markets in New Zealand and providing for the monitoring of Fonterra’s Farmgate Milk Price.

We know now, looking back, that there are more independent processors in the South Island and that they are collecting over 20 percent. The default expiry of the efficiency and contestability was triggered. Once that happens, the Minister must request a report on the state of the competition, and then, once the Minister’s received the report and gazetted the response to it, the Governor-General must by Order in Council declare that Subpart 5 and all of Subpart 5A will cease to apply to the island that’s reached the market threshold. The default expiry requirement really creates uncertainty for those involved in the dairy industry whilst also imposing time and scope restraints on managing the whole decision-making process and the regulatory response to expiry.

So, under clause 4, we see that sections 147 to 150 will be repealed. Currently, section 148 says that Subparts 5 and 5A cease to apply. So what that means is that there will be no obligation from Fonterra to collect milk from new conversions—or, potentially, dairy farms, currently—and that does not help provide certainty to the industry, and it’s an industry that at times faces real uncertainty through weather conditions, payouts, etc. So amending the Dairy Industry Restructuring Act and preventing expiry provisions will mean that the status quo remains.

Some of the key provisions that will be maintained are the open entry and exit, whereby Fonterra must accept applications from farmers to become a shareholding farmer and they must accept a supply of milk from that shareholder. Shareholding farmers can also exit when they choose and move to supply another dairy processor. This is one of the most significant of the Dairy Industry Restructuring Act provisions, and it allows for new processors entering the industry the opportunity to obtain milk supply and will also incentivise Fonterra to price milk efficiently.

The milk price monitoring regime, currently the Commerce Commission, is required to review Fonterra’s Farmgate Milk Price calculation at the end of each dairy season, and it also reviews Fonterra’s Farmgate Milk Price manual. This manual sets out the methodology by which Fonterra calculates its base milk price that is paid to the farmers for their milk at that season.

The intention of this is to provide confidence and transparency in Fonterra’s base milk price settings. It also allows for the 20 percent rule. This allows farmers to sell 20 percent of their milk to other processors each season. So, again, this is going to continue to provide certainty to dairy farmers while the Government undertakes a full review, or the ministry organises a full review, of the industry, and I think that it’s really important for our farmers. Where I live, in the electorate of Rangitata, the majority of farming practice there is predominantly dairying, and this will provide real certainty for them.

Thank you, Mr Chair. I’m pleased to take a call in the committee stage of the Dairy Industry Restructuring Amendment Bill (No 2). I want to really focus on the core provisions of what we are doing with this piece of legislation. It is all about, as my colleague Joanne Luxton said, providing certainty for our South Island dairy farmers, the whole dairy sector. If we look at clause 4 in Part 1, it really goes to the heart of it, because Subparts 5 and 5A of Part 2 of the Dairy Industry Restructuring Act (DIRA), those provisions have been activated under the 2001 principal legislation. That was because the market threshold, which was set in the legislation at 20 percent, had been assessed to be in excess of that. So we had all of these legislative triggers that had been activated, which led to the Minister requesting that the Commerce Commission produce a report, but it also activated—

💬 Hon Ruth Dyson: Did they do it?

They did; they did a very fine report. In fact, the Commerce Commission felt that there was sufficient competition and the industry wasn’t quite ready for full deregulation. So that’s what we’re doing here today, ensuring that the provisions of DIRA, which have been in place since 2001, will continue for all farmers in the South Island, and processors as well.

So let us think: what would happen had we not passed this legislation? It would throw the entire dairy sector of the South Island into disarray, because the provisions of Subparts 5 and 5A of the Act are far-reaching. As I said, it’s activated a process, a trigger point, and the cancellation, basically, of the regulations that have long applied. So what we would do, in one fell swoop, by failing to pass this legislation is throw all of the dairy sector into disarray. They would not know whether they would be obliged—who would collect their milk, whether they would still be able to apply for open entry into Fonterra, or whether they would still be entitled to be able to give 20 percent of their milk supply to a different processor.

So the reasons why we are doing this, as I’ve said—it’s very important that we maintain the status quo, that we provide certainty for our South Island farmers, and, as it states here, in repealing the provisions of the expiry, which are imprinted into Subparts 5 and 5A, we need to ensure that those provisions don’t come into effect so that, indeed, as I’ve mentioned, the status quo can remain. Our farmers of the South Island can be at ease, they can wake up in the morning, as they do, and get to work on their farms, and they will know exactly what will be taking place.

Now, that’s not to say that change is not on the horizon, and that’s why, running parallel to this piece of legislation, there will be a review being carried out. As the Commerce Commission said, there needs to be a pathway to deregulation, but that needs further discussion, further consultation with all of the industry, because, again, these are big issues that need to be discussed. Setting the right thresholds—again, based on the Commerce Commission’s recommended 30 percent threshold, effectively, again, the status quo should remain, because currently Fonterra’s supply that they don’t have is around 24 percent.

So it’s really important that we pass this legislation. We started it under urgency, and it’s really important that we continue that process so we can, again, provide comfort, certainty, to the South Island dairy sector but also, parallel to this, we will continue the path, have full consultation with the sector, to ensure that there is a clear pathway to deregulation, which will occur, and that will provide a larger picture for our dairy sector in the future. But for the time being, it’s very important that this legislation—that the triggers that are in place are cancelled so the status quo can remain.

