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Source: New Zealand Parliament – Hansard

Rt Hon DAVID CARTER (National): Madam Chair, thank you for the opportunity to ask two blocks of questions of the Minister. I do so acknowledging that the number of times the dairy industry restructuring legislation has been before the House, it’s been largely a bipartisan issue, whereby the two major parties, anyway, have a genuine interest in the importance of the dairy industry to New Zealand and the significance of Fonterra as our biggest company, and the fact that Frontier’s performance actually affects the livelihood and standard of living of every New Zealander.

My first question is in relation to the milk price panel and the fact that, in this legislation, or the first time the Government has the ability to appoint somebody, one person will be on a panel, then, of five, as the milk price is determined. My questions are: what are the qualifications that the Minister has in mind for that appointment? What sort of person are we looking at? Are we looking at a person with an economic background, for example? What, then, is the process for appointment of that person? Is it just a normal Government appointment—APH Cabinet committee process initially? And, finally, before the appointment is finally made, what’s the consultation process? Is the Minister required to consult with the dairy industry, dairy farmers, with the company Fonterra, and, in fact, with other companies before that appointment is finally made? So that’s my first block of questions for the Minister.

My second issue is the issue which he’s just addressed in relation to questions from Barbara Kuriger regarding the tricky issue they had in ending open entry, open exit and ensuring that this did not disadvantage new potential entrants into the industry. Whilst I understand—I wasn’t on the select committee, as I say—the select committee spent some time trying to come up with suitable wording, it went back from the select committee to the Government for them to have a look at it, and I think, correctly, the Government said, “Listen, this wording that you’ve arrived at, we know the intent of what you’re trying to do, but the wording you’ve arrived at in fact is to woolly. It’s not definitive enough.” Therefore, the Government, or the Minister, has tried very hard to come up with replacement wording—clause 73(3) of SOP 547. My question, in looking at this wording—I know exactly what the Minister’s attempting to do, but it is still, in effect, fairly undefined. Fonterra has to have regard to the effect of the ongoing viability of the farm to which the implication relies, if there is a new co-op and supply agreement in respect of the farm at any time in the previous season.

It’s not very exact wording, Minister. Fonterra has to have a look at the land-use opportunities available to the applicant. It means that somebody entering the industry expecting to be able to become a supplier to Fonterra—the very decision that person is making in buying the farms with the expectation that he or she will be a Fonterra supplier, and then they’ve got to step through this regime, which, while I accept the Minister’s made every attempt to define it, still lacks exactitude. I’d like the Minister to comment on those couple of points.

Hon DAMIEN O’CONNOR (Minister of Agriculture): Thank you, Madam Chair. The Hon David Carter raises a fair question. It is virtually impossible to be exact in this area. The intent, of course, as we understand, is that if someone buys a farm and converts it and then says that, you know, “This is the best land use. I have an expectation of Fonterra picking it up.” No, they shouldn’t. I guess that’s what we’re trying to achieve. But if someone buys a farm in a similar area that has been a dairy platform, they paid a price per hectare on the basis that it produces dairy, then there’s a reasonable expectation that Fonterra should. Can I say that, as officials reminded me, I referred to the Commerce Commission’s oversight, but, in fact, clause 120 of the Act provides access to Commerce Commission protection and review of any decision by Fonterra. So it is in the legislation there. Look, I accept that.

Can I go back to the issue of the milk price panel. In fact, I nominate a person but it’s still appointed by Fonterra. That may not give comfort to all the independents, but the process is one still of Fonterra appointing the milk price panel, but a nominee will come from the Minister. I would notify probably through APH, but it’s not, strictly speaking, a legal appointment by the Minister; it’s a nominee from the Minister. The skills of that person, in my view, as the member would know, as a Minister—we make judgments all the time, and I would hope that any Minister into the future gets the right mix of skills. I imagine they are audit skills. They are commerce skills, with some knowledge of, perhaps, the dairy industry. It may or may not be appropriate, but trying to achieve a fair outcome in what is possibly one of the most contentious areas of the dairy industry is that milk price. The independents have said for a long time that Fonterra has adjusted the milk price to serve its own purpose. We want to make sure that, indeed, its obligation to establish that milk price is a fair process. Then the companies can build off the opportunities from that.

Rt Hon DAVID CARTER (National): A very quick supplementary question to that. What the Minister’s saying there is the Government appointee to the milk price panel is, effectively, a nominee of the Minister to the panel, the rest of the members obviously being appointments by Fonterra. My question then is, having made the nomination, I assume the panel or Fonterra must accept that nomination, so it’s an appointment rather than a nomination, I’d suggest. We haven’t really had confirmation as to the consultation process that’s involved in making that nomination. I accept it presumably goes through a Cabinet Appointments and Honours Committee (APH) process, but, more importantly, if the Minister was in the unlikely event in the position to continue after the election on 19 September, and he’s moving to make this nomination, what process would he undertake in the way of consulting with the industry before making that nomination? Or would he simply have a name, run it through an APH process, nominate it to Fonterra for the panel and then the expectation, in fact the outcome, is that person is then on the panel?

Hon DAMIEN O’CONNOR (Minister of Agriculture): Just to clarify, thank you, Madam Chair. It doesn’t require an APH process—it does not. So it’s a fair question around consultation. In the end, it will be the judgment of the Minister, who, I would always hope, is doing the best thing for the dairy industry across the board and would appoint someone with the right mix of skills. Ultimately, that’s the judgment that many of us as Ministers, as you would know, make from time to time or, in fact, quite often. We must trust this democratic process here in the appointment by a Minister who has the right objectives for the dairy industry to appoint the best person for the job.

BARBARA KURIGER (National—Taranaki – King Country): So can I just have another supplementary on that? Does the Minister foresee that it could be a possibility at some point in the future where the Minister nominates someone and Fonterra actually does not appoint that person?

Hon DAMIEN O’CONNOR (Minister of Agriculture): Indeed, that’s a possibility, but I would assume that Fonterra should share the objectives of what we’re trying to achieve here. If they were to block that and the perception was that they wanted to dominate what should be a fair and objective process, then I’d suggest that would push back on them. In the end, we’re trying to find the right balance between what is a very dominant player and an industry champion, Fonterra—a national icon, I guess—but we have to keep some tension on them to ensure that they operate well. There’d be many across our economy who say that Fonterra hasn’t operated as well as it should have. We’re not reforming the Dairy Industry Restructuring Act in this situation, or the legislation governing the dairy industry, but we are changing it and making changes in the hope that we’ll better and more consistent outcomes for Fonterra, for our economy, and for indeed the farmers suppliers.

MIL OSI