Government Senators' Dissenting Report

1.1 With Australia's agriculture and food industry undergoing rapid change,
Government Senators welcomed the establishment of the Senate Select Committee on
Australia’s Food Processing Sector in March 2011 to inquire into possible policy
responses to the challenges confronting the sector. The Terms of Reference for the
Inquiry were very broad. The Committee was tasked with inquiring into and reporting
on:
• the competitiveness and future viability of Australia's food processing
sector in global markets;
• the regulatory environment for Australia's food processing and
manufacturing companies
• the impact of Australia's competition regime and the food retail sector,
on the food processing sector, including the effectiveness of the
Competition and Consumer Act 2010;
• production inputs costs, infrastructure, investment capital and human
capital issues
• Trade policy effects and opportunities.

1.2 Senate Select Committees are established to consider complex issues which
extend beyond the responsibilities of Senate Standing Committees. The overarching
scope of the terms of reference for this inquiry has been a challenge for the
Committee, particularly in relation to the regulatory issue where submissions have in
many cases reflected anecdotal evidence, rather than providing detailed analysis of
regulatory burdens.

1.3 Government Senators are particularly disappointed that only one State or
Territory government made a submission to the Inquiry, given that the food
processing sector makes a major contribution to the Australian economy and is
particularly important in rural and regional Victoria, South Australia, Western
Australia, Queensland and New South Wales.

1.4 Seventy submissions were received, and these were dominated by industry
associations and stakeholders, including the relevant unions who were concerned to do
justice to the terms of reference and to assist the Committee to understand the
complexity and challenges confronting this sector.

1.5 Government Senators want to highlight that some aspects of the Terms of
Reference were not widely addressed through submissions or evidence, and urge those
who are reading the full report to consider the comprehensive National Food Plan
Green Paper, as well as industry and other research which more fully reflect the nature
of national competition policy, the regulatory environment and the infrastructure and
investment issues which are critical to the future of Australia’s food Processing
Sector.
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1.6 This report does not seek to re-visit the issues raised in the wider Committee
Report and Government Senators support the general thrust of the report. However,
we specifically disagree with recommendations 4, 5, 24 25 and 26.

1.7 Government Senators make the following further recommendations:

1. Government Senators reject any call for further reviews of the Fair
Work Act. A comprehensive, independent review has just been
completed, which found that the legislation does provide a number of
avenues for flexibility.
2. Government Senators encourage food processing industry employers
who require greater flexibility of their workforce to utilise the existing
mechanisms allowable under the Fair Work Act.
3. Government Senators recommend that the Federal Government
increase consultation with, and education of, the food processing sector
about industry opportunities and obligations in relation to the carbon
pricing mechanism.

The Food Processing Sector in Australia

1.8 Agriculture, food processing and the retail and export of Australian primary
products has always been part of the Australian 'psyche'. There is a strong connection
between Australian farmers and their land, and between food processing and
manufacturing industries and the rural and regional communities in which they
operate. The Committee visited several regional locations where value-adding to local
produce was a significant part of the local economy.
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1.9 The food processing sector's value chain is significant to the Australian
economy.

FIGURE 1: Value chain for food in Australia, 2010–11

Source: DAFF 2012, Australian Food Statistics 2010-11, Department of Agriculture, Fisheries and
Forestry, Canberra

1.10 Several reports have informed the Green paper on Australia’s National Food
Plan, released in July 2012, and issues canvassed in the Terms of Reference for the
Senate Inquiry have been considered in the development of the Green Paper.

1.11 The issues include:

• The adequacy of investment in innovation and research and
development;
• The cost and availability of transport and freight infrastructure
• Increasing costs for raw materials, energy, water and labour
• The extent of competition within the food industry, and particularly in
the provision of retail and wholesale services;
• Concerns about rapid industry rationalisation and integration across the
supply chain and the impact these developments may have on small
producers and processors;
• concerns about the emergence of ‘private labels’ and they impact these
may have on brand competition and the allocation of shelf space;
• concerns about food safety and quality;
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• the potential environmental impacts of food production, processing and

handling practices;
• Evolving consumer tastes and preferences for healthier and more life-
style compatible meals;
• Changing labour requirements in the food processing, distribution and
retailing sectors;
• Potential bio-security risks and the integrity of Australia’s pest and
disease status.