It’s a privilege to take a call on the Dairy Industry Restructuring Amendment Bill (No 2). I want to acknowledge the importance of the dairy industry in terms of our reputation as a reputable export nation. Recently, I’ve just returned from the Asia Pacific Parliamentary Forum, which was the delegation led by Jonathan Young, and joining Jonathan Young were Mark Patterson and myself. I’m talking about this because they made stunning speeches internationally, in Vietnam, about New Zealand’s contribution to economic development in terms of the primary industry, and it is important to note that whilst we in the House might have differing ideas, when we represented the nation in the Asia Pacific Parliamentary Forum, we were one. We were one, and when we did speak, we spoke on matters regarding Aotearoa New Zealand. We were proud to talk about the great things that are happening here. So I want to acknowledge the dairy industry and its importance in terms of its contribution to the well-being of our nation.

I’ve chosen to make a call on this—I think the member, maybe three members ago, spoke about how it is a small technicality. He talked about—and I want to thank the Minister for putting clarification on—the small technicality, but I put it to the House that if the dairy industry is important to the nation, to our growth, then anything to do with the dairy industry is not small. Every discussion that we have on the dairy industry is not small.

I’ve heard members speak about the importance of preserving the status quo, and one thing that comes with preserving the status quo is the confidence and security—confidence and security, not just for the farmers themselves but the rest of New Zealand. And in doing this process, in terms of talking in the House about the dairy industry, it also educates parts of the country or members of the public, and I put myself in those in terms of educating myself in terms of the dairy industry.

I want to support this bill because it’s important that time is allowed. Some people might say 12 months is a long time, but if you take out the public holidays and the weekends, I think time is to allow certainty—if we are seriously looking at the sector, to ensure certainty in the market, and we as a country and as a Government are responsible for making sure that we provide time by conducting a review that runs side by side in terms of this legislation.

I want to also support what others have said—that the legislation has been here since 2015 and we’re just talking about it now. Some members of the Opposition—I sat through yesterday, and I’ve listened to honourable members speak on this subject and talk about their expertise in terms of their knowledge in the farming industry, and most of the people that spoke on that were accountants. My background is social work, and people might question, “Well, what does she know about the dairy industry?” Well, I started my talk about the importance of New Zealand’s contribution to the world economy, and the importance of that being transparent, and about keeping the status quo while the review is being conducted. It is because we want confidence and security—not just for our farmers but worldwide—we want to make sure that things—[Time expired]

Mr Chair, thank you. I’m delighted to take a call on this very important piece of legislation. As I walked into the Chamber not that long ago, Mr Chris Bishop shouted out the word “outrageous”, and I wasn’t sure if he was commenting on my entry into this debate or on the comments of one of my other colleagues or if it was a comment in relation to one of the leadership aspirants in the National Party today, but I don’t think this bill is outrageous at all. I think this bill is actually a very, very important piece of legislation, and the Government’s very pleased to be getting on with the job and putting it forward today. I think we’ve heard previously that this is a bill that languished in select committee for some time back in 2016, and, actually, there’s a degree of urgency in proceeding with it.

The bill, of course, amends the Dairy Industry Restructuring Act (DIRA). That Act came about in 2001 under the previous Labour Government, and enabled the formation of Fonterra. This goes to the very heart and the very purpose of what we’re talking about, because why was that Act required to enable the formation of Fonterra in the first instance? The chief reason that it was required was because Fonterra acts, essentially, in a monopsonist manner, in that it is not quite a single buyer but an extremely dominant buyer of a very important commodity product within our economy. The normal competition laws that are in place wouldn’t necessarily allow for such a company structure to form, and so we needed a special piece of legislation to allow for it. When this House makes those sorts of decisions, we need to put in place certain protections to ensure that that market power that is handed, in this case, to Fonterra has some checks and balances on it and that we don’t entirely eliminate the potential for companies to enter that market and create a degree of competition and a degree of innovation.

So the situation that we find ourselves in is that that original Act put in place certain provisions that created those checks and those balances, but there were, essentially, sunset clauses put in there that said that when we get below a certain threshold those provisions will no longer be in effect. That was passed last year.

So what happened at that point was the Commerce Commission had to undertake a review, and what they found—this is really, really important; that’s why we have to get this piece of legislation through—is that, and I’m quoting from the regulatory impact statement here, “the current state of competition is not yet sufficient to ensure the efficient and contestable operation of dairy markets in the absence of the DIRA regulatory regime.” So that is why we need this piece of legislation, to ensure that we have those protections while we get on with the broader business of looking at what the longer-term regulatory regime might be and whether it is, in fact, possible to move to more of a deregulated situation. But, of course, we want to be cautious in that area, because if we remove those regulations while there is not sufficient competition within the industry, we have a lack of competition, we have a lack of innovation, and we have a lack of protection for some of those smaller players who may well have good things to contribute within the dairy market.

So the bill itself is a reasonably short piece of legislation. Part 1, essentially, relates to sections 147 to 150 of the primary legislation. The particular provisions that we want to ensure are kept in place to ensure that we have a degree of competition within the industry relate to—I’ll just find them here—having an oversight of what is happening within the sector, essentially. We’re talking in particular about the South Island. The key things that we want to see in place are having an open entry and exit regime. So Fonterra must accept applications from a shareholding farmer in Fonterra and must accept supply of milk from that shareholder.

