Thank you for the opportunity.
It is great to see the industry so well represented here today.
I also welcome our friends from China, who are part of a delegation supported by Austrade.
In recent times there has been a real buzz around the industry and a keen sense of anticipation about what the future holds.
Having grown up on a dairy farm in Epping, just north of Melbourne, I have always had both an appreciation of what you do and the important contribution the sector makes to our economy.
One enduring memory from the farm is of my father Frank not missing a single day of milking – morning or night – over seven years.
Many things have changed since those days in Epping supplying fresh milk on contract, and in cans, to Metropolitan Dairies in Preston; the level of innovation and the embrace of technology on-farm to enhance productivity never ceases to amaze me.
You only have to look at the ‘super dairies’ of North America to see the advances, where 60 per cent of milk reportedly comes from 3.5 per cent of farms like Fair Oaks in Indiana with 32,000 cows producing 1.25 million litres daily.
Of course one thing that hasn’t changed is the need for a solid return on investment.
Creating the right environment to make it easier to do business and to maximise opportunities and returns on investment is a priority of this government.
It explains our determination to bring the budget under control; to reduce debt and deficit.
And also our commitment to abolish the carbon tax, which was a major impost on your industry, and also the mining tax.
We are committed to freeing up regulation, cutting red and green tape and streamlining approval processes for projects and investments.
Over six years the previous government delivered 21,000 new regulations; whereas the first of our planned six-monthly Repeal Days saw us remove 10,000 regulations.
As a government we have also made a firm commitment to back Australia’s strengths, the things we do as well as any and better than most.
Agriculture and agribusiness is one of our great strengths and of course dairy is a very important part of this.
In focussing on our strengths we are looking to replace growth driven by government spending – invariably spending paid for by more and more government debt – with growth driven by private investment and consumer confidence.
This is the only long-term, sustainable way of achieving strong economic growth, and sustainable growth in jobs.
For this reason we are very deliberately pursuing an aggressive trade and investment agenda.
We placed priority on concluding free trade agreements with Korea, Japan and China; three economies that account for more than 50 per cent of our exports, yet three negotiations which had gone on for up to 10 years and which had ultimately run into the sand.
We quickly concluded landmark agreements with Korea and Japan which will deliver strong gains across agriculture and services, and as you are acutely aware finalisation with China remains in prospect this year.
After almost 10 years and 21 formal rounds of negotiations, in my view it is now time to have the courage to make decisions and seek to complete an agreement that takes Australia’s relationship with China to another level.
To further delay will only exacerbate the advantages our direct competitors have, including most relevant to you, New Zealand.
I am aware of the significance of this agreement to the dairy industry, having advised your industry leaders many times over the last year that my major objective with the China FTA is to get at least a New Zealand-equivalent deal for the dairy industry.
In regard to trade negotiations, my starting position is to seek full liberalisation across every sector, but these are negotiations. There are always sensitivities on both sides and you rarely get everything you want.
As well, these trade agreements must be viewed as dynamic documents.
For example, we signed the Closer Economic Relations agreement with New Zealand which came into effect in 1983. Every year since then, ministers from both countries have met to further free up trade, services and investment.
The result is compelling. Two-way trade between Australia and New Zealand has increased by an average of seven per cent per year for the last 30 years.
That said, the future prospects for Australian food and agribusiness is very bright indeed, particularly across the Asia Pacific.
The fact that the region’s middle class from Indian to China, and every country in between, is set to grow from 600 million to more than three billion – not in 100 years or even 50 years – but over the next 20 to 30 years, says it all.
Our gold standard reputation for clean, green and healthy produce can ensure that we are an increasingly formidable competitor at the quality end of these rapidly emerging markets.
Given their scale, in many cases what will be effectively niche markets in Asia will to us resemble mass markets.
Australian dairy will continue to feature prominently and each free trade agreement we can secure are like bricks in the wall, providing new levels of opportunity, market access and forging valuable relationships.
From the most humble beginnings, literally involving seven cows and two bulls which were brought ashore from the First Fleet to feed in pastures around Parramatta; Australian dairy today is a $13 billion farm, manufacturing and export industry.
Farm gate value alone is $4 billion and in 2012 our share of world trade was 7 per cent.
Our industry involves around 1.65 million cows and 6,700 dairy farmers producing around 9.5 billion litres of milk annually. It directly employs 43,000 Australians and an additional 100,000 indirectly in related services.
Forty per cent of Australia’s milk production is exported, with China, Japan, Singapore, Malaysia and Indonesia our biggest markets.
The Middle East is also important.
With rapidly increasing global demand, Australian dairy clearly offers strong prospects for international investors looking to capitalise on export growth, which I will come to in a moment.
In 2013-14, we exported $3.21 billion worth of powders, proteins, cheeses, and other milk products.
Overall value of our dairy exports grew by 22 per cent from the previous year.
Milk powder was the strongest achiever, increasing by almost 50 per cent over the previous year.
Demand from China in particular will continue to grow, especially for fresh milk.