1.12 Government Senators acknowledge therefore that this Inquiry has not been a
'stand-alone' piece of work. In fact, the development and consultation around the
National Food Plan has built upon submissions provided to the Inquiry. In the same
way, the development of the Committee's report reflects issues raised in regional
consultations and industry roundtable meetings which have informed the Green Paper
for the National Food Plan as well as other work being undertaken by government and
industry to continue to address challenges in this sector.

1.13 Australia's status as a net exporter of food products depends on market access
and a liberal trade regime. The Committee received extensive evidence that those
within the sector acknowledge that the Australian food industry exists within a global
economic food market, and many of the recent changes evident in the industry reflect
the fact that producers and processors are competing in global export markers as well
as with importers in the Australian domestic market.

1.14 Many Australian food supply chains are also increasingly part of global
business and supply chains. This global participation enables access to foreign
technology, knowledge, capital and other business inputs.

1.15 The National Food Plan Green Paper identifies Australia's key strengths in the
market as:
Its geographic location, with relative proximity to key emerging markets in
Asia; resource endowments favourable to producing abroad range of
agricultural products; a large pest-and –disease-free bio-security status; a
stable political and business environment, strong R&D and innovation; and
a skilled and capable workforce. (p. 6)

1.16 The food processing sector is facing pressure from increasing international
competition including on costs of the strong Australian dollar and variable seasonal
outputs. To maximise opportunities, Australian businesses need to continue to change
and innovate in seeking cost efficiencies and market share.

1.17 While the Committee heard evidence that parts of the food industry face
difficult business conditions such as labour and skills shortages and increasing costs
of some farm inputs, industry bodies including the Meat and Livestock Australia
acknowledge that Australia's market advantages are allowing businesses to tap into
rising food demand and food prices, particularly in commodity and niche markets.
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1.18 Meat and Livestock Australia are promoting innovation as the way forward.
The global financial crisis separated the best from the rest as leaders were
forced to make tough decisions fast, based on less-than-perfect information,
throwing out the rule book without sacrificing growth potential. Today’s
operating environment is hyper-connected, volatile and fragmented.
Technology is a major driver, but the changes are more profound and the
implications for Australia are far-reaching. Sections of our economy might
be cushioned by resource wealth and Asia’s growing markets, but such
advantages are selective and finite.
Developing and implementing appropriate technology solutions is critical to
improving a processor’s bottom line and ensuring the sustainability of the
industry. MLA is committed to foster creativity and support technology
providers and processors to innovate and develop new safer, sustainable
and cost-efficient solutions to problems affecting the industry

1.19 Australian food producers and food businesses have significant opportunities
as the demand and prices for food commodities increase, in response to both
population and income growth, particularly in Asia.

Trade Policy Implications

1.20 Successive governments have supported multilateral trading systems. High-
quality bilateral and regional FTAS support the multilateral system promoting a
liberalised approach to trade in food and agricultural products between Australia and
its trading partners.

1.21 Australia has successfully concluded FTAs with New Zealand, Singapore, the
US, Thailand, Chile and the Association of Southeast Asian Nations (ASEAN). Work
is also underway to conclude FTAs with Korea, Japan, China, and co-operation
Agreements with India, Indonesia and the Gulf Cooperation Council. Negotiations
are continuing on the Trans-Pacific Partnership Agreement with the Asia-Pacific
countries of Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand,
Peru, Singapore, US and Vietnam.

1.22 Some submissions argued that FTAs reduce Australia's competitiveness and
argued for 'fair trade' rather than 'free trade'. Government senators are concerned
misunderstandings exist about the potential benefits and opportunities that come from
FTAs, and the importance of these agreements for driving regional economic trade
liberalisation and integration in participating countries.

1.23 Some submissions conflated several issues and argued for greater protection
for Australian industry. For example: Mrs' Mac's stated:
"...the lack of willingness by governments and retailers to consider applying
a level manufacturing playing field by requiring foreign manufacturers that
export food products into Australia to meet the same processing standards
and hence consequential costs that are imposed by government regulation
here in Australia across all tiers of government." (p. 1)
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1.24 Rather than a drive to the bottom, multi-lateral agreements seek to impose
WTO rules and obligations on those countries.

1.25 Australia also pursues agreements with trading partners on specific

commodities or commodity groups to ensure existing markets remain open and trade
in Australian products takes place with minimal disruptions. These include beef,
wheat, dairy, sheep, meat and sugar. To support export-ready companies to expand
their business in growing and emerging markets, the industry has argued strongly for
improving trade services to help identify those opportunities.