There’s a milk price monitoring regime, and that’s, effectively, ensuring that the regime that we have in place, which has Fonterra as a very dominant receiver of milk, a very dominant buyer, doesn’t result in milk prices being too high. This is really important—the 20 percent rule. That allows Fonterra farmers—farmers who’ve signed up with Fonterra—to sell up to 20 percent of their milk production to another processor each season. That, to me, is probably the critical part of this, which allows space for smaller suppliers, who might otherwise be squeezed out by a very, very dominant buyer, to have a place in the market, to get a toehold, to be able to innovate, to be able to give good service to those farmers, and also to keep Fonterra on its toes. So this piece of legislation does need to go through, so that we can ensure that degree of competition and innovation remains in this very important industry, which makes up 40 percent of our agricultural exports. Thank you, Mr Chair.

Thank you, Mr Chair. As someone who stands in this Chamber representing what, on the surface of it, would appear to be a very rural electorate, Ōhāriu—certainly, while it’s the most beautiful electorate in New Zealand, it also is quite interesting because it’s one that really, when we look at dairying, is a picture and a history of dairying in New Zealand. Unbeknown to many, there were once 20 dairy farms in that electorate, out in Ōhāriu Valley. Those farms once provided this fine city and the burghers thereof and the people thereof with their dairy products over the years. Obviously, this has evolved somewhat now—essentially it’s now horses and sheep mostly out there. However, that does give a little background to what I would like to discuss in relation to this bill.

In my own background in dairying, let me just say that I was so young when I first started milking cows on a West Coast dairy farm that my father, instead of using metal cups, actually had plastic cups so that we young lads could actually reach up and put them on in the very modern cowshed, the first herringbone cowshed, on the West Coast. So here we were—and I suppose as a member of the Labour Party I’ve got to be very careful that I’m not going to be quoted later on, across the Table, as advocating for child labour. But here I was, as a six-year-old, milking cows with my brothers while my father went off the farm to help the rest of the West Coast. As we had that herringbone shed, we did get many visitors from around the South Island. It was such an advanced piece of technology on this farm. It was to be, obviously, overtaken later on by those who were lucky enough to have the roundabout.

However, on a little bit of a sadder note, before I go on to the depth of the bill—and although farmers like to think of themselves as a very independent bunch, right through the history of farming there has been the need for good government oversight and even control to ensure that industry does continue. I talk of TB. I can still remember my father looking at the results of the latest TB test, and Buller, northern Buller in particular, was an area that was badly hit by TB—losing a third of the herd each time. He, like many other farmers in the district, was very nearly wiped out. It was only the timely intervention of the Government, where those cattle that previously went down the chute because they were riddled with TB when they went to the works, were actually bought from the farm—

💬 Rt Hon David Carter: I raise a point of order, Mr Chairperson. I just want to remind Mr Chair and the member that we’re talking about the Dairy Industry Restructuring Act Amendment Bill (No 2)—two simple pages of an amendment; nothing to do with the contribution being made by this member whatsoever.

Mr Chairman, if I might, just to give some context—

CHAIRPERSON (Adrian Rurawhe): No, no—e noho. [Interruption] No, I don’t need any help. I thank the member for that contribution. This has been quite a wide-ranging debate on such a small bill, and I tend to agree with the member and I’ll ask Greg O’Connor to continue but to come to the bill. Thank you.

Right, thank you for that very clear and concise direction—

💬 Darroch Ball: I raise a point of order, Mr Chairperson. I’d just like some clarification on the ruling you just made. This Chamber is aware, and every member should be aware, that this bill didn’t go through a select committee. So I’m just wanting your assurance that there is quite a wide berth given to the speeches that are made through this process.

CHAIRPERSON (Adrian Rurawhe): I can assure the member that if it did go to select committee, the content of some of the speeches would not be discussed there.

Thank you again, Mr Chair, for that very clear and concise direction. What I was endeavouring to do was to just build the background and context to understand that the background of this bill, of course, was around ensuring that there is sufficient competition in the dairy sector in the South Island—in fact, right throughout New Zealand—to ensure that, actually, the people who are ultimately protected are the farmers. I am aware that there are farmers now in the South Island who are in some trepidation that, ultimately, their milk will not be picked up because, in the absence of any such competition, which this bill is actually addressing, there will be only one big provider who will decide they will stop at a certain river and not go beyond that river to pick up the milk. We’ll see that those very people that members across the aisle seek to be protecting—or certainly leveraging their anger, as we saw in the previous election—will be the ones who will be left either pouring the milk down the drain or actually having to turn their farms into another source of production.

So I recommend this bill to the committee for the reason that it is absolutely essential in an industry that is so important to New Zealand that we have the right governance structure, and that this Government, which in the past has saved farmers like my father—saved industries—still maintains the ability to do so. A laissez-faire approach would be the result of ignoring this legislation, and that would result in a poorer farming environment. Thank you, Mr Chair.

Thank you, Mr Chair, for the opportunity to speak on the amendment to the Dairy Industry Restructuring Act. I think it’s important that we look at the role that the dairy industry plays in New Zealand and also how this has changed over time.

There was a time in New Zealand when any small farmer had the opportunity of participating in dairy farming and of being able to make a living from dairy farming. Over time, we’ve seen companies grow bigger and a more corporate spread happening, while that’s benefited New Zealand hugely—and we look at the contribution that our only multinational company, Fonterra, makes to our economy—we also look at how the average person is trying to make a living in farming. Their first crack really is as a sharemilker not as an owner or an operator. So when we look at the inability of the average farmer to be able to participate, and own and take a stake in how this is happening, we need to make sure that there is sufficient competition within New Zealand’s dairy industry to enable that healthy competition to take place.

