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High dollar, red tape pressuring food processing industry

Beef Central 28/08/2012

Establishing a national forum to tackle market access issues and easing regulations to allow processors to employ more foreign workers are among 35 recommendations stemming from a recent senate inquiry into Australia’s food processing sector.

The Senate Select Committee inquiry into viability and competitiveness of Australia's food processing sector commenced in July last year. It also looked at how domestic regulation and competition laws and foreign barriers to trade are impacting on Australia’s food processing chain.

After considering 70 submissions, conducting 15 site visits and holding seven public hearings between December 2011 and May  2012 in Canberra, Sydney, Shepparton, Devonport, Adelaide and Perth, the committee handed down its final report on August 16.

Senators noted in the report that the evidence revealed strong concerns regarding the health of Australia's food processing industry and, more broadly, all sectors of Australia's food supply chain.

Pressures identified by the inquiry on food processors included skilled labour shortages, increasing costs of electricity, water and transport, upward pressure on input costs caused by the mining boom, the complexity of cross–jurisdictional regulations, competitive disadvantages driven by a strong Australian dollar and high regulatory burdens, added to by the carbon tax and AQIS’ move to full cost recovery.

Not only was a strong Australian dollar impacting on processor margins, it was also making imports cheaper, which was dampening their ability to compete both domestically and overseas.

Murray Beros, the chief general manager of meat pie manufacturer Mrs Mac’s, told the inquiry that local manufacturers were desperate for a ‘level-playing field’: 

"About 10 per cent of our operating expenses occur as a direct result of regulation compliance requirements. It is a significant amount for things like, for example, payroll tax, local government rates, charges, by-laws, workers compensation, occupational health, super, all the requirements under the Food Standards Code, the QA audits. It is a huge cost to us. The one thing we really do want…is to find some way of having a real level playing field, guaranteeing that products coming in meet the same standard as Australian businesses are required to meet to manufacture their product. If that is done, then fair enough.”

The Australian Food and Grocery Council said regulatory reform was the most “prominent and important policy lever the Government could pull” to assist the food industry in the challenges it is now facing:

Compliance with regulation is always costly, compliance with ineffective, inefficient or unnecessary regulation is wasteful in the extreme. It reduces business profitability directly, undermines investment attractiveness and diverts funds from innovative activities necessary for continued competiveness and productivity growth.

The senate said a multifaceted, coordinated and collaborative response was needed, with industry focusing on innovation and finding ways to be competitive, and the Government ensuring appropriate policy settings were in place.

“In particular, the committee notes the urgent need for a review of the effectiveness of the Competition and Consumer Act 2010 with a view to striking a better balance between the consumer and competitors and ensuring market participants enjoy a level playing field,” the committee noted in its concluding remarks.

“The committee also suggests that broader reforms are required to help attract and retain suitable and qualified workers.”

The committee made 35 recommendations as a result of the inquiry, which have now been presented to Government.

The recommendations are:

Recommendation 1
2.41      The committee recommends that all state and territory governments develop a definitive timeframe for the Council of Australian Governments reform agenda for a National Seamless Economy and actively engage to ensure that momentum for implementation of the reforms is maintained. In particular, the committee urges participants to ensure movement on the integrated transport reforms, including reforms to the heavy vehicle registration process.

Recommendation 2
2.42      The committee recommends that the government expedite those recommendations of the Deegan Report which have not been rejected to position Tasmania to have access to a globally competitive freight system.

Recommendation 3
2.62      The committee recommends that following the introduction of the carbon price on 1 July 2012, the government monitor:
• how the big emitters pass on the costs into the food supply chain; and
• the profitability of businesses in that supply chain, including to farm gate.

Recommendation 4
3.120      The committee recommends that the government initiate an independent review of the competition provisions of theCompetition and Consumer Act 2010. The committee recommends that the review should include consideration of:
• the misuse of market power;
• creeping acquisitions;
• predatory pricing; and
• unconscionable conduct.

Recommendation 5
3.121      The committee recommends that the review of the Competition and Consumer Act 2010 consider the inclusion of the functions of a food supply chain ombudsman within the ongoing role of the ACCC.

Recommendation 6
3.123      The committee recommends that the major supermarkets in Australia voluntarily compile and establish benchmarks within their corporate social responsibility documents to measure the level of satisfaction of their suppliers in dealing with the supermarkets. External agencies should be engaged to conduct regular supplier satisfaction surveys, the results of which should be publicised by the supermarkets in their regular reporting cycles.

Recommendation 7
4.88      The committee recommends that the government expand the application of food labelling requirements to require all primary food products for retail sale to display their country of origin, in accordance with recommendation 40 of the Blewett Review.

Recommendation 8
4.97      The committee recommends that the government reform country of origin labelling requirements for food so that these requirements are clearer, more transparent and focus on the consumer's understanding.

Recommendation 9
4.100      The committee recommends that, as part of the review of the Competition and Consumer Act 2010 (Cth) recommended in Recommendation 12, government should specifically consider whether the 'safe haven' provisions in section 255 are sufficiently focussed on the consumer's understanding of country of origin claims on food products.