1.26 Government senators are very concerned about the level of pessimism that
exists within the food processing industry, as parts of the industry continue to struggle
with the impacts of the global financial crisis, our strong exchange rate and the
reduced competitiveness of the industry. The answer however, is not to diminish
Australian standards, rather to strive for efficiencies in regulation, minimise
duplication and support innovation across the supply chain. For Australia, as a
developed country with a strong, educated labour force, we are not going to compete
on labour costs. Therefore, the emphasis by successive governments must be on
research and development, and innovation that will increase productivity,
marketability and address production challenges.

1.27 Industry bodies acknowledge this. Meat and Livestock Australia, promoting
innovation in their sector argue:
Tight margins in the red meat processing sector mean limited resources
have been devoted to technical innovation and the application
of automation to some of the pressing human capital issues facing the
sector.
New technologies such as automation offer significant opportunities to
solve problems such as improving productivity, increasing yield recovery
and remuneration levels, occupational health and safety (OH&S)
performance and attracting people with new skills into the industry.
Developing and implementing appropriate technology solutions is critical to
improving a processor’s bottom line and ensuring the sustainability of the
industry. MLA is committed to foster creativity and support technology
providers and processors to innovate and develop new safer, sustainable
and cost-efficient solutions to problems affecting the industry. 1

1.28 The Australian government has a range of programs to assist firms increase
their productivity and move up the value chain by encouraging innovation. Raising
the capabilities of these firms is aimed at helping them adapt to the challenges of
working in a global economy, including currency fluctuations and in particular the
current high Australian dollar.

1 (http://www.redmeatinnovation.com.au/innovation-areas/new-technologies)
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1.29 The committee heard evidence that food industry firms are seeking greater
assistance to commercialise new products in response to changing food consumption
patterns and tastes. This may include how to manage IP issues and access investment
capital to modernise plant and equipment and to fund research and development.
Government incentives for SMEs with up to $20m turnover include a 45% refundable
tax offset for research and development. From 1 January 2014, these companies will
be able to access credits on a quarterly basis.

1.30 Government senators believe however, that more can be done to support
SMEs to access quality advice, support, technology advice and access to research ,
and encourages Enterprise Connect, (a government funded network that links local
firms to resources in their immediate region and across the country) encouraging
innovation, sustainability and entrepreneurship to better promote its Food Network
throughout the industry. This is critical for boutique parts of the sector developing
gourmet products, such as the Australian Barramundi Farmers Association, who need
access to early research funding for pre-commercialisation activities

1.31 The Australian government also pursues agreements with trading partners on
specific commodities to ensure existing markets for Australian agricultural and food
exports remain open. This is done through industry bodies, working closely with
government funded trade services located in overseas countries.

1.32 Industry leaders acknowledge the importance of market intelligence and

support for Australian food businesses and rely on government representatives to
provide country specific advice to potential exporters. However, some concerns were
expressed about the lack of access to this kind of information for small and medium
enterprises, which have fewer resources and capacity to understand technical market
access issues.

1.33 Government senators therefore call for greater efforts to improve market
intelligence and its coordination and dissemination to food export businesses to help
the industry, particularly SMEs to identify potential trade opportunities.

Regulation and Competition Policy Implications

1.34 Government senators support efforts to reduce duplication in the regulatory
environment and urges state and territory governments to address issues which are
delaying the completion of the National Partnership on the Seamless National
Economy. We particularly note concerns from industry on the importance of
delivering reforms to harmonise occupational health and safety laws and urges all
jurisdictions which have yet to deliver agreed outcomes for this reform to do so by the
end of 2012.

1.35 Given the importance and challenges for the food processing sector of
ongoing regulatory reform as highlighted by this chapter, we urge urges all
jurisdictions to prioritise work through COAG to develop a new regulatory reform
agenda for finalisation by the end of this year.
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1.36 Government Senators reject Recommendations 4 and 5. We see no need at
this time to review the competition provisions of the Competition and Consumer Act
2010 (CCA). Since coming into office in 2007, the Government has made a number of
important amendments to the competition provisions of the CCA, including clarifying
the misuse of market power provisions, criminalising hard-core cartel conduct and
clarifying the mergers and acquisitions laws in relation to creeping acquisitions. We
note that these recommendations closely mirror Recommendations 5 & 7 from the
Senate Economics References Committee’s Inquiry into The Impacts of Supermarket
Pricing Decisions on the Dairy Industry. We endorse the comments by the
Government Senators in relation to the Senate Economics References Committee
report.