So what we’ve seen through the Commerce Commission’s inquiry is that this is not sufficient in the South Island, that there is not a sufficient level of competition happening in order for us to be satisfied that those provisions should expire, and that’s exactly why this piece of legislation is being put through under urgency. We need to make sure that there is sufficient knowledge, that we do have healthy competition, and that we do have a good way of doing this. The Labour Party has a strong record of making sure that we have healthy competition in the market place. When I think back to having Telecom as a single provider in our telecommunications industry, the last Labour Government looked at opening the market place for there to be more healthy competition and to enable other providers to give New Zealanders access to fair price products in the telecommunications market. That’s also what we need to be reassuring New Zealanders should be happening right here. For that reason, we need to make sure that there are good opportunities for those in the South Island to have a fair go.

Now, one of the things that I remember, growing up in parts of rural New Zealand, was seeing how much it’s important to have a good community and good people who can make ends meet. I remember clearly at A and P show days where kids were struggling out in the farms and where farmers were struggling. We need to make sure that this bill proceeds with urgency in order to give that reassurance.

The Government wants to take a strategic view of the dairy industry, given its place in New Zealand’s economy; 40 percent is a big whack of what we earn, and it’s about right that we make sure that we do it properly. I think the members opposite would be inclined to rush into this blindly and stamp it and not be too concerned. But we do need to remember that this bill did not proceed to select committee, and it does need further interrogation and debate at this point in time. It would be nice if the members opposite actually even paid attention and started listening and contributing to the debate instead of sitting there quietly, so it’s important that they don’t even seem to be that concerned about this piece of legislation, which was kicked off initially by their own party. But there’s still opportunity tonight for further comment, and I encourage the members opposite to read the papers and take part in the debate and talk about some of their own constituents, potentially, who could benefit from this piece of legislation progressing as quickly as possible.

So, Madam Chair Williams, I thank you for the opportunity and I commend this bill to the House.

Kia ora, Madam Chair Tolley. Ngā mihi nui ki a koutou, kia ora. I’m glad the National members are supporting it. I’m glad they are, because on one hand it’s quite surprising. If you listened to the debate last night, David Bennett himself said it was the biggest attack on the New Zealand farming industry in the next three years—the biggest attack in the next three years—but David Bennett and the National Party voted for it. Now, I don’t want to call them up on their inconsistencies of language, but I’m glad they’re voting for it, because what we’ve had for a long time is an approach where policies and rules have been rammed through.

What we actually need to do is have a whole-of-the-country discussion, because it’s really important when we’re dealing with the dairy industry that we get all stakeholders around the table. Instead of a one-sided debate that has seen the massive intensification, the massive problems we’ve seen in New Zealand, we should be working collaboratively over those solutions. What we need is to hear from all those stakeholders that have had their voices ignored. It’s incredibly important because Fonterra, you know, is the world’s biggest dairy exporter company, the second-largest by volume, responsible for 40 percent of our primary industries and a huge number of jobs—tremendously economically important, but also, you could put an argument, a tremendously missed economic opportunity.

Now, what we haven’t heard in this debate in the committee stage is a comment on the environmental implications of what Fonterra’s done. What we’ve seen is two-thirds of our waterways in New Zealand are considered unsafe for our kids to swim in. Our kids are risking getting sick if they swim in our rivers, and we’ve got to acknowledge that Fonterra and all those dairy farms are a major contributor to declining water quality—in fact, the dirty rivers that are making us sick across the country. Other countries have their factories, which are quite visible with their smokestacks and pollution; this is our equivalent in New Zealand, responsible for half—half—of our total greenhouse gas pollution. So this is such an opportunity to address those issues. How do we encourage more value-added products from our agricultural sector? How do we tell that national story and leverage off our “clean, green” brand? How can we clean up our environment and make sure that our rivers are safe to swim in? So that’s why I’m glad that all parties are supporting it, because, essentially, all this bill does is give us a little bit of time, a little bit of breathing space so that we don’t have to do what the previous Government used to always do, which is ram stuff through to actually get all the parties around the table.

So in Part 1, by delaying the implementation of sections 147 to 150 of the Dairy Industry Restructuring Act (DIRA), we allow the open market entry and exit and the milk price monitoring regime to have a bit of time to have that review. At the moment, what we know is they would have expired in May of this year. Now, we did have concerns, originally, with this. What we wanted was for the industry to be able to crack on with the changes to the open entry and exit, because at the moment one of the major problems facing our environment in New Zealand is that automatic entry and automatic requirement for milk to be picked up. When you drive across country, be it Canterbury or the central North Island, you can see these massive dairy conversions, and I think, quite simply, you could argue we’ve been seeing dairy in the wrong place. It’s not suitable for the environment. What it has done is it’s encouraged peak cow—this fantastic growth in the numbers of dairy herds, which some experts say is the equivalent of tens of millions of people’s effluent flowing into our waterway. This is what these rules have achieved.

So we are urging the Government to crack on with this review, because we do need to call a halt to the massive and, I put it, crazy intensification in conversions we’ve seen in this country’s recent history.

💬 Alastair Scott: Ah, you are closing down the dairy farms.