Recommendation 10
4.101      The committee recommends that the government consult with industry about the use of the term 'defining ingredient' as a method of determining the country of origin of a product.

Recommendation 11
4.106      The committee recommends that industry and government investigate the potential use of smart phone and barcode technology to provide additional information about the country of origin of food products.

Recommendation 12
4.111      The committee recommends that the government move mandatory country of origin labelling requirements for food to a specific consumer product information standard under the Competition and Consumer Act 2010, consistent with recommendation 41 of the Blewett Review.

Recommendation 13
4.122      The committee recommends that, when presented with direct evidence, the Australian Competition and Consumer Commission investigate claims that country of origin labels on processed foods imported into Australia under free trade agreements and other international agreements are misleading and/or deceptive.

Recommendation 14
5.24      The committee recommends government develop a strategic focus on developing access to export markets for the food industry and facilitate an affordable cost environment for industry to access these markets.

Recommendation 15
5.47      The committee recommends that the government take the lead in pursuing a more appropriate level of mutual recognition of commercial and regulatory standards and audit outcomes, possibly through the use of the Global Food Safety Initiative standards benchmarking process.

Recommendation 16
5.54      The committee recommends that industry and DAFF Biosecurity consider establishing a forum in which they can meet to discuss and resolve factors that inhibit export market access, growth and development.

Recommendation 17
5.62      The committee recommends that the Senate Rural and Regional Affairs and Transport References Committee examine the new biosecurity legislation to assess whether it will appropriately address the problems of different standards applying to imported and domestic products and consider monitoring the implementation of relevant measures.

Recommendation 18
6.56      Tertiary and higher education providers should engage more directly with food processing businesses about curricula and outcomes to ensure that the skills developed through further education better match those required by industry.

Recommendation 19
6.61      The committee recommends that the government consider, in consultation with State and territory governments and industry, expanding existing programs promoting the study of, and career paths in, science to include food science and technology.

Recommendation 20
6.63      The National Food Plan should explicitly deal with the labour supply issues facing Australia's food processing sector.

Recommendation 21
6.65      The committee recommends that the government encourage and assist the agricultural and food processing industry in setting up a peak council of industry bodies so that the industry may, amongst other things, more effectively engage with primary, secondary, tertiary and higher education providers about potential career paths in the agrifood sector.

Recommendation 22
6.89      The committee recommends that the government continue to promote and investigate partnerships and programs that connect recently arrived migrants and international workers to jobs in the food processing sector, particularly to jobs in rural and regional centres.

Recommendation 23
6.91      The committee recommends that the government investigate the possibility of extending the class of employers able to access the Seasonal Worker Program to include employers in the food processing sector.

Recommendation 24
6.93      The committee recommends that the government investigate whether the skills recognition frameworks used for skilled migration programs, such as the Australia and New Zealand Standard Classification of Occupations code system, are appropriately recognising food processing skills and qualifications.

Recommendation 25
6.95      The committee recommends that the government require the officers responsible for assessing 457 Visa applications for the food processing sector to have specific knowledge of the sector, its requirements, and the markets within which it operates.

Recommendation 26
6.122      The committee recommends that the government review the flexibility provisions under both the Fair Work Act 2009 and modern awards, with a view to increasing the ability of employers and employees to negotiate flexible working arrangements, particularly with respect to penalty rates, split shifts and minimum hours for seasonal industries.

Recommendation 27
7.79      The committee recommends that the government investigate the effectiveness of research and development in the food processing sector and in doing so consider the following questions:
• has been a market failure of research and development in the food processing sector?
• are food processors relying on research and development conducted by primary producers?
• is there scope to develop a cooperative research and development approach in the food processing sector similar to rural research and development corporations?
• do the current arrangements for research and development funding support equity of access, particularly for small and medium enterprises?

Recommendation 28
7.80      The committee recommends that the government consider providing research and development assistance specific to the food processing sector.

Recommendation 29
7.81      The committee recommends that the government reviews tax and regulatory settings to support innovation.

Recommendation 30
7.82      The committee acknowledges the establishment of the Food Processing Industry Strategy Group and encourages its active engagement of leading food manufacturing and processing companies to encourage large scale investment in food manufacturing in Australia.

Recommendation 31
7.83      The committee recommends that the government review the funding it has allocated for research and development in the Australian food processing sector.

Recommendation 32
8.60      The committee recommends the government place a stronger focus on development of markets and assistance for market access in a much more costs effective way for developing business.

Recommendation 33
8.61      The committee recommends that the government prioritise completion of trade agreements, noting those currently being negotiated particularly in the Asia–Pacific region.

Recommendation 34
8.62      The committee recommends that the government continue to lobby for the reduction of tariff, non-tariff barriers and subsidies in export destinations through the World Trade Organisation. Pending the passing of the US Farm Bill this year, the government should consider the immediate and ongoing level and impact of these assistance packages.

Recommendation 35
8.63      The committee recommends that a Brand Australia program be considered to assess its effectiveness in promoting the food and grocery sector. In addition, the committee recommends that a campaign be developed promoting Australian food and grocery products overseas based on their unique provenance, premium quality, assured safety and environmental sustainability.
 

To view the full report, including dissenting report from Government senators, click here

 

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