1.37 Government senators welcome the recent focus placed on the major
supermarket chains by the Australian Competition and Consumer Commission
(ACCC). The ACCC has stated that, during 2012, it will be giving priority to
competition and consumer issues in highly concentrated sectors, particularly in the
supermarket sector. The ACCC is closely examining the major supermarket chains to
ensure that any negotiations of supply arrangements are not unconscionable and that
they do not misuse any market power.

1.38 Given the recent changes to the CCA, Government Senators consider that the
competition provisions need not be reviewed until the ACCC has had the opportunity
to further test the law in the courts. It is only after the laws have been suitably tested
that any weaknesses in the law can be appropriately identified.

Bio-security issues
1.39 Increased global trade and increased passenger travel has placed significant
pressure on Australia's bio-security, import inspection and export certification
systems. Food producers should not underestimate the advantages that come with
Australia's reputation for clean, pest and disease-free status in a number of key
markets.

1.40 Australia regulates the export of meat, dairy, fish, grains, horticulture and live
animals through the provisions of the Export Control Act 1982. These provisions
relate to the requirements of importing countries and are the outcome of negotiations
between Australia and the importing country.

1.41 Government senators were concerned to hear evidence that some trading
partners are setting unnecessary and unsubstantiated import requirements posing
significant burdens on food export businesses. The live cattle export trade is one
example of where this has occurred.

1.42 Imported foods, plants and animals must comply with all applicable
Australian laws, including those covering labelling, environmental, food safety and
biosecurity arrangements. Biosecurity restrictions are set out in the Quarantine Act
1908 and are consistent with Australia's obligations under the WTO. Imported foods
are inspected under the provisions of the Imported Food Control Act 1992 which
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provides for inspection and control of imported goods. However, the most common
deficiency in meeting these standards is in food labelling.

1.43 Evidence provided to the committee highlighted the cost impost on the
Australian food processing industry of the import and export system, and Government
Senators are particularly keen to see the development and introduction of the new
Biosecurity Bill to replace the 1908 Quarantine Act with a more streamlined and cost
–effective legislative framework. As well, we believe that the Imported Food Control
Act should be reviewed to address the concerns of industry about controls of imported
foods.

Cost recovery policy issues

1.44 In relation to issues of cost recovery mechanisms, it would appear that not all
parts of the industry understand the reforms and initiatives being undertaken to bring
the industry in line with the conditions of WTO agreements. New export fees and
charges returning industry to full cost recovery commenced on 1 December 2009. The
Australian Government provided $25.8 million to support reforms to the meat sector.,
and a further $1.92 million in transitional assistance to exporters of smallgoods and
poultry products, cold stores and freight forwarders.

1.45 This measure was not contested by the Coalition at the time . It is worth
noting that at the 2007 election the Coalition made no promise to extend the 40%
rebate on export certification fees. They made no provision for it in the budget beyond
2008. Full cost recovery was their stated policy in Government. However, they
subsidised the system which helped to entrench inefficiency and shielded export
certification users.

1.46 In relation to the evidence provided to the Committee from the horticultural
sector in relation to cost recovery issues, we note that even with the 40% rebate, the
Horticulture export certification program was subject to chronic under-collection and
was inefficient. Government senators note that the new arrangements have the
potential to deliver significant efficiencies and has provided $6.5 million in
transitional assistance to horticulture exporters..

1.47 Government Senators note that the Australian Government Cost Recovery
Guidelines were implemented by the Howard Government, and applaud the
Government’s efforts which have resulted in a reduction in the cost to exporters of
export certification services in the order of $30 million per annum.

Anti-Dumping Measures
1.48 The Committee received anecdotal evidence about this issue and Government
Senators are interested to ensure that our food processing sector is not disadvantaged
by this practice. Dumping occurs when goods are exported to Australia at a price
below the domestic price in the country of export. While it is a problem that reaches
industries far beyond primary production, the Committee considered the problem of
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tinned, frozen and fresh food from across the globe flooding the Australian market at a
fraction of the price.

1.49 One of the main drivers of produce dumping is the subsidies paid by foreign
governments, particularly in the European Union and US, where farmers and owners
of farmland receive cash subsidies depending on market prices for crops, the level of
disaster payments and other factors. The US Department of Agriculture also provides
subsidised crop insurance and marketing support to the country’s farmers. This is not
the case in Australia, where we operate on the counter argument to subsidised farming
– that it props up growers who are inefficient, instead of promoting successful farming
and production practices.