No, we’re not talking about closing down the dairy farms. We’re talking about a smart, rational approach that actually sees dairy in the right places and other agricultural industries in the right places, because when we’ve seen the massive environmental consequences, we know something’s gone incredibly wrong. That’s something that has been totally ignored by the previous Government. It’s something that their original legislation, which these clauses are changing, would have ignored. The National Party’s always said that environmental issues shouldn’t be dealt with by this, but when you’ve seen a structural body, in the form of Fonterra—with the massive market power and influence it has, it hasn’t acted as a force for good. In fact, it’s acted as a force for declining water quality in New Zealand and dirty rivers that are making our kids sick. So that’s why we want to make sure all the stakeholders are around the table. We can actually design a system where it acts as a force for good.

Now, we’re a huge supporter of cooperatives in New Zealand. We want to see more cooperative activities. It’s a great model that’s succeeding on the world stage, but let’s take it to the next step and make sure it’s a force for good. That’s why we were glad, when we were delaying these sections—only for the year review—that the Minister has agreed to some of the ideas that the Green Party has been pushing, because we want to make sure the sustainability and environmental protections are contained in that review. So the Minister’s agreed over that 12-month period to talk about organics. Now, what we know is it’s a higher value - added product. It receives greater export earnings and less environmental impacts. There’s some fantastic work being done by conventional and organic dairy farms in New Zealand. What we want to make sure is that Fonterra, as a cooperative, is set up to encourage us to approach those greater value - added products.

When you look at those 10,500 dairy farms in New Zealand, aggregated—you know, the world’s largest exporter—but when you look at a different comparator, we’re the 18th in the world for sales volume per kilogram of milksolids. That’s a common measure of value. What that means is we’re very good at producing milk, but we’re not that great at actually producing value out of it. So when we are exporting products all around the world, we’re focusing on these low-value commodities, these, essentially, brown paper bags of milk products—products that have a high greenhouse gas intensity. Now, when you’ve got a system that the DIRA encourages, which is for Fonterra to accept every single drop of milk being produced, what you’ve seen is negative environmental consequences. But, on the flip side, because the system has been driven by volume, they’ve gone for these low-commodity, low-value products. So to process those milk products—the milksolids—they’ve turned to coal, and we know that Fonterra’s the largest coal consumer in New Zealand. So not only are we trashing our environment and not only are we trashing our climate, but we’re not even getting the most out of the product.

So we’ve got a vision that we can achieve a sustainable dairy industry in New Zealand. We could leverage off that great—$18 billion is the estimate—“clean, green” brand. We could tell a fantastic story in traceability of dairy products, back to the story of those family farmers who produced it. We could be focusing on innovation, and I put it to this committee that Fonterra’s lack of success at innovation and focusing on R & D has been a primary driver of our country’s terrible standings, as we saw at the end of the National Government after nine years—in the bottom half of the OECD for R & D.

I guess our theme tonight is we can have an opportunity by passing this legislation—these key, critical sections we’re debating right now—so that we can have that national conversation. We can actually make sure that Fonterra is a force for good. We can focus on more income for New Zealand. We can focus on cleaner rivers. We can focus on innovation and R & D. So, basically, what we’re talking about is that if we listen to National and their arguments—never mind the inconsistency that they’re voting for it, but the way National went about it was if you didn’t support this, you’d see very little change and very little change for good. So what we’re talking about is let’s have this review, let’s get all the people around the table, and let’s sort out the solutions and have a cleaner, richer New Zealand.

Madam Chairperson Williams, thank you for the opportunity to provide a contribution this afternoon. Yesterday, I proffered a relatively animated contribution, because I personally am so concerned about the lack of attention that the previous administration paid to the implications that the absence of the Dairy Industry Restructuring Act (DIRA) amendments have for the primary industries.

Now, before I turn my mind specifically to Part 1, which repeals the provisions for the expiration of Subparts 5 and 5A of Part 2 of the primary legislation, I just want to make a brief note about the fact that the Opposition yesterday waxed lyrical—[Interruption]

CHAIRPERSON (Poto Williams): Order! Order! Order!

—about the fact that us having to go through this process of taking this legislation through urgency was, in some way, us trying to lack transparency. Right now, we are in the committee stage, where there is every opportunity for the Opposition to ask questions of our Minister and to ask questions of our officials, who are sitting in this Chamber. As I’ve been sitting here listening to the contributions, or lack thereof, from my Opposition counterparts, I have been trying to understand why—really have been trying to understand why—when they had their DIRA amendment bill up on the Order Paper in March of last year and they knew that the order—the revocation of the Dairy Industry Restructuring (Subparts 5 and 5A of Part 2 of the Act Disapplied to South Island) Order 2016. Now, that was enacted because Subparts 5 and 5A were triggered by the fact that the South Island had reached its 20 percent quota as determined in 2001, when the original Act came into being, and the provisions were triggered almost two years ago.

This order was gazetted by our former Governor-General Jerry Mateparae, noting that this provision—Subparts 5 and 5A—would cease to apply to the South Island in May of 2018. Now, that’s in three months’ time. That’s in three months’ time, and the Opposition, the former Government, has the cheek—there are two parts. One is to say that they’re a bastion and friend of our dairy industry, but the reality is that they’re completely fine to accept uncertainty within this industry, knowing that we are three months out from this order coming into effect, which will mean that the DIRA provision would cease to apply to the southern island.