Infant milk powder can retail for almost four times as much in Shanghai as it does in Australia.
Fresh Australian milk retails for more than $7 a litre on the shelves of Chinese supermarkets.
This demonstrates how Asian consumers are prepared to pay a premium for safe, high-quality Australian dairy products, and the same applies across so many areas, including beef, fruit, and vegetables and so on.
And the opportunity is definitely there for Australia to increase its market share in Asia, including in dairy.
We are capable of being the supplier of choice for innovative, high-quality products that meet demand.
In dairy, New Zealand is of course our most serious competitor.
And they gained a major advantage on account of the Free Trade Agreement they concluded with China back in 2008.
The inability of our predecessors to conclude an agreement with China during six years undermined our competitive position against our friends across the Tasman.
Since concluding their agreement New Zealand’s dairy trade revenue from China increased by $3.7 billion to the end of 2013, while over the same period our revenue from China has increased by $173 million.
There have however been good gains for us of late for example our dairy exports to China in 2013-14 almost doubled.
And China has been our fastest growing dairy market in recent years.
China is also our largest dairy cattle export market.
In 2013-14, it took almost 79,000 head, up 33 per cent from the previous year and valued at A$169 million.
It’s obviously not as simple as putting cows on ships.
It is about establishing strong integrated supply chains that work both here and in China.
There is no doubt that a free trade agreement with China will help the industry lift and grow the returns from our exports.
Australia’s economy and export profile is of course much more diverse than New Zealand’s so gains from an FTA will be more widespread for us.
For example, Australia’s current two-way trade with China is worth $150 billion, compared to New Zealand’s two-way trade of A$19 billion.
In 2013, New Zealand sent A$9 billion worth of goods to China in total, which included A$3.6 billion of milk powder, a record level.
Our services exports to China alone are worth around $7 billion and our merchandise exports around $95 billion.
I am not for a moment diminishing the importance of dairy, but simply illustrating the more diversified nature of our economy compared to that of New Zealand.
As I mentioned earlier substantially increased investment features very strongly if we are to achieve our long-term economic objectives.
For example, foreign investment is fundamental to tackling our $700 billion infrastructure deficit.
Foreign investment is also fundamental in helping to drive the innovation and productivity necessary to capture the premium end of markets rapidly emerging in the region around us.
It explains the addition of investment to my portfolio responsibilities. I am Australia’s first ever Investment Minister at a national level.
That is why attracting new investment is a key focus for me whenever I travel abroad.
As a government we have identified food and agribusiness as one of five National Investment Priorities.
If our dairy is to reach its potential it must remain a leader in production, new products, logistics and marketing. New investment and the innovation, capacity and new perspectives that comes with it, is critical to helping drive this.
As a country we have always relied on foreign investment since the First Fleet. Our thin capital markets means this need is as strong as ever.
Just last week the regional head of Swedish packaging giant Tetra Pak said while we are one of the few countries that produced far more milk than we consumed, the competition to cash in on the so-called Asian dining boom was escalating.
Tetra also builds new milk processing plants and said we need to invest in completely new factories based on the best technology and cost of production if we are to effectively compete into the future against the likes of the U.S. ‘super dairies’ I mentioned earlier.
Over the past 12 months I have conducted 40 significant investment roundtables in 16 countries – where opportunities in agriculture and agribusiness are commonly discussed.
These have already directly resulted in new billion-dollar investment decisions, leads and relationships.
Straight after this engagement I will head to Crown Hotel to witness the signing to establish the Beijing Australia Agricultural Resource Cooperation Fund, a joint initiative of the Beijing Agricultural Investment Fund and Yuhu Agriculture Investment.
The Fund is looking to invest $3 billion in various projects which include dairy – in particular infant formula – beef, lamb, seafood and others with an emphasis on supplying high quality Australian produce to the Chinese people.
An FTA with China will also definitely stimulate additional investment activity as the New Zealand experience shows.
When you develop stronger trading relationships additional investment inevitably follows and that works both ways.
As mentioned our industry is already attracting very strong investment interest from abroad.
Canada’s Saputo has acquired Warrnambool Cheese and Butter while China’s Bright Food Group invested in Mundella Foods.
These investments complement existing multinationals in dairy processing from Japan, France, New Zealand, the UK and Switzerland.
To meet future challenges and realise our potential we need investment in all parts of the supply chain.
We need investment that boosts productivity on the farm and improves efficiencies beyond the farm gate in transport, logistics and processing.
In finishing, I sincerely believe the coming years and decades can be spectacular for Australia in what will be the century of food, water and energy security.
The stars in many ways are aligning because Australia’s great strengths – of which agriculture and agribusiness is one – are the things the world increasingly needs.
In our region the demand for our food and protein of which dairy is a fundamental source will greatly intensify as the middle class continues its phenomenal surge around us.
To be sure, there will be challenges along the way, but they are worth confronting because there is a major prize at stake.
My best wishes for your success in capturing these emerging opportunities.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555