1.50 Other overseas producers have significantly lower costs across all categories –
including cheap and sometimes even illegal labour – that allow them to produce food
at a price that undercut Australians producers. Flooding the market with imported
produce, especially in the frozen food category, being may be profitable for some, but
many growers would like to see some level of protection against aggressive dumping
of food products at below the cost of production.

1.51 It is important to consider the conditions that Australian producers have

fought for decades for to secure. More than this, if free trade is also to be fair trade,
we need to consider the effect on wider Australian economy of local food producers
being excluded from the market because the supermarkets are not prepared to pay
them enough to survive while they can source similar products overseas.

1.52 Government senators acknowledge that in response to industry and consumer

calls, the Minister for Home Affairs has announced the Brumby Review to examine
the current arrangements for assessing and investigating anti-dumping matters and
consider the feasibility of a commonwealth anti-dumping agency.

Transport and Freight issues

1.53 The transport industry across Australia is under pressure to plan effectively
for the massive increase in the national freight task. The relationships between freight
infrastructure and economic growth is one of interdependence, and in terms of the
food processing sector, freight infrastructure is critical to ensuring that fresh produce
gets to market quickly and efficiently.

1.54 Government Senators disagree with the claims of some witnesses that the
Coastal Trading Bill 2012 will increase costs. This claim is based on modelling done
by Deloitte that claimed freight costs would increase up to 16% under the Shipping
Reforms. However the baseline assumptions of the Deloitte report are incorrect. The
modelling is based on the assumption that all temporary licenses will be phased out in
5 years and that all coastal cargo will be carried on Australian licensed vessels, paying
Part A wages. This has never been the Government’s intention and the exposure
drafts do not contain such a measure. The Deloitte analysis therefore is not based on
the legislation currently before Parliament.
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1.55 The Government has also pursued the creation of single National Transport
Regulators since coming to Office in 2007. From 1 January 2013 there will finally be
three National Transport Regulators (for Heavy Vehicles, Rail and Maritime). This
will reduce the number of regulators from 23 to 3 and result in $30 billion in
productivity gains over the next 20 years.

Workforce issues
1.56 The Government senators reject Recommendation 24 as it stands, pending
further consideration. The Australia and New Zealand Standard Classification of
occupations (ANZCO) is an international standard for comparative evaluation and
statistical analysis used by the ABS. Devoting resources to establishing another set of
standard for the food industry would be time-consuming and contentious and would
conflict with standards across other sectors, particularly in agriculture.

1.57 Government Senators also reject Recommendation 25. We do not believe that,
industry specific training is likely to assist in addressing this issue, because concerns
expressed by witnesses went more to the policy settings, rather than how DIAC
officers apply those settings. In fact, the challenges of a two speed economy are
common across a range of industries therefore specific training is unlikely to assist.

1.58 In relation to the industrial relations issues canvassed in the Inquiry,

Government Senators refer the Committee to the recently completed independent
Review into the Fair Work Act. The Report of the Panel reviewing the Fair Work Act
found that labour costs have not increased, with overall wage growth since 2009
around its decade-long average. It noted that the legislation provides a number of
avenues for flexibility, including through the use of individual flexibility agreements
and enterprise bargaining.

1.59 Under the Fair Work Act, an employer and employees can negotiate an
enterprise agreement on any matter that pertains to their relationship. There are no
unnecessary restrictions on what can be included in an agreement. The Fair Work Act
requires that such an agreement leave employees better off overall than against the
applicable modern award. This provides flexibility to change award conditions, so
long as employees are better off overall.

1.60 In addition, an employer and employee covered by an award or an enterprise

agreement can negotiate an individual flexibility agreement that meets the employee’s
individual needs. Again, the employee must be better off overall against the modern
award or enterprise agreement, as applicable.

1.61 The independent Panel rejected claims that flexibility is created by cutting
wages and conditions. The Report did not recommend the reintroduction of AWAs or
any form of individual contract. In fact, the Panel identified that AWAs were bad for
many employees, especially for low-skilled and vulnerable workers. The Panel found
many of these workers suffered the unilateral removal of conditions, a reduction in
their take-home pay and were worse off overall compared with the relevant award.
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AWAs undermined the safety net, often for those who needed protection most, and the
Panel had no appetite to reintroduce this arrangement.