Because they were the Government at the time, they know that the Commerce Commission found that albeit in 2001, when it might have made sense that 20 percent of the sharemilk contributions going to independent processors—that might have been sufficient to debunk the competition that Fonterra held. But when the Commerce Commission came out with their findings last year, I can only imagine the beads of sweat and the tears in quiet little cracks and corners around the former Minister for Primary Industries—what he must have been doing at that stage—knowing that a huge stoush was about to be on his hands. He was going to have to deal with a battle between Fonterra—and of course they want to be the dominant provider. Why wouldn’t you? This is commerce and business. And then, they wanted to compete with the interests of their farmers.

Now, we saw the submissions from Federated Farmers—and those guys waxed lyrical yesterday about the 105 submissions that they received. Well, they weren’t 105 submissions all in approval of their hack provision—the compromise legislation that they were going to rush through. No, they weren’t. They know that; we know that. This piece of legislation is being rushed through under urgency because the former Government failed the farmers of the South Island. They failed the farmers of the South Island.

Thank you, Madam Chairperson Williams. I stand here as a proud and staunch Mainlander, representing the South Island dairy farmers from my electorate of Dunedin South. Clearly, I am advocating for this bill and its intent and its objective and its effect, which is, ultimately, protecting the interests of South Island dairy farmers.

You know, this is a strategic bill. It fits into a wider strategy. It’s a bill that demonstrates that this is a responsible Government, in direct contrast to the behaviour of the previous Government, which is now the National Party Opposition, firmly in Opposition. I think the reason why we’re having this bill and the reason why it is under urgency is because the previous Government—the National Party Opposition—clearly either were avoiding a stoush that they didn’t want to have, or they just took their eye off the ball.

💬 Kieran McAnulty: They just fluffed about.

They fluffed about. They had the opportunity to put this bill before a select committee, because there was a time limit on it. Well, let’s hear from them and let’s hear the explanations as to whether they just took their eye off the ball, or they were avoiding a stoush that they didn’t want to have before an election. Why is it that this bill didn’t get to a select committee, given that it was time-limited? Two years, as Kiritapu Allan, the member before me, referenced—two years this was triggered.

I raise a point of order, Madam Chairperson. Is it appropriate for another member in the Chamber to physically come and interrupt a member’s speech?

CHAIRPERSON (Poto Williams): I would suggest that it is highly unusual, and I’d encourage the member not to do so. But I do believe that what is being indicated here is relevance to the bill. So I’d just encourage members to stay—it is a broad-ranging debate, but to stay, if we can, to the components of the bill.

Thank you, Madam Chair.

💬 Rt Hon David Carter: I raise a point of order, Madam Chairperson. While I appreciate that it’s not normal for members on the other side to assist Government members by taking them a copy of the bill, the general debate was three o’clock until four o’clock today. We’ve now had a very wide-ranging debate and the current speaker has certainly not once referred to the Dairy Industry Restructuring Amendment Bill (No 2). It’s a relatively wide-ranging debate but not to the extent we’re discussing all aspects of the dairy industry. It’s a simple piece of legislation. It’s simply about extending a threshold for the South Island. It’s no longer in urgency, despite the Hon Clare Curran claiming it’s still in urgency. It was the Government’s move yesterday, after going into urgency, to break urgency last night about 10 o’clock. We’re now on normal time.

CHAIRPERSON (Poto Williams): I thank the member. Thank you. No, I don’t need any more assistance.

💬 Darroch Ball: It’s up to the Chair.

CHAIRPERSON (Poto Williams): It is up to the Chair to determine relevance. I have cautioned members that we do need to come much more to the substance of the bill, but, given that the nature of the debate is quite wide ranging, I will determine relevance. And points of order will be taken in silence and so will determinations.

Thank you, Madam Chair. The Dairy Industry Restructuring Amendment Bill (No 2) is before the committee today because of a trigger that happened in 2015 and a Commerce Commission report that lead to a bill eventually being drafted by the previous Government that never made it to a select committee. That is why this bill is before the committee and has had to be put through its stages without going to a select committee. My point is made, and clearly to the National Party Opposition it is a sensitive point, and so that’s why we’ve had the reaction that we’ve had.

I’d also, as a proud Mainlander, like to acknowledge my heritage in the dairy industry and acknowledge my godparents, actually: my godparents, my uncle and aunt, Digger and Moira O’Neill from Edendale.

💬 Hon Member: Hey, but that was an important cousin.

It is. Digger and Moira O’Neill, sadly, passed away—my godparents and my uncle and aunt. Digger O’Neill actually sat on the board of the Edendale cheese factory when it was the cheese factory; very well known in Edendale. And I have milked a cow; not very successfully, but I have milked a cow. I actually feel very proud to acknowledge the O’Neills today, who made a very large contribution to the dairy industry in the South Island and that the interests of South Island dairy farmers are paramount in this piece of legislation.

But beyond that, I do acknowledge the Green member Gareth Hughes, for the importance of where this fits. This goes to this Government’s strategic approach, its responsibility; it’s responsible government. Looking at this in a context of a wider strategic undertaking of the dairy industry and its place, that’s looking at sustainability, and it’s looking at environmental impacts—something that the previous Government never would’ve gone near; that is of importance to New Zealand society, “New Zealand Inc.”—and looking at also the ability for us to examine and innovate in the industry, which will lead to more sustainability.

Thank you, Madam Chairperson Williams. I find it remarkable that the National Party Opposition, who claim to be the great friend of the farmer, negligently allowed the progress of this bill to just sail forth towards the automatic expiry provisions, seemingly without a thought for the state of the industry and the important decisions that needed to be made about the future of the dairy industry.