1.62 The Report found no convincing evidence that the Act impedes productivity
growth. It also cautiously notes some recent figures indicating improvements in
productivity. The Panel found that since the Act came into force, important outcomes
like wages growth, industrial disputation, the responsiveness of wages to supply and
demand, the rate of employment growth and the flexibility of work patterns have been
favourable to Australia’s continuing prosperity.

1.63 Government Senators note that Fair Work Australia is currently undertaking a
review of modern awards, including in relation to penalty rates and flexibility.
Interested parties are able to make submissions in relation to these matters as part of
the independent Fair Work Australia process.

1.64 The AMWU, as the union representing workers in the food processing sector
was not questioned about wages, conditions or flexibility let alone the impact of the
Fair Work Act and modern awards on their members and their members’ workplaces.

1.65 It is disappointing that the majority report reflects highly selective evidence
on industrial relations matters from the Committee's public hearings, rather than
including more measured responses by businesses to Committee questions about the
Fair Work Act.

1.66 At the Sydney hearing of the Committee, Mr Vincent Pinneri from SPC
Ardmona, a major fruit and vegetable processor, was questioned by Senator Fisher
about the supposed impacts of the Fair Work Act and modern awards on his business.
Mr Pinneri’s evidence, not included in the Committee Report, reflects a different
perspective:
Senator Fisher: Thank you. In your opening statement and your submission
you talk about challenges to your business and labour costs. How have you
found the Fair Work Act―good, bad or indifferent?
Mr Pinneri: I think there are some areas of improvement in the relationship
with the unions and the Fair Work Act.
Senator Fisher: Such as?
Mr Pinneri: I think the arrangements need to become more flexible.
Senator Fisher: Is that because of the unions’ conduct or because of the
legislative provisions or both?
Mr Pinneri: Both.
Senator Fisher: Have the unions approached your business any differently
since the passage of the Fair Work Act?
Mr Pinneri: The relationships that we currently have with the unions we
deal with has actually been quite collaborative. We want to move the
discussion into a different direction moving forward because right now, we
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need to get to a very different space in the negotiations around the next
EBAs. In our world, Sunday during a season is like a Friday.
Senator Fisher: You said that your needs are primarily in the area of
flexibility. Do you mean agreement content or the agreement-making
process?
Mr Pinneri: Agreement content.
Senator Fisher: Yes. The PM does not control when the apples ripen―none
of us do.
Mr Pinneri: So during the season I think there is a different approach that
we should have in terms of the agreement content versus out of season. We
are going to try to do everything we can to deseasonalise our business by
leveraging technology.
Senator Fisher: But you grow fruit.
Mr Pinneri: But there is processing technology that allows you to put it into
bulk containers that you can manufacture out of season without losing the
integrity of the product. We will do that, but our primary focus is during a
five- or six-month period. So we need to have very different arrangements
during that period which will help with our cost competitiveness as well in
terms of taking the input costs out of the business, specifically labour ones.
Senator Fisher: So how is your modern award?
Mr Pinneri: In what regard?
Senator Fisher: There is a federal award that would govern you and
underpin your agreement. Do you have any views on that or is that largely
irrelevant because of your enterprise agreement?
Mr Pinneri: It is largely irrelevant because of the enterprise agreement.
Senator Fisher: You talked about productivity and how you have been able
to increase it with your machinery et cetera, particularly during peak
seasons. Has the Fair Work Act helped you in respect of increasing
productivity?
Mr Pinneri: I think that has been driven by us making the right level of
investments out of season and us working with our own people to actually
get to the productivity and the union stewards that are on the floor.
Senator Fisher: Has the Fair Work Act hindered you? Could you have done
better without it in that respect?
Mr Pinneri: No, it has been irrelevant. 2

2 Mr Vincent Pinneri, SPC Ardmona, Food Services Division of Coca-Cola Amatil (Aust) Pty
Ltd, Committee Hansard, 10 February 2012, p. 42–43.
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1.67 Also at the Sydney hearing, in response to questions about the Fair Work Act
Mr Craig Funnell of Campell Arnott’s made the following observations:
Mr Funnell: In terms of Fair Work.. we probably see Fair Work Australia as
being reasonably benign... We have a very close working relationship with
our employees across our plants. We continue to drive productivity and
they continue to drive productivity in our operations. We have had no real
issue with Fair Work.
Senator Fisher: Fair Work Australia is the tribunal. Do you mean the Act as
well?
Mr Funnell: We have certainly had no issues across our plants that have
really required us to get into any major issues with Fair Work Australia. We
have certainly worked through an EBA process across our factories. We
have certainly had EBAs come up for renegotiation. They have been
processed through Fair Work with no issue. 3

1.68 In Adelaide, Mr John Millington, from Luv-a-Duck specifically identified no

adverse impacts of the Fair Work Act:
Senator Fisher: In your experience have you found any ramifications for
you in terms of labour, any changes good or bad since the implementation
of the Gillard government's Fair Work legislation?
Mr Millington: In our case we have not.... we have enterprise agreements in
place and we just do not have IR issues at all. So Fair Work Australia has
not been a problem for us in compliance or with our staff. 4

1.69 Government Senators note that there are the flexibilities available to
employers through the Fair Work Act that enable them to negotiate with their
employees an enterprise agreement on any matter that pertains to their relationship, as
long as the employee is better off overall comparative to the applicable modern award.
Further, an employer and employee covered by an award or an enterprise agreement
can negotiate an individual flexibility agreement that meets the employee’s individual
needs as long as the employee is better off overall against the modern award or
enterprise agreement, as applicable.

Recommendation 1

1.70 Government Senators reject any call for further reviews of the Fair
Work Act. A comprehensive, independent review has just been completed, which
found that the legislation does provide a number of avenues for flexibility.

3 Mr Craig Funnell, Campbell Arnott’s, Committee Hansard, 10 February 2012, p. 61.

4 Mr John Millington, Luv-a-Duck Committee Hansard, 17 April 2012, p. 35.
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Recommendation 2

1.71 Government Senators encourage food processing industry employers who

require greater flexibility of their workforce to utilise the existing mechanisms
allowable under the Fair Work Act.

Skills
1.72 Government Senators are concerned by the Committee Report's lack of focus
on increasing the skills of Australian workers. While we support programs that seek to
fill skills gaps with labour from overseas, this must not be done without due
consideration or at the expense of Australian workers.

1.73 A significant initiative in workforce skills development omitted from the

Committee Report is the AgriFood Skills component of the National Workforce
Development Fund (NWDF). This fund provides more than $6 million of skills and
training initiatives across the industry sectors and has been actively accessed by food
processing firms to ensure workers gain the specific skills required to improve their
business.

1.74 For example, Haigh's Chocolates has used the NWDF to train and qualify
workers in Competitive Manufacturing. Funding is also available through AgriFood
Skills to help individual employers to implement workforce planning and the training
of their workforce and to support industry stakeholders to implement sector wide or
regional workforce initiatives.

1.75 Government Senators note that AgriFood Skills was created by the Howard
Government in 2004 when it disbanded the National Food Industry Training Council.
While the National Food Industry Training Council was focussed solely on the food
industry, AgriFood Skills has vast responsibilities for areas such as food, beverage
and pharmaceutical processing; meat; horse and greyhound racing; rural and related
industries; and seafood.

Energy Costs and the Carbon Price

1.76 Government Senators fundamentally disagree with much of the evidence
presented to the Committee in relation to the Carbon pricing policy. There are many
examples in the food processing sector that highlight the potential for innovation and
opportunities being harnessed through the Clean Energy Technology package.

1.77 Government Senators note that a significant portion of the revenue from
carbon pricing is spent on industry assistance. Of particular relevance to the food
processing sector is the Clean Technology Investment program for manufacturing
businesses, which provides government co-investment into new capital which lowers
energy costs and improves competitiveness.

1.78 In evidence to the Committee, Mrs Mac’s Pty Ltd, a large scale bakehouse,
expressed appreciation for the range of government grants to assist businesses
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Mr Beros: "We have actually accessed, very recently, federal government
funding for some energy-saving initiatives within the organisation. The
benefits to us, for example, are: a 28 percent reduction in our water heating
costs, a 25 percent increase in one of our line speeds using the same level of
energy input, and a 30 per cent efficiency gain in some of our condensers
within our operations." 5

1.79 The Jobs and Competitiveness Program (JCP) alleviates anti-competitive

impacts from the carbon price on trade exposed and directly liable businesses. By
allocating up to 94.5 per cent of permits free to businesses who operate in
international markets, the JCP allows these businesses to remain competitive.
Businesses which provide inputs into the food processing sector are directly liable for
the carbon price and are trade exposed, therefore they are not required to pass on
carbon related costs, ensuring upstream clients are also shielded from anti-competitive
carbon price impacts.