So many members in this debate have pointed out how important the dairy industry is to this country.

💬 Hon David Bennett: Their heritage. Yes, I’ve learnt a lot.

Notwithstanding the heritage of various members, and we’re not going to go any further into the heritage of members of this House.

💬 Hon David Bennett: Come on. Tell us your heritage.

We’ll stay right out of my heritage, thank you, Mr Bennett. So this bill prevents the expiry of the Dairy Industry Restructuring Act (DIRA). Without this bill, we face two possibilities. The first is that the bill that the previous Government had before the House would’ve pre-empted an important consideration of strategic issues facing the dairy industry.

CHAIRPERSON (Poto Williams): Order! Could I just ask the member to take a seat. Can we just have a little bit of order. If members are wanting to interject across the Chamber, the interjections need to be helpful to the debate; currently they are not. Let’s just take a deep breath and start again.

I would say that any interjections that are helpful to the speaker would be most welcome—

💬 Hon David Bennett: I asked about your heritage.

—but no interjections about my heritage, thank you, Mr Bennett. So what this bill will mean is that the DIRA provisions will continue to apply throughout the whole of New Zealand, allowing time for the new Minister the Hon Damien O’Connor to undertake a comprehensive review of the DIRA before any other changes are made. The alternative to that is just to let the automatic expiry provisions run their course. But it’s our view on this side of the Chamber that that would not be helpful to the dairy industry.

The main purpose of the Act was to manage the dominance of Fonterra until there was enough competition in the market place to make regulation unnecessary. That’s why the DIRA contained those expiry provisions that were triggered when Fonterra’s market share fell below the threshold specified in the Act. So the expiry process that’s contained in the original Act necessitated a review of the state of competition in the dairy markets to be undertaken by the Commerce Commission. The Commerce Commission did that review in 2015, when Fonterra’s market share in the South Island met the threshold. So, as we know, the Commerce Commission found that there wasn’t sufficient competition to let parts of the DIRA expire in the South Island.

So keeping the DIRA in place now will give the industry certainty about the regulatory environment, and it allows the new Government to undertake the very review that the past National Government should’ve conducted if they were serious in their claim to being the great friend of the dairy industry.

The review that I know the Minister Damien O’Connor has under way now is intended to allow a much more strategic focus to be taken to the issues facing the dairy industry, including, for example, environmental issues, the likes of which Gareth Hughes set out; the need to get the industry on a much more sustainable footing; to reduce carbon emissions that are such a feature of our dairy industry right now; and to find new policy settings for land use in this country that will allow the industry to continue to generate the prosperity that it does for New Zealand without putting further stress on our waterways and our land. What this Government wants to see is the best outcomes for farmers, for consumers, and for the economy overall.

I said before that preventing the expiry of the DIRA will mean that the current regulatory settings will continue in place. The key provisions that are being maintained are the open entry and exit, the milk price monitoring regime, and the 20 percent rule. This bill provides certainty for the dairy industry while the essential review is carried out.

I move, That the question be now put.

Before I call another member to speak, I am encouraging you all to speak specifically to the substance of the bill and to give us some discussion and debate that hasn’t been heard before. We’ve been going for an hour and a half, and the substantive part of the bill appears to have been covered. So I am encouraging members to take a call if they have something new to add to the debate.

Thank you very much, Madam Chairperson Williams. It is indeed a great honour to stand here to speak to this bill. I have been waiting for quite some time, but on that fact I’m not surprised because this is a very important bill. It seems today, if we were to look at just what’s on offer, the Labour Party is the only party that’s taking this bill seriously.

This bill provides certainty for the industry. It is a very small and very specific bill, but it is a bill that’s important and will provide certainty, not only to the industry as a whole but to those individual players, those farmers, and those who work within the industry—just like my father, who’s a dairy shed inspector and has been for 40 years. The fact is—

💬 Rt Hon David Carter: Vested interest.

Oh, yeah—well, OK. The point here is that this Government—the Labour Government—wants to give New Zealanders the opportunity to hear what it is we’re proposing here and what it is that this bill is going to do. You would think that the Opposition would take the opportunity available to it and want to speak on it. In fact, all we have seen in the last half an hour, from the contributions of a former Speaker of the House, is to act the goat, cross the floor, and pass a piece of paper to a speaker—which I found to be highly inappropriate—and then stand up, and at that point I thought, “Here we go. Finally, the National Party will say something.”, but all it was was a closure motion.

I wonder why that may be. Perhaps it’s because this bill, or something very similar, was available to be discussed and implemented in March of last year. Did they do anything with it?

💬 Hon Members: No.

No. No, they fluffed about. They fluffed about, for two potential reasons: one, they wanted to avoid taking responsibility—they wanted to actually avoid having this debate—or, two, because they couldn’t be bothered. They ran out of time. And, here, the only contributions that we saw on this bill from the National Party last night were criticisms of it being considered under urgency. Perhaps if the opportunity was taken at the time, there wouldn’t be the need for urgency.

Now, talking specifically to the purpose of this bill, I want to highlight why we wouldn’t just leave it and let the expiration date that this bill proposes to push out come into force. When the original Act was passed in 2001, Fonterra had a dominant position in the market by the nature of its establishment. The main purpose of the original Act was to ensure that that dominance, until sufficient competition emerged within the market, still allowed for those smaller or alternative contributors to the industry to actually be there. We wanted to ensure a competitive market.