1.80 The Committee noted industry requests that government support be targeted
‘so that the competitive balance is not tilted in favour of products with a larger carbon
footprint’. Government Senators believe that this concern is addressed in the design of
the Clean Technology Investment Programs (CTIP) and the JCP. JCP assistance is
directly tied to carbon price liability and trade exposure in the market, while the CTIP
provides co-investment based on the merit of investment proposals.

1.81 The food processing sector is quickly drawing on these programs to improve
innovation and productivity. For example
• Crafty Chef – Emu Plains NSW have received nearly $500,000 from
carbon pricing revenue to install a new commercial blast freezer. This
will reduce the carbon intensity of its operations by 54.1 percent, reduce
energy intensity by over 56 per cent and boost turnover by 150 per cent
to $50 million.
• Across its national network, De Bortoli Wines is undertaking a range of
measures across its all areas of its business from production to
warehousing. The purpose is to improve energy efficiency across its
operations and upgrade old equipment, supported by almost $5 million
from the Clean Energy Technology package. De Bortoli will improve
energy efficiency across its operations by 36.3 per cent.

1.82 Government Senators refute the claim made by Campbell Arnott's using
modelling from the AFGC, that pricing carbon will have about a 4.5 percent impact on
operating profits in the industry. The AFGC modelling did not include the assistance
measures outlined above and should be treated as an overestimate of the actual
impacts on the sector.

5 Mr Murray Beros, Mrs Mac's Pty Ltd Committee Hansard, 18 April 2012, p. 18.
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1.83 Lion Pty Ltd suggested significant potential administrative costs would occur
as a result of the carbon pricing mechanism. As Lion Pty Ltd is not a directly liable
business, there should not in fact be any additional administrative burdens. However,
the evidence indicates the extent of community misunderstanding about the actual
impacts of carbon pricing on Australian businesses.

1.84 Treasury modelling of the food manufacturing industry projects growth by

108 per cent by 2050, with meat processing growing by 137 per cent over the same
period. It also projects that carbon pricing will result in food processing outputs 2 per
cent higher in 2050 than without, and that meat processing output alone will be over 1
per cent higher in the same time period. This supports Treasury’s broad conclusion
that carbon pricing will drive a shift of economic activity towards non-emission
intensive sectors of manufacturing, like food processing, and away from emission
intensive sectors of manufacturing, like aluminium.

1.85 The food processing sector needs assistance to understand the real
implications of the carbon price on the food supply chain and the mechanisms for
determining those costs and how to pass them on to consumers. Government Senators
are concerned that consumer information and education is a critical factor in
understanding the principles and purposes of carbon pricing and its effect on the
sector, and urges continued investment in community awareness and education as the
mechanism comes into operation.

Recommendation 3

1.86 Government Senators recommend that the Federal Government increase

consultation with, and education of, the food processing sector about industry
opportunities and obligations in relation to the carbon pricing mechanism.

1.87 Government Senators note that the ACCC has a strong mandate to monitor
business activity that makes misleading claims about the impact of carbon pricing to
mask other price increases. Misleading claims can result in action by the ACCC and
fines of up to $1.1 million. Directors and senior officers also face fines of up to
$220,000, and disqualification as a director. The ACCC has already fined companies
for misleading price gouging.

1.88 For example, in late July,2012 the ACCC accepted an enforceable

undertaking from a South Australian refrigeration contractor, Equipserve, to correct
their claims that price increases were wholly due to the carbon price. Equipserve
represented that the entire refrigerant price increase from $98 to $395/kg was wholly
due to the carbon price, but this was not the case. Equipserve Solutions admitted that
the conduct breached the Australian Consumer Law by wrongly attributing the entire
price increase to the carbon price.

Concluding Remarks
1.89 Government senators were impressed by the depth and diversity of the food
processing sector represented through this Inquiry. The evidence highlighted the
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challenges of an industry sector undergoing significant change, and the opportunities
for innovation that are emerging from those pressures.

1.90 Domestic and international factors impacting on the sector reflect the
globalised nature of the sector, as well as more highly informed consumers seeking
value for money. It is government's role to create an enabling environment for strong
market participation, and this report highlights important areas of reform that will be
critical for the food processing sector.

1.91 It is clear that the answer is in the sector's capacity to innovate and thrive. We
were provided with inspiring examples of new and emerging products that are capable
of transforming parts of the sector. We need to remember however, that the industry
is best served by an innovative and adaptive business culture and a well trained and
supported workforce.

Senator Ursula Stephens

Senator Glenn Sterle

Senator Anne Urquhart