You would think, given the founding principles of the National Party, that they would want to take the opportunity to discuss why it is so important to ensure competition in the market, or is that not what the National Party stands for?

💬 Kiritapu Allan: We thought so.

We thought so, of course. But, obviously, not today.

This bill gives certainty to the market because it pushes out what would have been the expiry date of May this year, and in doing so it provides this Government the time to consider a broad review of the industry—something that is good practice, particularly when there hasn’t been one in an industry that has seen significant growth over the last couple of decades. It also gives those producers in the South Island that are worried about their particular farm and the contract that they have—without this expiration date being pushed out, they have no certainty within their contract of supply. They could live beyond any arbitrary boundary and miss out on what was previously a guaranteed contract, because it is not preserved in legislation. So I’m pleased to be able to be part of a Government that is actually wanting to take the initiative, that does take the dairy industry seriously, and that is therefore putting this forward to the House so that no more are those within the industry showing concern.

But, touching on the key provisions that are being maintained here, there are three in particular.

I move, That the question be now put.

I raise a point of order, Madam Chairperson. I just wanted to raise a point of order with respect to this bill and remind the committee that the Dairy Industry Restructuring Act passed in the time that we have dealt with the No. 2 bill in the committee stage. I thought that was pretty amazing, because that was quite a substantial piece of legislation.

I thank the member.

As we have heard, dairy obviously plays a key role in New Zealand. This bill amends the Dairy Industry Restructuring Act 2001 (DIRA) to prevent the expiry of certain provisions in May 2018. The Dairy Industry Restructuring Amendment Bill (No 2) aims to prevent the expiry of those provisions to provide certainty for the dairy industry about the regulatory regime. There are three key words here: No. 1 is continuity, No. 2 is consistency, and No. 3 is competition. We’ve certainly heard a lot about competition, and markets thrive under competition, and that’s what this bill attempts to do.

Dairy makes up approximately 40 percent of New Zealand’s total primary sector exports. New Zealand’s largest dairy processor, Fonterra, as we know, was established in 2001 from a merger of the two largest dairy cooperatives and the New Zealand Dairy Board. It was created under a Labour Government, and it is something we’re certainly very proud of.

The DIRA Fonterra provisions are due to expire in the South Island on 30 May 2018, hence the reason for this bill. This bill will allow a more strategic focus to be taken to issues facing the dairy industry, including, for example, environmental issues—as we’ve heard from the member Gareth Hughes—land use, and how to achieve the best outcomes for farmers, consumers, and the New Zealand economy.

The DIRA was passed in 2001 to manage Fonterra’s dominant position in dairy markets until sufficient competition emerged. We’ve heard a lot about that, around that aspect. The DIRA, therefore, contains automatic expiry provisions that were triggered in 2015 in response to Fonterra’s reduced market share in the South Island. If we look at DIRA in the South Island—my family once had a dairy farm there and it was the largest producing dairy farm in the South Island; it had only 300 cows. But, certainly, this is an example of the Labour Party standing up for farmers in the South Island.

The DIRA regulatory provisions on Fonterra in Subparts 5 and 5A of Part 2 provide a means of promoting efficiency that would ordinarily be provided through competitive market pressures.

💬 Hon Ruth Dyson: Which you’ll talk about later, on Part 2. We’re on Part 1.

Ah. So just coming back to the three key points there I mentioned around No. 1, continuity—so it provides continuity for farmers, it provides certainty for the market around consistency and around competition. It allows for checks and balances around Fonterra.

So we certainly commend this bill to the House, and we’re not going to take too much more time. Thank you for listening to contributions.

Madam Chairperson Williams, it does give me pleasure to speak again on this bill. I’d just like to speak about the Pāhau River. The member who represents Canterbury there may be aware of this, but this is a river that recently has been given an award. It is the river in New Zealand that has reduced the E. coli count by the most for any river in New Zealand, which is a wonderful achievement by the dairy farmers in that area. That’s on the back of some other great achievements in North Canterbury where, by the use of pivot spray, by the use of moisture probes and only irrigating when necessary, and by the use of riparian planting, some great things have been achieved in North Canterbury in dairy farming. However, one of the problems is that those achievements have been lost in the noise that’s been created deliberately by those who seek to turn town against country on this and other issues—which will bring me very shortly to this bill, and to summarise this bill.

The important point is that this bill ensures that there will be sufficient governance of the dairy industry to ensure, not only for farmers but for the rest of New Zealand, that the industry—which we all accept is extremely important to New Zealand—is properly governed. We’ve heard that in the past, through suspensory loans, through subsidies, and through other means, Governments have been very involved in ensuring that farming does stay in a good state, and this Dairy Industry Restructuring Amendment Bill (No 2)—DIRA, as we call it—is simply an extension of that. It is about ensuring that we get an extension to the exemption—that we get this extension that will guarantee we can do the necessary work to ensure there is sufficient competition in dairying in the South Island; to make sure that the continued intervention—positive intervention, necessary intervention, that has made the New Zealand dairy industry and other parts of farming in New Zealand the success they are today—continues.

I recommend this bill to the House as a means of ensuring that the necessary governance over this vital industry is maintained. Thank you, Madam Chair.

Part 1 agreed to.

Part 2 agreed to.

Clauses 1 to 3 agreed to.

House resumed.

Bill reported without amendment.

Report adopted.